MSME Loan Scheme 2024: Features, Eligibility, and Application Process
How do I apply for an MSME loan? What will be the most popular MSME loans in 2024? What is the best way to get a government loan? Find answers to all your questions about MSME loans in India. This blog covers the features, eligibility, and application process of some popular MSME loan schemes.
Importance of MSME Loans
All businesses, both small and large, require credit and finance facilities. Access to funding and credit is crucial for Micro, Small, and Medium Enterprises (MSMEs). Various msme loan schemes are available, alongside business loan , invoice financing, and advances from banks and non-bank financial companies. The government has created several MSME loan schemes, each with unique eligibility criteria and features, to meet the funding needs of MSME businesses.
MSME Loan Scheme 2024
The MSME sector has always been a priority for the government. Several unique loan schemes and financial yojanas have been developed to cater to the diverse funding needs of MSMEs.
Who Can Apply for an MSME Loan
The eligibility criteria for these loans are specific and designed to assist MSME businesses. Eligibility is determined by the type and amount of the loan being offered. Women entrepreneurs, individuals from states with special status, SC/STs, and others may also be eligible for additional relaxations.
How to Apply for a Government Loan for MSMEs
Most MSME loan schemes accept both online and offline applications. Information about the application process can be found on the loan scheme websites. However, it is recommended to have an MSME registration certificate to take full advantage of these financial schemes.
Popular Loan Schemes for MSMEs
The following are some of the most popular loan schemes and financial yojanas for MSMEs:
- Pradhan Mantri Mudra Yojana (PMMY)
- Credit Linked Capital Subsidy Scheme (CLCSS)
- Prime Minister’s Employment Generation Programme (PMEGP)
- Pradhan Mantri Rozgar Yojana (PMRY)
- PSB Loans – 59 Minutes
- Credit Guarantee Fund Trust for Micro and Small Enterprises
- Stand-Up India Scheme
- SIDBI Loan Schemes for MSMEs – SMILE and Others
1. Pradhan Mantri Mudra Yojana (PMMY)
What is the MUDRA Loan?
MUDRA is the popular name for the Pradhan Mantri Mudra Yojana. The Micro Units Development & Refinance Agency, set up by the government, offers loans of up to ₹10 lakhs or ₹20 lakhs (this limit has recently been increased from ₹10 lakhs to ₹20 lakhs).
Types of MUDRA Loans
The PMMY Loan Scheme offers three types of funding:
- Shishu: Recommended for new startups and businesses that require funding of up to ₹50,000.
- Kishore: Recommended for companies seeking funding for expansion or growth.
- Tarun: For established MSMEs seeking to grow their business, loans of ₹5,00,000 to ₹20,00,000 are available.
MUDRA Loan Eligibility
MUDRA is a low-interest loan that does not require collateral. Below are the eligibility criteria for MUDRA Loans:
- You must be an MSME registered business.
- The applicant’s age must be between 18 and 65.
- Business type: PMMY loans are available to all non-corporate, non-farming enterprises, including startups, retailers, wholesalers, and distributors in the manufacturing, trading, and service sectors.
- The business must not have a CIBIL credit score below 650.
How to Apply for a PMMY Loan
MUDRA loans are available through specific financial Member Lending Institutions (MLIs), namely:
- Public and private sector banks (check SBI MUDRA loan)
- Regional Rural Banks and Cooperative Banks
- Small finance banks
- Micro Finance Institutions and NBFCs
Please Note: MUDRA Loans are only available through MLIs. Only apply via MLIs.
2. Credit Linked Capital Subsidy Scheme (CLCSS)
What is CLCSS?
The Credit Linked Capital Subsidy Scheme is a capital subsidy program designed to help MSEs upgrade their technology. This loan can be used to adopt more advanced technology for quality or productivity improvement. The loan subsidy can be utilized to purchase machinery or upgrade their plants as per the specified list.
The Scheme Offers Subsidies For:
- 15% capital subsidy for MSEs, including coir and khadi (for 51 sub-sectors).
- The upper limit for institutional finance is ₹1 crore.
CLCSS Eligibility
- You must be an MSE in the specified sub-sectors to benefit from the CLCSS scheme.
- MSE registration is required with a valid UAM.
There are many sub-sectors in industries like printing and cosmetics.
How to Apply for a Government Loan for MSMEs
Primary Lending Institutions can initiate an online application for CLCSS. The PLIs upload the application directly to the Nodal Agency, which then recommends it to the Office of DC(MSME) for the subsidy. The funds are released once approvals have been granted to the Nodal Agencies, who then transfer them to PLIs.
The following are some of the nodal banks that have been approved:
- Public sector banks: State Bank of India (SBI), State Bank of Bikaner & Jaipur (SBJ), Bank of Baroda, Corporation Bank, Canara Bank, and Punjab National Bank
- Tamil Nadu Industrial Investment Corporation Limited
- NABARD, SIDBI
3. Prime Minister’s Employment Generation Programme (PMEGP)
What is PMEGP?
The PMEGP MSME Loan Scheme has been in existence since 2008, administered by the Ministry of MSME and executed by KVIC. This is a credit-linked subsidy program designed to create jobs in rural and urban areas by establishing small businesses that are not farm-related. Not only does this create jobs, but it also helps reduce migration from rural areas to urban areas.
The PMEGP Scheme Offers:
Subsidies for two activities:
- Establishment of micro-businesses: 15% to 25% subsidy in urban and rural areas.
- Upgrade existing units under MUDRA/PMEFGP/REGP: 15% subsidy for all (general).
The maximum cost of a project in the manufacturing sector for an upgrade is ₹25 lakhs, with a subsidy of ₹3,75,000 (15%). The maximum project cost for the services sector is capped at ₹10 lakhs, with a subsidy of up to ₹1,50,000 (15%).
How to Apply for PMEGP
KVIC has a portal that accepts applications for the PMEGP subsidy program. If you want to apply for a new unit or upgrade, you will need to go online and submit your application.
Finding the Best Government MSME Loan Scheme
By now, you should understand that the type of loan you need to obtain will determine whether you qualify for an MSME loan. The eligibility requirements and application process vary because the loan schemes were designed to address specific challenges. Additionally, given India’s gradual move towards a digital economy, most of these loan schemes can be applied for online or offline.
