How to Get a Government Loan for Startup? | List of Government Business Loans

Niharika Gupta Niharika Gupta
Apr 11, 2022 7 min read
How to Get a Government Loan for Startup? | List of Government Business Loans

The entrepreneurial dreams of Indians have given the country over 94 Unicorns in recent years. This number is expected to cross a century by the end of 2022. Startups across the MSME sector have been at the heart of the Indian economy and generated millions of jobs for people across the country.

It is anticipated that MSMEs alone contribute 8% of the overall GDP, and startups play a huge role in it. But unfortunately, not every entrepreneurial dream gets the chance to take off due to a lack of funds. Keeping this in mind, the Indian government offers various government loans to help passionate entrepreneurs make through.

Budding entrepreneur with a revolutionary idea in mind should use the government loan schemes to transform their ideas into action. For further assistance of all entrepreneurs, we’ve curated this epic guide that has all the information on how to avail of a government loan for a startup.

Who Can Avail Business Government Loans for Startups?
Documents Required to Avail the Government Loan
List of Government Loans for Startups

How to Choose the Best Loan Ideal for Your Business?

Who Can Avail Business Government Loans for Startups?

How to get Government business loans for startups
How to get Government business Loans for Startups

Although the precise eligibility criteria would vary depending on the government loan people take, the general criteria common across all loans are:

  • The applicant must be an Indian citizen
  • The applicant must have a robust business plan
  • The applicant should be more than 21 years of age; the maximum age is capped at 65
  • The startup must be registered as a partnership firm, sole proprietorship, Limited Liability Partnership (LLP), Private Limited company, etc
  • The applicant and startup must have a good credit score

Documents Required to Avail the Government Loan

People willing to avail government loan for a startup should be ready with the following documents:

  • KYC documents, including Aadhar card, passport, voter’s ID card, PAN card, etc
  • Past 12 month’s bank statement
  • Self-drafted, sound Business Plan
  • Previous year’s ITR
  • Credit Rating/CIBIL documents
  • GST Documents
  • Business establishment certificate
  • Business address proof
  • Any other document asked by the lending institution

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List of Government Loans for Startups

Government business loans have always provided the necessary financial backing to startups. If a startup requires some financial help, the founders might want to apply for any one of the following government loans for a startup.

Pradhan Mantri MUDRA Yojana (PMMY)

Pradhan Mantri MUDRA Yojana (PMMY) - Government Business Loans for Startups

Launched in 2015, this government loan scheme offers business loans to non-corporate & non-farm small and micro-enterprises. Under this scheme, startups can avail of a loan amount of up to Rs. 10,00,000. The tenure for repayment for this collateral-free loan ranges from one year to five years. Startups can avail of this loan by visiting any nearest small finance bank, microfinance institution, commercial bank, and non-banking financial company.

The Pradhan Mantri MUDRA Yojana provides loans depending on the development stage of the startup. Hence, the applicants can find the following three segregation under this loan:

Loan Type Coverage Yearly Rate of Interest
Shishu Up to Rs. 50,000 1% to 12%
Kishore Above Rs. 50,000 to up to Rs. 5,00,000 8.60% to 11.15%
Tarun Above Rs. 5,00,000 to up to Rs. 10,00,000 11.15% to 20%

Startup founders can apply for this loan if they’re a trader, shopkeeper, vendor, etc. Just visit any lending institution mentioned above or login to a PSB or 59 minutes portal and do the needful. They will guide further. Startups can utilize this loan as a working capital loan through the offered MUDRA card.

Pradhan Mantri MUDRA Yojana (PMMY) - Government Business Loans for Startups

MSME Loan in 59 Minutes

MSME Loan for Startups Approved in 59 minutes
MSME Loan for Startups Approved in 59 minutes

As the name suggests, this loan offered by the government is approved in 59 minutes flat. Launched by SIDBI, this loan is ideal for small and medium-size startups that need capital assistance of under Rs. 10, 00,00,000 at a somewhat lesser interest rate. In some cases, the interest rate is as low as 8%.

To avail of this Public Sector Banks (PSB) loan scheme, startup founders can visit the Central Bank of India, Canara Bank, Bank of Baroda, Bank of India, SBI, etc., for a hassle-free loan application process. Once the loan application is processed and approved, the applicants can get the amount within 8-10 working days. Startup founders can also visit the PSB loan in 59 minutes portal to get more details about this loan scheme and apply.

Credit Guarantee Fund Trust Scheme for Micro & Small Enterprises

CGTMSE for starting new Business
CGTMSE for starting new Business

Also known as CGTMSE, this government business loan provides collateral-free loans to startups. Launched by the SIDBI and MSME ministry, this loan scheme offers a loan amount of up to Rs. 2,00,00,000 to both new and existing startups. A special preference is given to women entrepreneurs under this loan scheme. Under the CGTMSE, startups can get a collateral-free loan of up to Rs. 10,00,000. But for any amount above this value, startups will have to provide collateral in the form of any building or land attached to the primary business.

Those who want to avail of the CGTMSE loan can approach a scheduled commercial bank or select a regional rural bank classified by NABARD for loan approval. Both new and existing startups can apply for this loan engaged in manufacturing activity, retail trade, and service activity.

Credit Facilitation Through Bank by NSIC

NSIC Launched by the MSME ministry for business loans
NSIC Launched by the MSME ministry for business loans

The NSIC has signed an MoU with various banks to provide super-fast and hassle-free loans to different startups. Launched by the MSME ministry, this one-of-a-kind loan facility is provided by NSIC under the central government. The best part of this government loan is that NSIC also helps complete the full documentation and legal formalities to quickly avail of the loan.

Small or medium startups needing a short-term loan for maintaining working capital or other operations should consider applying for this loan. It is a reasonably low-interest loan and can be availed by visiting any well-known banking institution like the HDFC bank, ICICI bank, Axis bank, YES bank, etc.

Also known as CCLCSS, it is a loan provided by the MSME ministry and the government of India to startups for technology upgradation. Startup founders that own a manufacturing enterprise, textile startup, fabrication unit, or any business that uses machines and equipment should avail of this loan of up to Rs. 15 lakh to upgrade to the latest technology. This loan helps startups stay up-to-date regarding technology to withstand the competition at local and global levels.


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How to Choose the Best Loan Ideal for Your Business?

Now that the information related to top business loans offered by the government to startups is made available, some entrepreneurs might be confused about which one to proceed with. The answer is pretty simple. Every loan discussed above has a different purpose, interest rate, credit limit, etc. The startup founders should go ahead with the one that helps the business stay afloat and even scale in the best way possible.

To apply for any of the above-discussed government business loans, startup founders can head to the respective website of the financial institution providing the loan, fill out the application, and wait for someone from the organization to contact them. Business loans offered by Government are sure to help you accelerate your business growth, so they should be applied for.

FAQs

What are the Government loans for startups?

List of Government Loans for Startups are:

  • Pradhan Mantri MUDRA Yojana (PMMY)
  • MSME Loan in 59 Minutes
  • Credit Guarantee Fund Scheme for Micro & Small Enterprises
  • Credit Facilitation through Bank by NSIC
  • Credit Link Capital Subsidy Scheme

How much loan can you get under the MSME government business loan scheme?

Under the MSME government business loan scheme, as an MSME, a startup/business can get a loan sanction of up to Rs. 1 crore within just 59 minutes.

What is the eligibility for a startup business loan?

Eligibility Criteria for Startup Business Loan are:

  • Resident citizen of India
  • Minimum CIBIL score of 700
  • Business should at least 2 years old
  • Annual income of business should be at least INR 2 lakhs
  • Applicant Should be between 21 years to 65 years of age

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