How to Get Government Business Loans


Whether you are a seasoned businessman or an entrepreneur just starting, you must have faced a dire need of cash at one point. No matter how well the business is doing, it would need a sudden influx of cash at some point. This does not mean that this cash is meant to save your business – it may simply be used to expand the existing systems. In such situations, it would be wise to turn to Business Loans.

You do not always have to turn to private banks or non-baking financial companies NBFCs if you want quick money – it is a lesser known fact that the government has a lot of schemes for businesses too. The government aims to support the start-ups and the budding businesses in the nation, to help people stoke the entrepreneurial fire within them. The government is trying to make credit available easily for SMEs and start-ups, and this article is all about how to Get government Business Loans in India.

Available Schemes

These are a few of the schemes which the Government is currently operating, to provide credit for small businesses:

  1. Credit Guarantee Scheme (CGS)

This is aimed at providing credit for micro and small businesses in India, and the loans are collateral free for the borrower. The interest rates for the loan are reasonable and lower than most other financial institutions providing similar loans. The maximum amount available with the loan is Rs.1 Crore, although it depends upon the feasibility of the business, eligibility of the borrower and other factors. This scheme is particularly useful for both new and existing Micro and Small Enterprises.

  1. MUDRA Loan Scheme

MUDRA stands for Micro-Units Development and Refinance Agency Ltd. The scheme exists so that micro-units and non-corporate small businesses can obtain enough credit when they need it. The government created this scheme as a remedy to the lack of substantial funding options available for the Small and Medium scale businesses in the nation, and the scheme itself has been designed keeping in mind the scalability of the business. The loan amounts are according to the needs of the customer, and the maximum amount in the various sub-schemes is upto Rs. 10 Lakhs.

  1. Stand Up India Scheme

This loan scheme is aimed at empowering women and SC/ST entrepreneurs in the nation and necessitates that under this scheme.

  1. Bank Credit Facilitation Scheme

The National Small Industries Corporation (NSIC) brought this scheme to life, and it was aimed at MSMEs (Micro, Small & Medium Enterprises) in the nation. The NSIC has partnered with various public and private banks in the country to arrange credit for the users at no extra cost to the MSMEs. The repayment tenure of the loan will depend upon the income the business generates after the loan amount is disbursed to it. The usual loan tenure ranges between 5 to 7 years, while it can even be as much as 11 years in exceptional cases.

How Do You Apply for a Government Business Loan?

The application procedure is collateral free since they are created by the government. However, you will require some documents to Apply for HDFC Business Loan or other business financing options, and other factors will be taken into account too such as:

  • Background: The details of the personal background of the borrower are checked thoroughly by the disbursing organisation. If there are any crimes committed or cases pending in court, it may result in an automatic disqualification. In some cases, it would at least delay the sanctioning of the loan in case of a criminal background.
  • Business Background and Resume: Since most of the Business Loans are of large amounts, you will be asked to produce your resume and your background in this business. The government will try and assess whether you are capable of growing the business with the loan amount provided.
  • Business Plan: It is equally important to have a sound plan for your business, as you are asking for a loan to help grow it. Therefore, you will have to submit a well-thought-out business plan along with the loan application.
  • Tax Returns: Tax returns of both the business and your tax files will have to be submitted, to obtain the loan amount. The tax returns should be of at least the previous three years.
  • Financial Statements: The health of any business can be assessed with the help of the financial details, so you will also be asked to submit those for these loans. These may include bank statements, profit and loss statements, cash flow forecasts and balance sheets.
  • Legal Documents: When you are applying for the loan, you will also have to submit documents which testify that the business is run entirely legally, to be eligible for the loan.
  • Collateral: This is needed in the case of some loans, while it is not needed in the case of many others. Collateral will strengthen your profile while applying for the loan and you may be able to withdraw a larger loan amount depending upon the value of your collateral.

The eligibility for the Business Loans mentioned above varies depending upon the purpose and the area in which the business operates. Therefore, it is always a wise idea to procure all the details of the loan and other factors such as loan amount, the tenure of the loan, interest rate and processing fee before applying for government loans.

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