In order to assist businesses, particularly Micro, Small, and Medium Enterprises (MSMEs), the government of India has established a number of programmes and initiatives, the most prominent of which is the provision of unsecured loans through Government Banks and Non-Banking Financial Companies (NBFCs). The purpose of these loans is to encourage new business ventures, which in turn will stimulate economic expansion and produce new job openings. The following is a list of prominent government programmes that, through government banks and NBFCs, offer unsecured loans to eligible borrowers:
Micro and small businesses are eligible for unsecured loans through the Pradhan Mantri Mudra Yojana (PMMY), which is part of the Mudra Yojana. These loans are broken down into three categories: Shishu, Kishor, and Tarun. The maximum loan amount that can be obtained from Shishu is 50,000 rupees, the maximum loan amount that can be obtained from Kishor is 500,000 rupees, and the maximum loan amount that can be obtained from Tarun is 1,000,000 rupees.
Stand-Up India initiative: This initiative offers unsecured loans to SC/ST borrowers and women in order to facilitate the establishment of greenfield businesses in the manufacturing, service, or trading sectors. The goal of the scheme is to increase the number of women and SC/ST borrowers who become entrepreneurs. The amount of the loans ranges from 10 thousand rupees to one million rupees.
Under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) programme, micro, small, and medium-sized enterprises (MSMEs) are eligible to get collateral-free credit facilities from banks and NBFCs of up to 2 crores (or 50 lakhs for retail trade). These financial establishments benefit from a credit guarantee extended by the government, which covers a sizeable portion of the total loan amount.
This programme provides unsecured, soft loans to micro, small, and medium-sized enterprises (MSMEs) engaged in manufacturing operations so that they can fulfil their growth and working capital requirements. It is called the SIDBI Make in India Soft Loan Fund for MSMEs (SMILE).
National Small Industries Corporation (NSIC) Subsidy programmes The National Small Industries Corporation (NSIC) offers financial assistance to micro, small, and medium-sized enterprises (MSMEs) through a variety of credit-linked subsidy programmes. These loans are unsecured and do not require collateral.
Credit Link Capital Subsidy plan for Technology Upgradation (CLCSS): The goal of this plan is to make it easier for micro, small, and medium-sized enterprises (MSMEs) to upgrade their technology by offering a capital subsidy on loans that are taken out for this specific purpose.
It is essential to keep in mind that the eligibility of the applicant, their creditworthiness, and the policies of the particular lending institution all play a role in determining whether or not these programmes are offered, as well as the amount of the loan that can be obtained through them. The eligibility requirements, needed papers, and other terms and conditions that are specific to each government programme should be carefully reviewed by any businesses that have an interest in obtaining unsecured loans through one of these programmes.
Businesses can approach the participating government banks, NBFCs, or specified institutions that are empanelled under the relevant government schemes in order to apply for these unsecured loans. Applicants are responsible for submitting all of the appropriate documentation, which may include business registration information, financial accounts, project reports, and information relating to collateral when it is requested.
There is a possibility that the applicant's credit history, the lending organisation, and the programme all play a role in determining the interest rate and the terms of repayment for these unsecured loans. It is vital to investigate a number of different lending options in order to select the loan with the most suitable terms and conditions. Before applying for a loan, companies should make sure they have a thorough understanding of the loan agreement, which should include details on the interest rates, processing costs, repayment period, and any other applicable charges.