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Fincash » Business Loan » Best Small Business Loans

Best Small Business Loans

Updated on April 11, 2024 , 6376 views

The Coronavirus pandemic has been a wave of change for the world today. All of us are experiencing changes in the way we operate in our day-to-day at home and work. One of the major alterations today is seen in the world of business. Small businesses in India and around the globe are being recognised like never before amid the pandemic today.

Best Small Business Loans

Even before the pandemic could make its way through in India, the Market was known as a truly emerging market. A majority of the country’s growth was contributed by the micro, small and medium enterprises in the country.

Recognising the growth and the contribution of the small businesses, the Government of India has introduced various business loan schemes to finance these initiatives.

Prerna Verma is the founder of the popular MSME Creative India. Her company deals with leather cords, cotton cords, leather bags and other handmade leather goods. She started off small with just Rs. 3500 in Kanpur, Uttar Pradesh. Today, she has a yearly turnover of over Rs. 2 crores with her business spread across 25 countries.

Small Business Loan Scheme Features

The following table contains the loan amount and interest rate available with the available loans for MSMEs.

The interest rates are affordable for people with a vision for a start-up.

Loan Scheme Loan Amount Interest Rate
Mudra Loan From Rs. 50,000 to Rs. 10 lakhs Starts at 10.99% p.a.
Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) Up to Rs. 2 crores Starts at 14% p.a.
MSME Business loans in 59 Minutes Up to Rs. 1 crore Starts at 8% p.a. (depends on your Credit Score)
Stand Up India Scheme Up to Rs. 1 crore Bank’s MCLR + 3% + tenor premium

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1. MUDRA Loan

Micro-Units Development and Refinance Agency (MUDRA) loan is an initiative for the uplifting of the MSMEs. Mudra is an owned subsidiary of Small Industries Development Bank of India (SIDBI).

SIDBI is responsible for working towards developing and refinancing SME units. Mudra Loan scheme is under the Pradhan Mantri Mudra Yojana (PMMY) and it offers loan schemes in three categories- Shishu, Kishor and Tarun schemes.

You don’t require Collateral security or third-party guarantor while applying for a Mudra loan. However, the criteria for application varies from one bank to another. You will have to check with the desired bank and their application requirements before applying for the loan.

It is also important to note that not all banks offer Mudra loans. However, banks that fall under the eligibility criteria of the Pradhan Mantri Mudra Yojana (PMMY) from both private and public sectors along with regional-rural banks, scheduled urban co-operatives, state co-operatives, will offer the loan.

Three different categories of Mudra Loans are explained below:

a. Shishu Loan

Under this category, you can apply for a loan of up to Rs. 50,000. This is targeted towards small start-ups. You have to present your business idea while applying for this loan. This will decide whether they would be eligible for the loan sanction.

b. Kishor Loan

Under this category, you can apply for a loan of Rs. 50,000 to Rs. 5 lakhs. This is targeted toward those with an established business but wishes to set a strong base for it. You are required to present all relevant documents to showcase the current position of their company.

c. Tarun Loan

Under this category, you can apply for a loan of up to Rs. 10 lakhs. This is targeted toward those with an established business, but are looking for expansion. You will have to show related documents to get the loan approved.

2. CGMSE

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched in 2000. It was launched as a financial support scheme for micro and small enterprises. The main aspect of this scheme is that it offers a collateral-free loan for new and existing businesses. However, to avail of this benefit, you must meet its eligibility criteria.

Under this scheme, you can avail loans up to Rs. 10 lakhs without any collateral. If you are seeking a loan above Rs. 10 lakhs up to Rs. 1 crore, collateral will be required.

This scheme is financed through various public and private sector banks covered under this scheme.

3. MSME Business Loans in 59 Minutes

The MSME Business Loans in 59 Minutes is a very popular loan scheme offered by the government of India. It was announced in September 2018. The scheme is offered to provide financial assistance for the growth of the Micro, Small and Medium Enterprises in India. You can avail loan amount up to Rs. 1 crore for both new and existing business.

The scheme is called the loan in 59 minutes because the approval or disapproval of the loan is granted within the first 59 minutes of application. However, the actual process takes 8-12 days to complete.

The rate of interest will depend on the nature of your business and credit rating. In order to apply for this scheme, you will need GST verification, income tax verification, bank account statements for the last 6 months, ownership related documentation and KYC details.

4. Stand Up India Scheme

The Stand-Up India scheme was introduced by Prime Minister Narendra Modi in April 2016. It is a part of an initiative by the Department of Financial Services (DFS). The scheme focuses on helping women entrepreneurs from the SC/ST category to avail loans to fund their businesses. The scheme is available for women venturing into fields of Manufacturing, services and trading.

Businesses with at least 51% shares held by a woman entrepreneur from the SC/ST category will have the benefit of receiving funding from this scheme. The Stand Up India loan scheme will cover 75% of the total cost of the project. However, the woman entrepreneur will be expected to commit at least 10% of the project costs. This scheme will be reached out to women through government and private banks.

Common Documents Required for Small Business Loans

The following documents are required while applying for Mudra loan.

1. Identity Proof

  • aadhaar card
  • PAN Card
  • Voter’s ID card
  • Passport
  • Driving license
  • Business license
  • Passport size photos

2. Address Proof

  • Aadhar Card
  • Telephone Bill
  • Voter’s ID card

3. Income Proof

  • Bank statement
  • Quotation of items for business purchase

Conclusion

Small businesses are booming in today’s situation. The government of India has played a major role in helping small businesses gain their profit and recognition today. Read all the loan related documents carefully before applying.

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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