List of Government Business Loan Schemes for Small Businesses

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Small businesses are the foundation of India’s economy, driving innovation, employment, and inclusive growth. Yet, lack of capital continues to block many promising ventures from reaching their full potential. To bridge this gap, the Indian government has introduced several government loan scheme options to offer credit access to micro, small, and medium enterprises (MSMEs). Whether you're a first-time entrepreneur or looking to expand your business, these government Business Loan schemes are designed to support your journey.

Why Government Business Loans Matter for MSMEs?

Access to affordable finance is often the biggest hurdle for MSMEs. With government loans for business schemes, entrepreneurs benefit from easier credit access, reduced interest rates, and collateral-free loans. These initiatives also provide support for modernisation, job creation, and rural enterprise growth.

Also Read: Government Loan Schemes for Women Entrepreneurs

Top Government Business Loan Schemes in India

Here’s a closer look at the most popular government Business Loan scheme options available to Indian entrepreneurs in 2025:

1. Pradhan Mantri MUDRA Yojana (PMMY)

This government Business Loan targets micro and small non-farm enterprises. Loans are categorised into:

• Shishu: Up to INR 50,000
• Kishor: 50,001 to 5 Lakh
• Tarun: 5 Lakh to 10 Lakh

The loans are offered through banks, NBFCs, and MFIs. No collateral is required, and the funds can be used for business setup, working capital, or expansion.

2. Prime Minister’s Employment Generation Programme (PMEGP)

This government scheme for business helps first-time entrepreneurs set up micro-enterprises.

• Loan Limit: INR 25 Lakh (manufacturing), INR 10 Lakh (services)
• Subsidy: 15–35% based on category and location

The scheme is open to individuals above 18 years, self-help groups (SHGs), and cooperatives.

3. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

One of the most impactful government loan schemes for businesses, CGTMSE offers collateral-free loans up to INR 2 Crore.

• Coverage: 85% for loans up to INR 5 Lakh, 75% for higher amounts

This is ideal for MSMEs seeking credit without third-party guarantees or security.

4. Stand-Up India Scheme

Designed to promote entrepreneurship among women and SC/ST categories, this government loan scheme for business provides:

• Loan Range: 10 Lakh to 1 Crore
• Purpose: Greenfield ventures in manufacturing, trading, or services

Borrowers get hand-holding support, along with working capital or term loans.

5. SIDBI Make in India Loan for Enterprises (SMILE)

Aimed at supporting the ‘Make in India’ vision, SMILE offers soft loans to boost MSME growth.

• Minimum Loan: INR 10 Lakh
• Repayment Tenure: Up to 10 years with a 3-year moratorium

It supports both manufacturing and service sectors looking to modernise or expand.

6. Credit Linked Capital Subsidy Scheme (CLCSS)

This scheme offers a 15% subsidy on loans up to 1 crore to encourage tech upgrades.

• Target: Manufacturing units investing in modern equipment

Ideal for businesses looking to boost productivity and remain competitive.

7. Credit Guarantee Scheme for Startups (CGSS)

Part of Startup India, this government loan scheme offers:

• Guarantee Coverage: Up to 10 Crore
• Loan Types: Term loans, working capital, venture debt

Only DPIIT-recognised startups are eligible, and loans are backed by a nominal guarantee fee.

8. PM SVANidhi Scheme

This scheme supports street vendors and micro-business owners.

• Loan Limit: Up to INR 50,000 (in phases)
• Benefits: Interest subsidy, digital incentives, working capital support

No collateral is needed, and the scheme promotes financial inclusion.

9. AIF – Agriculture Infrastructure Fund

Offers credit for post-harvest and farm-gate infrastructure.

• Loan Limit: Up to 7.5 Crore
• Interest Subvention: Up to 3% for 7 years

It supports FPOs, agri-entrepreneurs, cooperatives, and rural startups.

10. Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PM FME)

Helps micro food businesses grow through:

• Credit-linked grants and seed capital
• Moratorium: 6–24 months

Ideal for SHGs, cooperatives, and individual processors seeking formalisation and growth.

Also Read : Explore Government Schemes and Loan Options

Eligibility Criteria for Government Business Loans

While each government loan scheme has its specific terms, the general eligibility conditions include:

• Indian citizenship
• Age 18 years and above
• A valid business idea or operational MSME
• Compliance with local and central registration norms (GST, Udyam, etc.)

Some schemes may require specific sector focus, credit scores, or startup recognition.

How to Apply for a Government Business Loan?

You can apply for a government Business Loan through:

• Banks: Public and private sector banks offer most of these loans
• Government portals: UdyamiMitra, StandUpIndia
• Common Service Centres (CSCs): Helpful for rural or remote applicants

Online applications make the process easier, faster, and more transparent.

Documents Required for Government Business Loans

Here’s what you’ll typically need to apply for a government Business Loan:

• Identity Proof (Aadhaar, PAN)
• Address Proof
• Business registration or incorporation certificate
• Detailed project report or business plan
• GST registration (if applicable)
• Bank account details
• Passport-size photographs
• Financial statements (if already in business)

Benefits of Choosing Government Loan Schemes

• Collateral-free loans: Most schemes waive the need for physical security.
• Low-interest rates: Government subsidies and interest subsidies make borrowing affordable.
• Extended repayment: Flexible tenures up to 10 years with moratorium options.
• Inclusive access: Special provisions for women, SC/ST, and rural entrepreneurs.
• Tech upgradation: Support for machinery, digitisation, and innovation.
• Handholding support: Training, financial literacy, and advisory assistance.

These government Business Loans are designed to reduce risk for lenders while promoting self-employment and enterprise growth.

Conclusion

Government-backed loans play a crucial role in empowering India’s small businesses. With options tailored to various industries, investment levels, and entrepreneur profiles, there's a government loan scheme - whether it's an MSME loan or other funding option—that fits almost every need. Whether you’re a startup founder, street vendor, or rural manufacturer, these schemes can unlock capital, boost operations, and build resilience. To plan your finances better, tools like a Business Loan EMI Calculators can help estimate monthly repayments and manage budgets efficiently. Explore the right government loan scheme and take your next step toward business success.

FAQs

Q.1. Which government scheme is best for startup loans?

A. The Credit Guarantee Scheme for Startups (CGSS) and Startup India are among the best options, offering collateral-free loans up to INR 10 crore for DPIIT-recognised startups with minimal guarantee fees.

Q.2. How can I get a government loan for my business?

A. You can apply through authorised banks, NBFCs, or online portals, like UdyamiMitra and StandUpIndia, depending on your business type and loan requirement.

Q.3. Do government Business Loans require collateral?

A. Not always. Schemes like MUDRA, CGTMSE, and CGSS offer collateral-free loans, making it easier for small businesses and startups to access funds.

Q.4. What is the loan limit under the MUDRA scheme?

A. MUDRA loans are available in three categories: Shishu (up to INR 50,000), Kishor (50,001–5 lakh), and Tarun (5 lakh–10 lakh), based on the stage and size of the business.

Q.5. Who is eligible for PMEGP loans?

A. Any Indian citizen above 18 years with at least a Class 8 pass for manufacturing units above 10 lakh can apply. The scheme also supports SHGs, cooperatives, and charitable trusts.

Disclaimer:

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