Small businesses and Micro-SME (MSME) contribute significantly to economic activity in India. Besides adding on to the vibrancy of the economy, they found the very backbone of the socio- economic development of India as a result of generation of employment, robust export market, manufacturing activity etc. An estimated 42.5 million registered and unregistered SMEs operate in India which contribute to 95% of the total industrial units in the country. They include small businesses like fitness and gyms, small manufacturing units, rental services, Day schools’ owners etc. There are several operational issues that are particular to this sector largely due to the unorganized nature of establishment.
So, what ails this sector?
-Financial strain and stress
-Credit gap for the manufacturing sector since they are largely capital intensive
-Lack of access to easy credit facility
-Stunted growth and scalability
It is evident from the above discussion that the key challenge revolves around the inadequate access to financing by the MSMEs. Although attempts are underway to bridge the gap between the credit availability and demand, access to finance and fruitful utilization of the available capital must be addressed-especially for businessmen in the low-income group or belong to geographically far-flung areas.
So, the availability of loans and access to Government financing is the key. Identification and recognizing the government loan schemes can ensure that small businesses can grow and help economy prosper in their own little way.
Here’s a look into the various Government credit Schemes that SMEs can avail in order to scale up and use it to meet the business needs:
MSME 59 Minute Loan Scheme
The loan scheme launched in September 2018 aims to reach out to the micro, small and medium businesses. While the process may take a couple of days to complete, approval or this approval is granted within 59 minutes. To apply, individuals need to provide the GST verifications bank account statements for the past 6 months.
Credit guarantee fund scheme for Micro and Small Enterprises
Ever since its launch in the year 2000 the CGSMSE has been instrumental in providing monetary support and collateral free credit for small and medium businesses-both existing and the new ones. Under this scheme businesses can avail of a collateral-free working capital of 10 lakhs. For loans exceeding this amount and up to Rs.1 crore, business loans can be availed by providing primary security of immovable property. The financial institutions which are eligible under the scheme include the 26 public sector banks, 21 private sector bans, 73 regional rural banks, 4 foreign banks and other financial institutions such as Small Industries Development Bank Of India (SIDBI), National Small Industries Corporation, North Eastern Development Finance Corporation, Tamil Nadu Industrial Investment Corporation, Andhra Pradesh State Financial Corporation, Exim Bank of India, J & K Development Finance Corporation, Delhi Financial Corporation.
Micro Units Development and Refinance Agency limited provides refinancing and loans up to 10 lakhs onwards for businesses and MSME. The same can be availed through commercial banks NBFCs MFA etc. The PM Mudra Loan is formed as a wholly owned subsidiary of SIDBI as a refinance company and aims to provide social support to the lowest strata of the society with enough opportunities to sustain life.
Credit Link Capital Subsidy Scheme for Technology Upgradation
Under this scheme, Small Scale Industries can avail financial support to upgrade technology and integrate their business with technology. Whether it is agricultural upgradation, manufacturing processes or technological upgradation within the supply chain or even automation of processes, the loan provides support for the deserving SSIs. Earlier, the SSIs had no option but to relay on outdated plant in missionary for the manufacture of goods due to several reasons such as-
-lack of investment
-lack of knowledge about the investment options available
-and no access to the up to date technology
In order to address these issues, this scheme provides capital subsidy of 15% on institutional finance available through the SSI. Sole proprietorships partnerships Cooperative societies private and public limited companies in the SSI sector are eligible to avail this credit facility.
National Small Industries Corporation Subsidy
The NSIC Subsidy for small businesses aims to offer financial benefits of two kinds- marketing assistance and raw material assistance. Under the marketing assistance, the scheme provides funds to the SMEs for enhancing their competitiveness and the market value of their products and services. They are mainly focused to provide finance to SMEs and MSMEs who wish to improve the quality of manufacturing as well as help them reach out to the larger customer base. Under the category of raw material assistance, the scheme helps businesses to procure raw materials from authentic sellers. Domestic sellers of raw materials and imported raw materials are covered under the scheme. In other words, the NSIC facility aims to provide funding for those small and medium enterprises who wish to scale up and improve the quality as well as quantity of their products.