Business Loans for Small Business

 Business Loans for Small Business

A small business loan, also known as a commercial loan, is loan products designed especially for investment in a business. These loans can either be secured by collateral or be unsecured, based on the amount needed, the type of loan and the relationship between the business and the lender. The following are few government loan options for small business sectors.

1. CGTMSE Loans

What is the CGTMSE Scheme?

A brainchild of the Ministry of Micro, Small and Medium Enterprises, the CGTMSE Scheme is a unique offering which aims to bridge the gap between a business idea and its execution, offering financial support to entrepreneurs. Under the scheme, eligible members can get credit facilities from banks to finance medium and small enterprises. Loans up-to a maximum of Rs1crore can be availed, with the differentiating factor being the Credit Guarantee provided by the government.This Credit Guarantee offers security to entrepreneurs in the event of their business failing. A maximum cover equivalent to 85% of the loan amount is available under the scheme.

CGTMSE Scheme Salient Features

• Micro & Small Enterprises as per MSMED Act eligible.
• Credit guarantee for MSE loans up to 1 crore, without collateral and third party guarantee.
• Both Manufacturing and Service sectors covered.
• Credit for retail trade, educational/training institutions, and SHGs are not eligible for coverage.
• All fund / non-fund based facility covered.
• Maximum Guarantee Cover of up to 85% of credit facility covered under CGS.
• Guarantee coverage is 50% for credit facility covered under CGS above 50 lakh.
• 133 Banks / RRBs / other lending institutions registered as MLIs with CGTMSE (26 PSU Banks, 21 private Banks, 73 RRBs, 9 Financial Institutions and 4 Foreign Banks).

Eligibility

Let us look at the eligibility criteria for CGTMSE scheme for credit providers and credit borrowers.
Lending Institutions: All scheduled commercial banks and specified regional rural banks including NSIC, NEFDi, and SIDBI can be considered as eligible lending institutions. The institutions that enter into an agreement with CGTMSE are called Member Lending Institutions (MLIs).

Eligible Borrowers: All new and existing micro and small enterprises are eligible for this credit guarantee under certain conditions. The conditions are:

1. The trust guarantees up to 75% of the defaulted principal amount (up to 85% of the defaulted principal amount for select category of borrowers). The cover comes with a maximum guarantee cap of Rs. 62.50 lakh / Rs. 65 lakh for the credit facilities up to Rs. 50 lakh.
2. The term credit including interest on principal is covered for a period of one-quarter and / or outstanding capital advances including the interest, as on the date of the account becoming a non performing asset (NPA) or as on the date of filing the suit (whichever is lower).
3. The extended guarantee cover for micro enterprises for credit up to Rs. 5 lakhs is 85%. Also, the extent of guarantee cover remains 50% of the sanctioned amount of the credit facility for credit above Rs. 50 lakh with a maximum guarantee cover of Rs. 100 lakh (or Rs. 1 crore).
4. Other charges such as penal interest, commitment charge, service charge including any other levy/ expenses do not qualify for the guarantee cover.

Business loan under CGTMSE

A simple process is followed by most lending institutions who are part of the CGTMSE Scheme, with borrowers expected to follow a few basic steps in order to get credit.

• Idea generation– The first step towards achieving a dream is to have an idea. Any idea which is feasible and can contribute to the growth of the MSME sector can be the basis for further work.
• Registration– One should register a business entity as per existing laws. This can be a partnership firm, a private company, proprietorship, etc.
• Business development plan– A concrete and workable business development plan is required before approaching lending institutions for a loan. This plan should have in-depth information about multiple aspects related to the idea.
• Approach lending organisation– Post the preparation of a business plan one could approach any of the lending organisations associated with this scheme. The banks will process the information and grant a loan under CGTMSE.
• CGTMSE cover– The cover will be availed on paying a certain fee to lending institutions.

Interest rate

Lending institutions can charge an interest rate as their discretion, subject to the condition that this rate falls under RBI guidelines. This interest rate depends on the Prime Lending Rate (PLR) of an institute, with it not exceeding the PLR by over 3%.

2. Mudra Loan

MUDRA Bank or Micro Units Development and Refinance Agency Bank, is a new initiative by the Government of India set up for the development of micro units and refinance of MFIs. This bank has been conceptualized in order to encourage entrepreneurship, by offering funds to the non-corporate small business sector.

The products initially being launched are as under

Sector/activity specific schemes, such as schemes for business activities in Land Transport, Community, Social & Personal Services, Food Product and Textile Product sectors. Schemes would similarly be added for other sectors / activities.
1. Micro Credit Scheme (MCS)
2. Refinance Scheme for Regional Rural Banks (RRBs) / Scheduled Co-operative Banks
3. Mahila Uddyami Scheme
4. Business Loan for Traders & Shopkeepers
5. Missing Middle Credit Scheme – Equipment Finance for Micro Units

Eligibility criteria to avail Mudra Loan

The borrowers must be from the following Non-corporate Small Business Segment:

• Proprietorship
• Partnership firms
• Small manufacturing units
• Service sector units
• Shopkeepers
• Fruit or vegetable vendors
• Truck operators
• Food service units
• Repair shops
• Machine operators
• Small industries
• Food processors
• Other industries in rural and urban areas.

Features of Mudra Loans

1. Brief background for introduction of MUDRA Loan Scheme by Govt. of India
2. Brief details of the Product
3. Eligible borrowers
4. Purpose of Assistance/Nature of assistance.
5. Amount of assistance
6. Margin/Promoters Contribution Margin/Promoters
7. Interest rate Interest rates are to be charged as per the policy decision of the bank.
8. Upfront fee/Processing charges.
9. Security
10. Tenor of Assistance
11. Repayment Term Loan
12. 12. Availability of the loan

3. Stand-Up India Scheme for MSME

Stand-Up India Scheme facilitates loan for Enterprises in trading, manufacturing, or services. In the case of non-individual enterprises, at least 51% of the shareholding and controlling stake should be held by an SC/ST or woman entrepreneur. The borrower should not be in default with any bank or financial institution.This scheme facilitates loans from Rs. 10 Lakhs to 1Crore.

Eligibility

• SC/ST and/or woman entrepreneurs, above 18 years of age.
• Loans under the scheme are available for only green field project. Green field signifies, in this context, the first time venture of the beneficiary in the manufacturing or services or trading sector.
• In case of non-individual enterprises, 51% of the shareholding and controlling stake should be held by either SC/ST and/or Women Entrepreneur.
• Borrower should not be in default to any bank/financial institution.

Interest Rate

The rate of interest would be lowest applicable rate of the bank for that category (rating category) not to exceed (base rate (MCLR) + 3%+ tenor premium).

Security – Besides primary security, the loan may be secured by collateral security or guarantee of Credit Guarantee Fund Scheme for Stand-Up India Loans (CGFSIL) as decided by the banks.

Category

• Ready Borrower

In case the borrower requires no handholding support, then the process of application for the loan at the selected bank can be done through the Stand-Up India portal (www.standupmitra.in) . At this stage an application number will be generated and information about the borrower shared with the bank concerned, the LDM (posted in each district) and the relevant linked office of NABARD/ SIDBI. The offices of SIDBI and NABARD shall be designated Stand-Up Connect Centres (SUCC). The loan application will now be generated and tracked through the portal.

• Trainee Borrower

In cases where the borrower indicates a need for handholding, then registration as a Trainee Borrower on the Stand-Up India portal (www.standupmitra.in will link the borrower to the LDM of the concerned district and the relevant office of SIDBI/ NABARD. This process which would be electronic could be done at the borrower’s home by himself/ herself.

4. PSB 59 Minutes Loan

Psbloansin59minutes.com – to enable them to access loans of upto Rs 1 crore in just 59 minutes. Unlike their larger counterparts, India’s smaller companies have long faced difficulty in accessing bank loans. The psbloansin59minutes website was presented as the solution. Once a firm uploads key information such as tax returns and ownership details, proprietary algorithms on the website appraise the application, determine the loan amount that can be given and then connect the applicant to a bank branch – all in under 59 minutes.

Details of the loan

• The loan amount will be between Rs 10 lakh and 1 crore. The rate of interest (RoI) starts from 8%. After the approval in principle of the application, the loan amount will be disbursed in 7-8 working days.
• There is no mandatory requirement for collateral as the online portal is directly connected to the Credit Guarantee Fund Trust for Micro and Small Enterprises scheme.
• For registration, the borrower does not need to make any payment. A borrower whose proposal matches the products of lenders and who wants to receive an approval in principle will be required to make a nominal payment of Rs 1,000 plus applicable taxes.
• There is no fee for the registration, but once the applicant’s proposal matches the bank’s products, the borrower will have to be submitting a fee of Rs 1,000 plus taxes.

Key features of the MSME loan in 59 minutes

• MSMEs will be able to apply for loans from SIDBI and 5 PSU Banks — State Bank of India, Bank of Baroda, Punjab National Bank, Vijaya Bank and Indian Bank.
• MSMEs will be able to connect with banks without visiting the branch. There will be no human intervention until the sanction and or disbursement stage.
• The portal will be using “sophisticated algorithms” to read and analyze data points from sources such as IT returns, GST data, bank statement etc.
• MSMEs can also get loans up to Rs 2 crore without any collateral using this portal.

You can apply for an attractive offer with best possible Rate of Interest and Terms for Personal Loan, Business Loan, Home Loan and Car Refinance Loan.

FundsTiger is an Online Lending Marketplace where you can avail fast and easy Home, Business and Personal Loans via 40+ Banks and NBFCs at best possible rates. We will also help you to improve your Credit Score. We have dedicated Relationship Managers who assist you at every step of the process. We can also help you in Balance Transfers that will help you reduce your Interest Outgo