The Government of India has launched numerous loan schemes to provide credit to MSMEs. MSMEs contribute altogether to our nation for building a solid economy. One of the critical parts of MSMEs is access to credit. MSMEs require credit or funding to build up the business or the development of the business. The Micro, Small, and Medium Enterprises (MSMEs) need financing to build up and develop.
MSME Loan Schemes 2020
To provide credit facilities to the MSMEs, the Government of India has concocted many loan schemes, and even the banking sector and monetary organizations grant loans to them. Some of the well recognized MSME loan schemes of 2020 are discussed below.
Pradhan Mantri Mudra Yojana (PMMY)
The Hon’ble Prime Minister launched the Pradhan Mantri Mudra Yojana (PMMY) scheme on April 8, 2015. This scheme provides credits up to 10 lakh to the non-corporate and non-farm small or micro-enterprises. These loans are classified as MUDRA (Micro Units Development and Refinance Agency Limited) loans under PMMY. MUDRA is a non-banking monetary organization (NBFC) which supports the improvement of MSMEs. MUDRA offers help by renegotiating to banks, microfinance establishments (MFIs), and NBFC for loaning credits to micro units having a loan requirement of up to 10 lakhs.
Under this scheme, the loans are granted by Commercial Banks, Small Finance Banks, MFIs and NBFCs. The borrowers can approach any of these lending institutions or apply for loans online through the UdyamiMitra portal. Under the plan of PMMY, there are three unique schemes specifically ‘Shishu’, ‘Kishore’ and ‘Tarun’ which signify the stage of development and the financing need of the beneficiary micro-units or business people and it additionally gives a reference highlight the following period of graduation or development.
Prime Minister’s Employment Generation Programme
The Prime Minister’s Employment Generation Program (PMEGP) is a merger of two schemes of Prime Minister’s Rojgar Yojna (PMRY) and Rural Employment Generation Program (REGP). This scheme centers around generating self-employment opportunities for the unemployed youth and customary craftsmen through micro-enterprise foundations in the non-farm sector.
Eligibility
Any individual/s who is/are above 18 years old is/are eligible to avail the benefits of the scheme. The individual/s should be at at least VIII standard pass for the projects, in the manufacturing sector which cost above Rs.10 lakh and in the business or service sector which cost above Rs. 5 lakhs. Under this scheme, only the new projects are considered for sanction. Self Help Groups, Institutions enlisted under Societies Registration Act, 1860, Production-based Co-usable Societies, and Charitable Trusts are also eligible. Any unit/s existing under PMRY, REGP, or any other scheme of Government of India or State Government are not eligible. Even the units that have already availed Government Subsidy under any other scheme of Government of India or State Government are not eligible.
Nature of Assistance
The maximum cost of the venture or unit admissible in the manufacturing sector is Rs.25 lakhs and in the business or service sector is Rs.10 lakhs for help under this scheme. The recipient’s rate of the subsidiary for the general category is 15% in urban areas and 25% in rural areas. The recipient’s rate of the subsidiary for the special category is 25% in metropolitan territories and 35% in rural areas.
Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE)
Ministry of Micro, Small and Medium Enterprises, and Small Industries Development Bank of India (SIDBI) together established the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). CGTMSE is set up in order to implement a credit guarantee scheme for MSMEs. The Government of India and SIDBI add to the corpus of this scheme. The entire thought behind this trust is providing monetary help to the small and medium industries with no outsider assurance or collateral. The guarantee coverage under this scheme ranges from 85% for Micro Enterprise (up to Rs 5 lakh), 75% for others, and 50% for retail activity.
Eligibility
Both existing and new enterprises are eligible under the scheme. The applicants meeting the eligibility criteria may approach banks or monetary establishments and select Regional Rural Banks which are eligible for getting assistance under this scheme.
Credit Linked Capital Subsidy Scheme (CLCSS)
The Credit Linked Capital Subsidy Scheme (CLCSS) renders a subsidy for technology up-gradation to the MSMEs MSMEs. This scheme gives 15% subsidy for an additional investment up to Rs.1 crore for technology up-gradation by MSMEs. Technology up-gradation implies induction of state-of-the-art or near state-of-the-art technology. The candidates meeting the eligibility criteria may approach 12 nodal banks or organizations to avail of the subsidy under this scheme. These 12 nodal banks or agencies are SIDBI, NABARD, SBI, BoB, PNB, BOI, SBBJ, TIIC, Andhra Bank, Corporation Bank, Canara Bank, and Indian Bank.
Eligiblity
Any MSME unit is eligible under this scheme. In any case, the units replacing existing gear or technology with similar equipment or technology won’t meet all requirements for a subsidy under this plan. Also, the units upgrading with used machinery would not be eligible under this scheme This subsidy is provided to MSMEs for induction of settled and improved technologies in specified sub-sectors or products approved under the scheme. This scheme gives an upfront subsidy of 15% on institutional credit up to Rs.1 crore (for example a subsidy cap of Rs.15 lakh) for identified sectors/subsectors/ technologies.
Equity Infusion for MSMEs through Fund of Funds
To urge MSMEs to develop and get listed on stock exchanges, the Fund of Funds provides equity funding to MSMEs who have growth potential and practicality. This scheme will have the option to middle various sorts of funds into underserved MSMEs and address the developing requirements of practical and high growth MSMEs with the intervention of the government.
Eligibility
All MSMEs are eligible. MSMEs can apply through Investor Funds onboarded and registered with the proposed Fund of Funds. The proposed fund of funds will encourage the private sector investments in the MSME with an influence of Rs.50,000 crore.
Credit Guarantee Scheme for Subordinate Debt (CGSSD)
Credit Guarantee Scheme for Subordinate Debt (CGSSD) tries to stretch out help to the promoters of the operational MSMEs which are pushed and have become NPA as on April 30, 2020. The promoters, thusly, will infuse this sum in the MSME unit as equity and thereby increase the liquidity and maintain the debt-equity ratio. The subordinate debt will be of impressive assistance to support and resuscitate the MSMEs which have become NPA or are on the edge to become NPA. The promoters of the MSMEs will be given credit equivalent to 15% of their stake (value in addition to obligation) or Rs.75 lakh whichever is lower.
Eligibility
The operational MSMEs which are NPA or are stressed will be eligible. The promoters of MSME who meet the eligibility criteria can apply for this scheme. They can move toward scheduled commercial banks to avail benefit under this scheme.
SIDBI Make In India Loan For Enterprises (SMILE)
The SIDBI Make In India Loan For Enterprises (SMILE) is proposed to take forward the Government of India’s ‘Make in India’ mission and help MSMEs take part in this mission. This scheme gives a soft loan in the nature of quasi-equity. It likewise provides term loans on generally soft terms to MSMEs to meet the necessary obligation value proportion for their establishment meant. It additionally gives credits to the current MSMEs to seek after open doors for their development.
Eligibility
New ventures in the manufacturing and the service sector are covered under this scheme. The existing enterprises undertaking expansion for making the most of the emerging opportunities are eligible under this plan. This scheme will likewise cover the existing enterprises undertaking expansion for undertaking modernization, technology up-gradation, or different tasks for developing their business. Under this scheme, the accentuation is given to financing smaller enterprises within MSME. The minimum loan size is Rs.10 lakh for equipment and finance. The minimum loan size for others is Rs.25 lakh. The repayment period is up to 10 years, including a moratorium of up to 36 months.
MSME Business Loan for Startups in 59 Minutes
Another web-portal was launched to give loans to MSMEs in 59 Minutes. The processing of the loans for MSMEs on this online portal is completely automated. This portal will process the loans within 60 minutes. After the loan is approved through this portal, the loan is disbursed to the candidate the loan in the following seven or eight working days. This scheme focuses on automation and digitization of different cycles of business loans offered, which include term loans, working capital loans, and mudra loans.
Eligibility
Any existing business or MSMEs which need to apply for a business loan (term loan/working capital loan) on a fundamental level endorsement is eligible. The business should be IT agreeable and must have a six months Bank Statement Facility. Both GST registered as well as not-registered organizations are eligible. On the off chance that any business not enlisted with GST or has not filed ITR or doesn’t have a bank statement applies for mudra loan, at that point, the business can give provide the related details by self-declaring the same.
MSME Loan Scheme By Banks
Banks and other lending institutions offer term loans and working capital loans to MSMEs. The working capital loans are offered to MSMEs by banks to satisfy their day by day cash requirements. The term loans are offered to MSMEs for capital expansion, capital expenditure or purchasing fixed assets. Apart from term loans and working capital credits, the banks or monetary institutions have different loan schemes which they offer to MSMEs. The MSME credit plans offered by various banks or monetary organizations have various terms and conditions pertinent.
Each loan scheme offered by the banks/financial institutions has different interest rates. The interest rates are based on various factors such as desired loan amount, repayment tenure, nature and tenure of business, creditworthiness and repayment capability.
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