If you are keen on starting a new business, the government offers various schemes to help you with funding and support. These schemes provide financial assistance, subsidies, and resources aimed at fostering entrepreneurship. Several ministries extend numerous training courses and incubators free of cost, but due to fear of over-elaboration, we will only cover monetary incentives--loans. Here are some notable loan schemes with support from the government to help you start a business:
Pradhan Mantri MUDRA Yojana (PMMY)
This scheme completely sponsored by the Central government provides loans of up to Rs 10 lakh for those planning to start a business. It is available to all entrepreneurs across all sections, including General categories and communities in the reservation category.
The Government of India, in Budget 2024-25, announced an increase in the loan limit under the Pradhan Mantri Mudra Yojana. The loan limit has been increased to Rs 20 lakh for those who have successfully repaid their previous loans under the Tarun category. This category erstwhile included all loans ranging from Rs 5 lakh to Rs 10 lakh repayable within a maximum of 84 months. For loans taken under PMMY, no collateral is required. Borrowers can apply online for Mudra loans through the government-run Udyamitra portal or they can approach the enlisted bank's nearest branch office or a Non-banking financial company.
Stand-up India
This scheme provides loans ranging from Rs 10 lakh to Rs 1 crore to Scheduled Communities (SC) or Scheduled Tribes (ST) and women entrepreneurs to set up new enterprises in select sectors. The loan can be used to cover capital investment or working capital needs. The loans can be used to establish new enterprises in manufacturing, services, agri-allied activities, or the trading sector.
It strives to cover at least one SC or ST and one woman borrower per bank branch. Individuals from SC or ST backgrounds or woman borrowers should hold at least 51 per cent ownership of the business enterprise to be eligible to apply for this loan.
Up to 85 per cent of the project cost can be funded through this scheme. The interest rate would be the lowest applicable rate of the bank for that category (rating), not to exceed (base rate (MCLR) + 3 per cent + tenor premium), as stated on the government website. The loan should be repaid in 7 years, including a moratorium of 18 months. If you still need additional funds, you can use eligible Central or State schemes for further support, but you should mandatorily contribute a minimum of 10 per cent of the project cost.
This loan is available through all branches of Scheduled Commercial Banks and can be availed either directly at the branch or through SIDBI's dedicated portal 'www.standupmitra.in'.
CGTMSE
The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) allows collateral-free loans to the micro and small enterprise sector, up to Rs 2 crore.
The Centre provides a guarantee on loan repayment under CGTMSE up to 75 per cent to 80 per cent of the sanctioned amount of the credit facility. Over 150 institutions including Public Sector Banks can lend under this scheme, and businesses availing loans have to pay an annual guarantee fee--a maximum of 0.55 per cent of the loan amount. Micro-enterprises (up to Rs. 5 lakh), MSEs owned or operated by women, and entrepreneurs in the North-East Region Centre provide the highest coverage.
Startup India Seed Fund Scheme
Startup India Seed Fund Scheme (SISFS) aims to provide financial assistance to startups for proof of concept, prototype development, and product trials up to Rs 20 lakh. Further for market entry and commercialization up to Rs 50 lakh will be provided through convertible debentures, debt, or debt-linked instruments.
This would enable these startups to graduate to a level where they will be able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions.
Atal Innovation Mission (AIM)Launched by the government in 2016, the scheme aims to foster innovation by lending a maximum of Rs 10 crores to the Atal Incubation Centre. These incubation centres will support all emerging organisations in health, agriculture, education, transportation, etc.
Dairy Entrepreneurship Development Scheme (DEDS)The Department of Animal Husbandry, Fisheries, and Dairying has launched the Dairy Entrepreneurship Development Scheme to support dairy entrepreneurship and to create self-employment in the rural sector. The activities covered under the scheme include milk production, procurement, preservation, marketing, etc. The entrepreneur must contribute a minimum of 10 per cent of the total project cost.The DEDS scheme offers back-end capital for bankable projects for 25 per cent of total project cost for general category candidates and 33.33 per cent for farms that belong to the SC or ST category. The balance portion can be funded by a bank loan and the repayment period can be a maximum of 7 years but varies depending on the cash flow.
