The Government of India provides various business loans to small, micro, medium and large companies to support their operations from inception to promoting their expansion. Each program has its own uniqueness and understanding the goal is key to obtaining a loan from the government.
Forbes Advisor India has compiled some of the key central government programs and loan application submission process to help businesses obtain a loan from the government.
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Step-by-step process to apply for government business loans
The Government of India has provided an online facility for companies to register for business loans including Mudra Loans, Stand Up India Loans, SIDBI Loans and others Udyami Mitraan initiative that provides businesses with the ability to obtain credit, as well as materials to submit a credit application, track credit, and connect them with authorized lenders.
Still, businesses can find their system of choice to avail government loans and submit a form through an authorized bank branch near them. The online process for registering and applying for business credit includes:
First step
Visit the online website of Udyami Mitra.
Create a login ID by entering your name, email address, mobile number and verify via OTP.
Second step
Enter the loan amount and fill out the self-explanatory form required to:
- Personal Data: Email, Gender, Applicant Category, State, County, City/Municipality, Residence PIN Code, Residence Type, Minority (if applicable).
- Professional details: Educational level, work experience, current employment status, number of months worked (if applicable), current gross annual income, type of business identified, area of interest/sector, qualification program in area of interest (yes/no), work experience in your area of interest (y/n), previous loan taken out (y/n).
- Choose from the service you want Udyami Mitra portal: Project identification or preparation, assistance in filing loan applications, self-application for business loans.
Third step
- Your Name, Father/Husband Name
- constitution (property, partnership, other),
- Company name and business address.
- KYC documents [Aadhaar, voter, driving, pan card, GST no]
- New Company (Y/N), Existing Company (Y/N), First Time Entrepreneur (Y/N)
- Occupation details
- annual sales
- Select loan type: cash advance, overdraft, term loan.
- Fill in your bank account details (bank name, account number)
- Choose if you have a preferred lender
fourth step
Upload required documents as required from the drop-down list in the form.
Fifth step
Read the declaration form and do what is necessary
Documents required to apply for a government loan for business
- Type of ID Proof (Aadhaar Card, Driving Licence, Pan Card, Passport, Self-Certified Copy of Voter ID)
- Proof of address (Aadhaar card, passport, ration card)
- offer document
- Business venture details documents
- Proof of rental agreement
- Supplier Details
- category proof
- Two photos of the applicant
- Applicant’s signature
- IT PAN number
Mudra Loan – Pradhan Mantri Mudra Yojana (PMMY)
Micro Units Development and Refinance Agency Limited, popularly known as Mudra Loans, is a centrally sponsored financial institution providing finance to small and medium sized unincorporated companies. Mudra refinances Authorized Commercial Banks (SCBs), Regional Rural Banks (RRBs), Small Financial Banks (SFBs), Urban Co-operative Banks (UCBs), Microfinance Institutions (MFIs), and Non-bank Financial Corporations (NBFCs) to provide Mudra loans.
Mudra loans allow eligible companies to avail financing under the Pradhan Mantri Mudra Yojana (PMMY).
Eligible Companies
Non-corporate small business (NCSB) segment such as owner or partnership businesses operating small manufacturing or service sector units. Shopkeepers, fruit or vegetable vendors, truck drivers, catering units, repair shops, machine operators, small industries, artisans, food processors and others.
loan amount
Up to INR 10,000.
Products
Mudra loans under the PMMY program provide business loans according to the stage of growth, development and financing needs. The scheme is further divided into:
- Shishu: This is the first tier financing for businesses up to INR 50,000.
- Kishore: Companies that have already established a business and need loans from INR 50,000 to INR 5,000.
- Tarun: Loans up to INR 10,000 for growth and development.
edge
Up to 20% for loans from INR 50,000 to INR 10,000.
tenure
Three to five years, including a moratorium period of up to six months.
interest rate
MCLR-based interest rate as per internal rating.
handling fee
Up to 0.50% for loans up to INR 10 lakh.
Credit Guarantee Fund Scheme for Micro and Small Businesses – CGFSMSE
The Micro and Small Business Credit Guarantee Fund Scheme (CGFSMSE) is a central government initiative to provide collateral-free loans to a startup or an existing business in the form of term loans, working capital, or both.
The program under the Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Development Bank of India (SIDBI) is made available to companies through authorized banks on the basis of project feasibility or business model validation.
Eligible Companies
Small and micro businesses, start-ups engaged in manufacturing and service activities.
loan amount
Up to INR 2 crore.
interest rate
MCLR-based interest rate as per internal rating.
guarantee fee
Up to 2% per year.
Service fee
Up to 1.50% per year.
Stand Up India Loan Program
Authorized Proposed Commercial Banks (SCBs) offer the Stand Up India program on behalf of the government for companies in manufacturing, services, agricultural activities and trade.
Eligible Companies
Plan caste, planned tribes and women entrepreneurs over 18 years of age.
Loan amount and Art
The Stand Up India program covers up to 85% of the project cost disbursed as a term loan, working capital or overdraft loan from INR 10,000 to INR 1,000,000.
interest rate
MCLR + 3% + term premium
Security
Primary collateral as well as guarantee from the Credit Guarantee Fund.
edge
10% to 15% cost of the project.
tenure
Up to seven years, with a moratorium period of 18 months.
SIDBI loan
The Small Industries Development Bank of India referred to as SIDBI offers MSME loans up to INR 25 crore depending on the needs of the business on par with the feasibility of the project beyond the eligibility criteria. Some of the popular systems under SIDBI are:
stage scheme
Objective: For MSME to carry out urgent orders.
Eligible Companies: MSMEs must have been in operation for at least three years.
loan amount: INR 2 crore to INR 3 crore
tenure: Up to three years
interest rate: MCLR-based ROI as per internal assessment.
Sangam scheme
objective: To meet working capital requirements
Eligible Companies: Women-owned businesses and entrepreneurs from smaller towns
loan amount: Up to INR 1 crore.
interest rate: 5.50% for women-owned companies, 6% for others.
Frequently Asked Questions (FAQs)
Can I get a business loan from the government?
Yes, the Government of India provides various business loans to companies to support their operations from inception to promoting their expansion.
How do I apply for a business loan from the state?
The Government of India has provided an online facility for companies to apply for business loans online Udyami Mitra, and fill out the self-explanatory form. Businesses can also visit their respective bank to see if they offer government business loan programs and submit a form and documents as mentioned above.
Is KYC required to apply for a business loan?
Yes, businesses are required to submit documents such as Aadhaar Card, Voter ID, Driving Licence, Pan Card as well as Business GST number for KYC usage.
How does the Udyami Mitra portal help companies to apply for a business loan?
Udyami Mitra is an online central government initiative to enable businesses to obtain credit, as well as provide materials or resources to apply for credit, track credit and connect them with authorized lenders.
