As an MSME founder looking to navigate the labyrinth of loan schemes in India, understanding the available options is crucial for the growth and sustainability of your enterprise.
The Government of India, recognizing the pivotal role MSMEs play in our economy, has introduced various credit schemes to facilitate funding for establishment and expansion.
Here’s a detailed exploration of prominent MSME loan schemes in 2023, designed to cater to the diverse needs of businesses, especially those impacted by the COVID-19 disruptions.
1. Pradhan Mantri Mudra Yojana (PMMY)
Launched on April 8, 2015, by the Hon’ble Prime Minister, PMMY aims to provide credit to non-corporate and non-farm small or micro-enterprises. Administered by Micro Units Development and Refinance Agency Limited (MUDRA), the scheme categorizes loans into ‘Shishu,’ ‘Kishor,’ and ‘Tarun,’ representing different stages of development and funding requirements, ranging from up to Rs. 50,000 to Rs. 10 lakhs.
Eligibility:
- Non-corporate and non-farm small or micro-enterprises.
- Three categories: ‘Shishu’ (up to Rs. 50,000), ‘Kishor’ (above Rs. 50,000 up to Rs. 5 lakhs), ‘Tarun’ (above Rs. 5 lakhs up to Rs. 10 lakhs).
Other Relevant Details:
- Loans provided by Commercial Banks, Small Finance Banks, MFIs, and NBFCs.
- Loans accessible through UdyamiMitra portal.
2. Prime Minister’s Employment Generation Programme (PMEGP)
PMEGP, a merger of the Prime Minister’s Rojgar Yojna and Rural Employment Generation Programme, focuses on generating self-employment opportunities. Executed by the Khadi and Village Industries Commission (KVIC), the scheme provides financial assistance for projects in the manufacturing sector up to Rs. 25 lakhs and in the business or service sector up to Rs. 10 lakhs.
Eligibility:
- Individuals above 18 years with at least VIII standard pass.
- New projects eligible; existing units under other schemes are not eligible.
Other Relevant Details:
- Maximum project cost: Rs. 25 lakhs (manufacturing), Rs. 10 lakhs (business or service).
- Subsidy rates vary based on category and location.
3. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE)
Established by the Ministry of Micro, Small and Medium Enterprises and SIDBI, CGTMSE aims to provide credit guarantee for MSMEs without requiring third-party guarantees or collateral. Guarantee coverage ranges from 85% for Micro Enterprises (up to Rs. 5 lakh) to 50% for retail activities.
Eligibility:
- Both existing and new enterprises.
- Guarantee coverage ranges from 85% to 50% based on enterprise size.
Other Relevant Details:
- No third-party guarantee or collateral required.
- Guarantees for credit facilities up to Rs. 200 lakhs.
4. Credit Linked Capital Subsidy Scheme (CLCSS)
CLCSS offers a 15% subsidy for technology upgradation by MSMEs, providing financial support for induction of state-of-the-art technology. Eligibility is open to any MSME unit, with 12 nodal banks facilitating the subsidy process.
Eligibility:
- Any MSME unit.
- Excludes units replacing existing equipment or upgrading with used machinery.
Other Relevant Details:
- 15% upfront capital subsidy on institutional finance up to Rs. 1 crore.
- Applies to specified sub-sectors and technologies.
5. Equity Infusion for MSMEs through Fund of Funds
Addressing the equity shortage faced by MSMEs, this scheme encourages growth-stage funding by providing equity funding for viable and high-growth enterprises. The government’s intervention aims to facilitate private sector investments with a leverage of Rs. 50,000 crore.
Eligibility:
- All MSMEs.
- Apply through Investor Funds registered with the proposed Fund of Funds.
Other Relevant Details:
- Government support for VC or PE firms investing in viable MSMEs.
- Fund of Funds encourages private sector investments with leverage of Rs. 50,000 crore.
6. Credit Guarantee Scheme for Subordinate Debt (CGSSD)
Supporting stressed operational MSMEs, CGSSD allows promoters to infuse funds into their enterprises, enhancing liquidity and maintaining the debt-equity ratio. The scheme provides a 90% guarantee for sub-debt, with a maximum repayment tenure of ten years and a moratorium of 7 years on principal repayment.
Eligibility:
- Promoters of operational stressed MSMEs.
- Apply through scheduled commercial banks.
Other Relevant Details:
- 90% guarantee for sub-debt, 10% from promoters.
- Maximum repayment tenure: 10 years, with a 7-year moratorium.
7. SIDBI Make In India Loan For Enterprises (SMILE)
Aligned with the ‘Make in India’ campaign, SMILE offers soft loans and term loans to MSMEs for establishment, growth, and modernization. Eligibility includes new and existing enterprises in the manufacturing and services sectors.
Eligibility:
- New enterprises in manufacturing and services.
- Existing enterprises for expansion, modernization, or technology upgradation.
Other Relevant Details:
- Soft loans and term loans for debt-equity ratio compliance.
- Minimum loan size: Rs. 10 lakh for equipment, Rs. 25 lakh for others.
8. MSME Business Loan for Startups in 59 Minutes
Designed for quick processing, this scheme offers automated in-principle approval for business loans within 59 minutes. Eligibility criteria include IT compliance, a six-month bank statement facility, and both GST registered and non-registered businesses.
Eligibility:
- Existing businesses or MSMEs.
- IT compliant, with a six-month bank statement facility.
Other Relevant Details:
- In-principle approval within 59 minutes.
- Loans from Rs. 1 lakh to Rs. 5 crores, with or without collateral.
9. MSME Loan Scheme by Banks
Banks and financial institutions, including State Bank of India, HDFC Bank, ICICI Bank, and Axis Bank, offer various term and working capital loans to MSMEs. Interest rates vary based on factors such as loan amount, tenure, business nature, and creditworthiness.
Eligibility:
- Varied eligibility criteria based on the bank or financial institution.
Other Relevant Details:
- Term loans and working capital loans.
- Interest rates based on factors like loan amount, tenure, and creditworthiness.
Navigating the diverse landscape of MSME loan schemes requires a thorough understanding of each option’s eligibility criteria, nature of assistance, and terms and conditions.
Make informed decisions to secure the financial future of your MSME. Remember, the information provided here is for reference purposes, and professional advice is recommended for specific financial decisions.