India’s small and medium enterprises play a significant role in the economy. It generates employment opportunities for around 120 million workforces and contributes approximately 30% to GDP and 40% to exports.
However, despite its immense importance, this sector faces issues like poor infrastructure, lack of skilled human resources and shortage of upgraded technology. These issues are mostly due to limited access to finance.
Consequently, the Government of India, recognising the importance of this sector, has introduced several financing schemes. These schemes aid business owners to avail funding quickly and give their firms a boost.
- Pradhan Mantri MUDRA Yojana – Under this scheme, businesses and enterprises in the SME sector can avail collateral-free SME loans at affordable rates and zero processing fees. Borrowers can apply at any of the designated financial institution, NBFCs, RRBs and the like.
This scheme is divided into three other plans, each representing different phases of funding requirements.
These plans are –
- Shishu – for loans up to Rs.50,000.
- Kishore – covering loans from Rs.50,000 to Rs.5 lakh.
- Tarun – includes loans till Rs.10 lakh.
Applicants need to submit an identity proof and address proof along with the application form. They should know everything about MUDRA loans before applying.
- Credit Linked Capital Subsidy Scheme for Technology Upgradation – One of the major problems faced by micro, small and medium businesses is lack of state-of-the-art technology. It will enable them to manufacture products quickly, reducing the cost of production and boost business.
Therefore, the government launched this scheme so that business owners have access to the required funds to upgrade their machinery. An individual can avail 15% subsidy on SME loans availed to purchase new plant and machinery or to improve their technology.
- Marketing assistance scheme – Once a product is manufactured, it needs to be marketed properly so that it reaches its target audience. For this reason, the Government of India introduced this scheme.
This scheme provides financial aid to small businesses and start-ups to market their products and services by organising and participating in exhibitions or trade fairs held abroad.
This scheme also facilitates buyer-seller meets, marketing campaigns and promotional activities. Businesses who wish to participate in this scheme should apply to National Small Industries Corporation.
- Standup India – Women entrepreneurs and members from Scheduled Caste and Scheduled Tribe can also set up their business venture by availing capital under this scheme.
Before applying, candidates should meet the eligibility criteria, which are –
- Applicants should be above 18 years of age.
- He or she should not have any history of default in payment to any financial institution.
- Borrowers can only opt for credit under this scheme if they are setting up a business venture for the first time.
Aside from SME loans under financing schemes by the government, an individual can also accrue the necessary funding by applying for business loans from a financial institution. As these are unsecured loans, applicants are not required to mortgage any personal or business asset.
Business loans have simple eligibility criteria and nominal documents which means an applicant will be quickly approved for the same.
Moreover, lending institutions like Bajaj Finserv also provide pre-approved offers which aid in saving time during the credit application process. These offers are available on a list of financial products like personal loans, business loans, etc.
An individual also has the freedom to look for an online business loan that meets the requirements of his/her firm.
The different types of credit include –
- Working capital loans
- Business loans for women
- MSME and SME loans
- Machinery loan
There are several reasons why business loans are financially beneficial. Entrepreneurs can choose these over government schemes to avail funds of up to Rs.30 lakh with tenors 60 months.
