Are you looking for a small business loans to boost your business or start one? While there are a number of private banks that offer MSME loans, you could think about taking a look at these small business loans offered by the government of India.
What Kind of Loan Do You Need?
Generally, there are three loan categories that you could borrow into. These loans are specific to what your business currently needs. You can also choose on the basis of the stage of business that you’re in.
Working Capital Loan:
Working capital is the capital you require to meet your day-to-day business expenses like your monthly electricity bills. All operational costs to run your business come under working capital and some loans are crafted to suit your working capital needs alone. These loans are offered typically for 12-month tenure and have an interest rate of 12% to 16%. Working capital loan can be either secured or unsecured.
Corporate Term Loan:
Term loans are generally used to start a venture or expand a business. Hence, if you are starting up, you may want to look at term loans or funding. These are large sum of funds borrowed from banks or financial institutions that are expected to be repaid over a longer period of time. These loans are usually secured and have a longer tenure and the interest rate is negotiable. They can be converted into equity options and also have tax benefits.
These loans are used to buy fixed assets. If you want to put up an office, you could consider borrowing a term loan. In general, these loans are secured with tenure of 1 to 10 years and a floating interest rate between 10 to 20%.
Below mentioned are the 3 govt. small business loans you should know about:
The government of India has partnered with financial institutions to make credit availability easy for SMEs in the country. If you are setting up to start something of your own & need funds, you can consider one of these small business loans schemes offered by the government of India.
- The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS)
This scheme is run by the government of India in association with SIDBI (Small Industries Development Bank of India) to provide unsecured loans to businesses. You can borrow up to Rs.100 Lakh in term loans or working capital loans as per your eligibility and viability.
- The MUDRA Loan Scheme
MUDRA stands for Micro Units Development and Refinance Agency Ltd. It is an agency launched by the Indian government to facilitate corporate term loans to entrepreneurs. Take a look at its features in this table below:
- Stand up India Scheme
The Stand up India scheme is a unique scheme started by the government of India to financially empower SC/ST and women entrepreneurs. You can borrow between Rs. 10 lakh and Rs. 1 CR to start a manufacturing, trading or service unit, which is to be repaid in 7 years.