India is moving fast to become a global startup hub. Big cities like Bengaluru and Mumbai have earned places among the top 50 startup cities in the world, according to PitchBook’s Global Venture Capital Ecosystem Ranking 2024. In March 2024, Prime Minister Narendra Modi also said at the Startup Mahakumbh that India now has the third-largest startup ecosystem in the world.
But starting a business needs more than an idea, funds. Most young entrepreneurs struggle to arrange money to take their ideas to the next level. To solve this problem, the Government of India has launched several easy loan schemes, especially for startups. These schemes support new businesses, especially those owned by women, SC/ST individuals, and small entrepreneurs, with no need for big security or high paperwork.
Let us understand some of these major government startup loan schemes.
Pradhan Mantri Mudra Yojana (PMMY): Loans Up to Rs. 20 Lakh for Small Units
Mudra Yojana is a popular scheme for non-corporate and non-agricultural small businesses. Entrepreneurs can get loans up to Rs. 20 lakh based on their business size and stage.
The scheme offers four loan slabs:
- Baby Loan: Up to Rs. 50,000
- Teen Loan: Rs. 50,001 to Rs. 5 lakh
- Tarun Loan: Rs. 5.01 lakh to Rs. 10 lakh
- Tarun Plus Loan: Rs. 10.01 lakh to Rs. 20 lakh
You can apply for a Mudra loan through banks, regional rural banks (RRBs), NBFCs, MFIs, and small finance banks. The scheme needs minimum paperwork and no collateral in most cases. It suits small shop owners, manufacturers, service providers, and traders.
Stand-Up India Scheme: Loans for SC/ST and Women Entrepreneurs
This scheme helps Scheduled Caste (SC), Scheduled Tribe (ST), and women entrepreneurs start new manufacturing, trading, services, or agriculture-related businesses.
Under the Stand-Up India Scheme, banks provide loans between Rs. 10 lakh and Rs. 1 crore. Each bank branch must support at least one SC/ST and one woman entrepreneur.
If a group runs the business, 51% of ownership and control must be with an SC/ST or a woman.
The scheme also offers a One Rupee Debit Card, training, mentoring, and business report support through a vast network of development agencies.
CGTMSE: Loan Without Collateral for Micro and Small Businesses
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was created by the Ministry of MSME and SIDBI. It gives a loan guarantee without needing security or a third-party guarantee.
Since April 1, 2023, the scheme has allowed micro and small enterprises to get collateral-free loans of up to Rs. 5 crore through Member Lending Institutions.
This scheme is best for startups that cannot provide assets or guarantees but have a good business idea.
Credit Guarantee Scheme for Startups (CGSS): Help for DPIIT-Recognised Startups
The Credit Guarantee Scheme for Startups (CGSS) supports startups recognized by DPIIT (Department for Promotion of Industry and Internal Trade).
The scheme offers loan guarantees up to Rs. 10 crore. The National Credit Guarantee Trustee Company (NCGTC) handles the process.
The scheme offers two types of loan covers:
- Transaction-based: Separate guarantee for each loan
- Umbrella-based: Common guarantee for multiple loans under one head
This scheme supports innovation-driven startups that need big loans without mortgages or a high risk of rejection.
How to Apply for a Startup Loan from Government Schemes
If you want to get help from any of these schemes, follow these steps:
- Visit the official website of the scheme you are interested in
- Read all the details like eligibility, loan amount, repayment rules, and required documents
- Visit the bank or lending institution’s website and apply online by uploading documents
- You can also visit the nearest bank branch, ask for the application form and submit it with proper documents
Who Can Apply for Startup Loans?
The eligibility may vary with different schemes, but general conditions include:
- The startup should be less than 5 years old
- It must have a turnover of less than Rs. 25 crore
- It should be DPIIT-recognised
- In some cases, a patent or registration with the Indian Patent Office is required
What Documents Are Needed to Apply for a Startup Loan?
You need to keep these documents ready while applying:
- Two passport-size photos
- ID proof: Aadhaar card, PAN card, voter ID, passport, or driving license
- Address proof: Passport, Aadhaar, voter ID, or phone bill
- Age proof: PAN card or passport
- Income proof: Bank statements (last 6 months), ITR, or salary slips
- Signature proof: PAN card or passport
- Cancelled cheque or the front page of the passbook of the bank account
Government Loans Make Startup Dreams Easier in India
With India’s startup ecosystem growing fast, a lack of money should not stop good business ideas. The government is actively helping young minds by offering easy and safe loan options. Entrepreneurs from small towns and big cities can benefit from these schemes without heavy paperwork or collateral.
Sources: Startup India, MSME Ministry, SIDBI, EPFO, Moneycontrol, PitchBook, PM Mudra Yojana
