The MSME (Micro, Small & Medium Enterprises) sector in India is growing at a fast pace. The total number of MSME units has almost doubled over the last decade. It is a large employment-generating sector in every major state of the country. It includes both small scale and medium scale units. There are numerous start-up business loans given by the Indian government to support this sector. Apart from this, financial institutions also offer loan schemes for small businesses in India. However, they mostly focus on loans to other sectors like retail, manufacturing, construction, tourism etc. That is why it is essential to know about the Government’s loan schemes specifically aimed at helping small businesses in the MSME sector. The Government of India has a number of loan programs targeting the MSME segment in India. These schemes consist of various loan types and are available to the owners of the units. For example, the Government of India has launched several schemes for Startup Loans, Rural Micro Units, Women Micro Units, Investment Micro Units, Manufacturing Micro Units, and SME Micro Units. Although there are a number of schemes for the MSME sector in India, there are only a few loan programs that the Government has specifically launched.
What Are The 2 Best Indian Government Startup Business Loans for Small Businesses and Entrepreneurs?
- The Pradhan Mantri Mudra Yojana is a flagship start up business loan by the Indian government, to help small businesses and startup entrepreneurs. It provides loans of up to 10 lakh rupees to entrepreneurs and small business owners who need financial support. Under this scheme, the Government offers three types of loans – Shishu, Kishor and Tarun – to cater to the needs of different businesses at different stages of their growth. The Shishu loan is for small businesses that need funds to establish a startup. This loan provides up to Rs. 50,000 to help entrepreneurs with their initial investments. The Kishor loan is for businesses that have already established a base and need additional funds to expand their operations. This loan provides up to Rs. 5 lakhs to help entrepreneurs grow their businesses. The Tarun loan is for businesses that need funds to expand their operations further. This loan provides up to Rs. 10 lakhs to help entrepreneurs take their businesses to the next level.
- The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE), launched by the Indian Government, is a great initiative for startups and small business owners to get easier access to bank loans. Under this scheme, a loan up to Rs. 1 crore can be obtained through a startup business loan approved by any participating bank. CGTMSE acts as a guarantor and provides credit guarantee coverage to the banks, which eliminates the need for the borrower to provide collateral security and personal guarantees. This scheme encourages banks to provide loans to small and micro enterprises, allowing them to expand their businesses and create more economic jobs. The CGTMSE scheme also offers financial assistance to small and micro-enterprises so they can access credit without any security or collateral. This helps them to start their business without any financial burden. This start-up business loan by the Indian government is a great opportunity for entrepreneurs to start and grow their businesses, as it offers them the financial assistance they need to get their businesses up and running. With this scheme, entrepreneurs can access the capital they need to establish their businesses and start operations.
What is the Impact of the Indian Government’s Startup Business Loans on Small Businesses and Entrepreneurs?
The Indian Government’s startup business loan scheme has been a blessing for small businesses and entrepreneurs. The startup business loan by Indian Government has provided a much-needed boost to small businesses and entrepreneurs, who often lack the financial resources to start and grow their businesses. This has increased people’s disposable incomes and helped stimulate the economy. Moreover, the availability of these loans has enabled entrepreneurs to take the risk of venturing into new business opportunities, which is beneficial for the growth of the country.
But given the number of startups that are applying for these loans, loan disbursement becomes an issue here. By the end of 2022, 80,152 startups were officially recognized by DPIIT (Department for Promotion of Industry and Internal Trade) in India. Thus, with this level of competition, sometimes it gets difficult to have timely access to these loans. What should be done in that case?
Why should we opt for RBF (Revenue Based Financing)?
Starting a business is a dream for many, and with the help of the Indian Government’s startup business loan, this dream can be made into a reality. However, despite the availability of this loan, opting for revenue-based financing from Velocity is a better option. This is because it provides a unique form of funding customized to the business’s needs. Unlike the Government’s startup business loan, Velocity’s revenue-based financing allows the business to pay back only a fraction of the revenue generated so that the business has enough capital to invest in expanding operations. Furthermore, the start up business loan by Indian government comes with a number of restrictions and requirements, such as the need to meet certain criteria and provide collateral. On the other hand, RBF does not have such restrictions, making it easier for startups to access the required capital. Additionally, the turnaround time for revenue-based financing is far shorter than the Government’s startup business loan, which makes it even more attractive.
Summary: In conclusion, revenue based financing offers several advantages over the Government’s startup business loan. It is a more flexible and less risky form of financing and has a much shorter turnaround time. Therefore, opting for RBF loans is a far better choice than the start up business loan by the Indian government.