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Government Loan Schemes for Startups


The GoI has announced the best schemes fos Start-up business. There are huge numbers of start-ups currently existing in India who are looking for the loan schemes, the government opens the doors for them. – PowerPoint PPT presentation

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Title: Government Loan Schemes for Startups

Government Loan Schemes for Startups
Start-ups story so far
  • As per KPMG report, the number of start-ups in
    India accelerated to 50,000 in 2018 from 7000 in
  • There are huge numbers of start-ups currently
    existing in India and to cater to their
    requirements, the Government of India has devised
    various schemes of business loans for start-ups.
  • In 2015, the GoI announced the Start-up Campaign
    with initial budget of ? 10,000 crore to support
  • Government subsidy loan for business is offered
    at lower interest rates than that from private
    banks by almost 300 basis points.

Most popular schemes offered by GoI for Startups
  • Stand-up India This is a constructive initiative
    to encourage entrepreneurship among SC, ST, and
    women communities. They can avail loans ranging
    from ? 10 lakhs to ? 1 crore under this scheme.  
  • Pradhan Mantri Mudra Yojana Under this scheme,
    working capital and term loan are available for
    all kinds of manufacturing, trading, and service
    sector including allied agricultural activities.
    The scheme was launched in 2015, for offering
    loans under various categories, namely- Shishu,
    Kishore, and Tarun in amounts ranging from ?
    50,000 and ? 10 lakhs. 
  • Sustainable Finance Scheme Here, the funding is
    available for the businesses working in green
    energy, renewable energy, technology hardware,
    and non-renewable energy segments. Headed by
    SIDBI, this scheme intends to provide support to
    the value chain of cleaner production/energy
    efficiency, and sustainable development project.

Most popular schemes offered by GoI for Startups
  • Bank Credit Facilitation Scheme National Small
    Industries Corporation (NSIC) eyes to meet the
    requirements of MSME units in an easy way.
    Usually, the loan is offered for a tenure ranging
    from 5-7 years, but in special, cases it can also
    be extended till 11 years. Credit facilitation is
    offered through many banks, some of which are
    mentioned below
  • IndusInd Bank
  • Vijaya Bank
  • Yes Bank
  • Federal Bank
  • Kotak Mahindra Bank
  • HDFC Bank
  • Corporation Bank
  • AU Small Finance Bank
  • Bank of Baroda

Most popular schemes offered by GoI for Startups
  1. Credit Guarantee Scheme (CGS) These are suitable
    for both kinds of businesses - those who are in
    the initial phases, and also those who require
    funds to expand their businesses. It includes
    service and manufacturing sector industries
    however educational, institutional, agriculture,
    and retail trade are excluded from applying for
    this scheme. Under this scheme, a business loan
    of up to ? 2 crores can be raised.
  2. Coir Udyami Yojana The primary aim of this
    scheme is to set up coir units across India. This
    Coir Board heads this scheme, and the fund's
    project costs up to ? 10 lakhs. The rate of
    interest will be at par with the base rate. The
    total lending fund should not exceed 25 of the
    total cost of the project. 
  3. National Bank for Agriculture and Rural
    Development (NABARD) NABARD is focused on
    providing refinance to lending institutions in
    rural areas. The bank aims to provide and
    regulate other facilities that help to promote
    and develop agriculture, cottage, small
    industries, handicrafts, and village industries. 

Key differences between a public sector and a
private sector bank
  • Processing Fee Private Banks in most of the
    cases, channelize their customers via Direct
    Selling Agents (DSAs). These agents charge fees
    to source the customers, which the banks
    ultimately charge from the customers in one form
    or another. The Public Sector Banks charge
    comparatively lower interest rates as their
    sourcing of customers have a direct approach.
  • Processing Time If in case you need the funds
    urgently, go for a private bank. They disburse
    loans faster, to meet their targets and
  • Efficiency Private sector banks score better
    than that of public sector banks in terms of
    service and efficiency. In public banks, the
    effort is much more from a borrowers side. 
  • Prepayment A public bank gives an applicant the
    flexibility to pre-pay as per his/her wish.
    However, in case of a private bank, an applicant
    can start pre-payment only after 6 months from
    the date of disbursement.

Key points to know while applying for a business
  1. The costs involved The first and foremost point
    to consider before applying for the business loan
    is to understand the costs involved in applying
    for the same. Reading all the enclosed documents
    carefully will give a clear picture of all the
    costs to be paid to the bank. 
  2. The actual money required as loan amount It will
    be a good idea to avail the loan amount only for
    the exact purpose and plan. Borrowing the funds
    as much as possible will escalate the fees and
    interest rates of the loan amount. There should
    be a proper plan in place for the utilization of
    funds and its repayment.
  3. Improving the credit score The credit score of
    the applicant highly influences interest rates of
    business loans. It is highly recommended to
    update your credit score by repaying all the
    previous dues. Credit ratings of both the
    business and the proprietor are taken into
    consideration before approving the loan amount.
  4. Line of Credit For businesses that are smaller
    or medium-sized, and if their requirement is for
    a short term a line of credit seems to be a
    viable option. This is more beneficial where the
    maximum limit for borrowing is set, and the
    interest is only payable for the actual amount

Major types of Start-up Business Loan
  1. Line of Credit No need to pay the interest on
    the borrowed amount for the first 9 - 15 months.
    It gives relaxation to the entrepreneurs who
    struggle in the initial phases of establishing
    the business. It is in similar lines with Credit
    Card, where the borrower is required to pay the
    interest for the amount used. 
  2. Equipment Financing This kind of loan demands to
    put up the collateral as security. This enables a
    lender to charge at lower interest rates but with
    a relatively high risk. The advantage of this
    loan is that the borrower is eligible to claim
    the tax benefit for the depreciation of the
    equipment. Both these types of loan need a high
    credit score. 

Major types of Start-up Business Loan
  • Instalment Loans This means borrowing a lump sum
    amount all at once. A start-up business needs to
    have the following things to avail an instalment
  • Collateral
  • Good credit score
  • Business plan
  • Additional guarantees
  • The loan is repaid in the form of both principal
    and interest amount. The interest amount is
    calculated from the day when the contract is
    signed and it remains till the closure of the
  • In addition to these, other types of business
    loan include term loans, accounts receivable
    loan, commercial loans, to name a few.  

In short
  • Analyzing a few factors before applying for the
    business loan will help one decide what works
    best for them.
  • Like - Line of Credit is the option when the
    borrower needs flexibility in terms of the
    repayment schedule. 
  • Like any other financial product, obtaining a
    business loan is easy.
  • But you need to make a comparative study to
    figure out which financing option will work best
    for you. 

Thank You !!!
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