With the passing years getting a loan has become all the more difficult. Banks are becoming a private sector and they are not willing to give off loans without any collateral. How will the small and medium enterprises (SMEs) survive this? How will an entrepreneur obtain the desired startup Loan in such a situation? Well, it is not a situation to panic, because the Government of India is there to hold your hand in troubled times. The government has come up with various schemes for SMEs and entrepreneurs such that they get easy access to a startup loan, and let their dreams fly!
Credit Guarantee Scheme
The Government started the CGS scheme in association with the Small Industries Development Bank of India (SIDBI). They provide exceptional collateral-free loans up to a sum of Rs. 1 crore to any small or medium scale businesses. The only criterion is that the business has to be not more than 5 years old and cannot have a maximum turnover of greater than Rs. 25 crore. The loans are subjected to very reasonable rates of interest. It should also be noted that this scheme provides loans only in the form of term loans or working capital loans. The loan does not apply to the set up educational institutions, agriculture, and the likes.
Micro Units Development and Refinement Agency (MUDRA)
MUDRA was developed by the Government of India to finance small scale enterprises depending upon the stage of business and also the requirements in funding that they require. There are 3 different kinds of collateral-free loan provided by MUDRA which are-
- Shishu- This scheme provides a loan of Rs. 50000 or lesser to any needy SME.
- Kishor- The loan amount is increased to Rs. 50000 up to Rs. 5 lakhs.
- Tarun- Tarun loans range between Rs. 5 lakhs to Rs. 10 lakhs.
*All the schemes have a 1% per month interest rate and a 5-year tenure.
Stand Up India Scheme
The Stand Up India Scheme is designed to help the SC/ST community and also to empower women. Banks are directed to provide such a startup loan to at least one SC/ST person or one woman per bank. This loan is sure to help the entrepreneurs with an amount anywhere between Rs. 10 lakhs and Rs. 1 crore. The loan amount can be obtained without any collateral but needs to be paid back within the tenure of 7 years.
Bank Credit Facilitation Scheme
The Bank Credit Facilitation Scheme was started by the National Small Industries Corporation (NSIC) in accompaniment with the Government of India. This scheme is valid for all small and medium scale enterprises, registered to India. Non-Indian MSMEs are not at all eligible to opt for this loan scheme by the government. The MSMEs can access this startup loan without any cost to themselves, i.e., they do not have to keep any collateral. The general tenure of this scheme is 5 to 7 years, but it can go up to 11 years in exceptional situations.