Types of Government loans
Economic growth depends on its MSME ( micro, small and medium enterprises ) in contributing to the GDP of the country. The MSME sector is the heart of the Indian economy. The loans by the government offer the right kind of financial backing to MSMEs. Types of Government loans
India has about 40 million Micro Small and Medium Enterprises (MSMEs), including registered and unregistered ones. MSMEs fall under the categories of both the organized and the unorganized sectors. These MSMEs contribute to about 40% of the total GDP of India, and it remains a critical source of employment. The MSMEs provide solutions to critical issues in the country like poverty, unemployment, income inequality, regional imbalances, etc. The government for this purpose has introduced various schemes to sanction loans to MSMEs to boost their business and their economy. The entrepreneurs who run such MSMEs can borrow money in the form of a loan through any one of the schemes that suit their requirements.
Some of the most significant kinds of Government loan schemes for small businesses are explained:-
1. MSME business loan in 59 minutes:- It is launched by the government of India as a quick business loan portal for individuals who need to expand their existing business. The scheme allows new and existing businesses to utilize the financial assistance that is provided by the scheme. The loans provided under these schemes extend up to Rs. 1 crore and take about 8 to 12 days to complete the process, wherein the approval for the loan is received within 59 minutes which is primarily why the name of the scheme is known as MSME business loan in 59 minutes. The rate of interest depends on the nature of the business that is carried on by the applicant of the loan. The interest of such loans begins at 8.5%, and the loan amount granted under this scheme can range from 1 lakh to 5 lakh. The following are the requirements for obtaining a loan under this scheme:
- GST verifications
- Income tax verifications
- Bank account statements for the last 6 months
- Ownership-related documentation
- KYC details
2. Pradhanmantri Mudra Yojana provides refinancing support to banks and NBCs for lending to micro units having loan requirements up to INR 10 lakh. The theme behind MUDRA loans is to “fund the unfunded”. All bank branches across India provide MUDRA loans. Such loans have created the low-cost credit concept for micro and small businesses.
3. Credit guarantee fund scheme:– for micro and small Enterprises businesses loan scheme, allows collateral-free credit to the MSME sector. The loans under the scheme can be granted to both new and existing enterprises. The Credit Guarantee Fund Trust is a trust that has been established by the Ministry of MSMEs and the Small Industries for the purposes of implementing the CGFMSE scheme.
4. National Small Industries Corporation is an ISO Certified Indian government enterprise under MSME. One of its primary functions is to aid the growth of MSMEs by providing services including finance, technology, market, and other services across the country.
5. Credit-linked capital subsidy scheme:- It is an innovative credit scheme with the primary objective to aid the technology up-gradation of MSMEs, especially in rural and semi-urban areas.
