Government Start-up Loans: Eligibility Criteria to Apply For Business Loan

India has one of the fastest-growing start-up landscapes in the world. Increasing digitalization, coupled with the adoption of newer technologies, has paved the way for start-ups, especially B2B tech start-ups. In 2020 alone, more than 10 Indian start-ups achieved the coveted ‘unicorn’ tag with a valuation of above $1 billion.To encourage entrepreneurship and startup culture in the country, the government has launched many different types of startup loans. But only entrepreneurs who fulfil the eligibility criteria can apply for these loans.
So, what are the different types of startup loans available in India? What is the eligibility requirement? Take a look-

Some of the most popular startup loans offered by the Indian government are as follows-

1. Credit Guarantee Scheme (CGS)

To facilitate credit delivery to the MSME (Micro, Small & Medium Enterprises), the government launched CGTMSE (Credit Guarantee Fund for Micro and Small Enterprises). Under this scheme, working capital loans and/or term loans of up to Rs. 2 crores will be offered to existing and new MSMEs involved in service or manufacturing activities.

• Eligibility for CGS The CSG scheme is not available for MSMEs involved in retail trade, agriculture, educational institutions, training institutions, and SHGs (Self-Help Groups).

2. MUDRA Loan

The MUDRA loan under PMMY (Pradhan Mantri Mudra Yojana) is another loan facility available to non-farm and non-corporate small and micro-enterprises. Loans of up to Rs. 10 lakhs can be availed from public and private sector banks, small finance banks, corporate banks, and RRBs (Regional Rural Banks) under this facility.

• Eligibility for MUDRA Loan MSMEs, including enterprise firms and proprietorship, from NCSB (Non-Corporate Small Business Segment) located in urban and rural areas, are eligible for MUDRA loan.

3. Stand-Up India

To encourage entrepreneurship among women and people from SC/ST category, the government launched the Stand-Up India initiative under SIDBI (Small Industries Development Bank of India). Under this scheme, every branch of SIDBI is allowed to offer composite loans of Rs. 10 lakhs to Rs. 1 crore to one SCT/ST borrower and one women borrower.

• Eligibility for Stand-Up India Enterprises involved in manufacturing, services, and trading sectors are eligible for the Stand-Up India loan. In the case of non-individual companies, a woman or SC/ST entrepreneur should hold a 51% stake in the company.

4. SMILE

The SMILE (SIDBI Make in India Soft Loan Fund for MSMEs) initiative was launched in 2015 to offer soft loans to existing and new MSMEs to help them meet their debt-to-equity ratio. Eligible MSMEs can apply for a loan of Rs. 25 lakhs or above under this scheme.

• Eligibility for SMILE New and existing enterprises from the services and manufacturing sector can apply for this loan. Even existing enterprises starting new projects or upgrading with the aim to expand their operations can also apply for this loan.

Apart from all the different loans having their individual eligibility requirements, there are also standard criteria for all these loans offered by the government. They are as follows-

• In the case of existing enterprises, the company should not be older than 5 years.
• The total turnover of the enterprise should not be more than Rs. 25 crores.
• Only LLPs (Limited Liability Partnerships) or private limited companies are eligible for these loans.
• Eligible applicants should also have DIPP (Department of Industrial Policy and Promotion) approval which is only possible if the company is funded by any Private Equity Fund, Angel Investor, or Incubation Fund.
• Patron guarantee from Indian patent and trademark office is a must to qualify for government startup loans.

It can be challenging for startups to apply for standard business loans with no proven track record. This makes the loan offerings from the government an ideal option for startups to raise initial funding or grow their operations.Entrepreneurs can consult financial institutions eligible for offering these loans to know more about the application process.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.