BEST GOVERNMENT LOAN SCHEMES FOR STARTUPS

Searching for Government loan schemes for your small scale business in India?

In starting a new venture or for an expansion, both the cases need finance. Though the small and medium enterprises are the backbone of Indian economy, most of the SME owners face a lot of problem due to the non-availability of timely and adequate credit at the reasonable rate of interest.

LIST OF GOVERNMENT LOAN SCHEMES FOR SMALL BUSINESS IN INDIA


#1. The Credit Guarantee Fund Scheme for Micro and Small Enterprises-The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the Government of India to provide collateral-free credit to Indian MSMEs. Both the existing and the new enterprises are eligible for the scheme. The Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI) established a trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the scheme.
The scheme provides credit facilities in the form of term loans and working capital facility of up to Rs. 100 lakh per borrowing unit. The amount is contributed by the Government and SIDBI in the ratio of 4:1, respectively. The scheme also offers rehabilitation assistance to sick units covered under the guarantee scheme.
#2. Credit Link Capital Subsidy Scheme for Technology Upgradation-Upgradation of the process as well as the corresponding plant and machinery is important to help SMEs reduce the cost of production and remain price competitive in the global market. To help SMEs flourish in international trade markets, the Ministry of Small Scale Industries (SSI) runs a scheme for technology upgradations of Small Scale Industries. Known as the Credit Linked Capital Subsidy Scheme (CLCSS), it aims at facilitating technology upgradations by providing an upfront capital subsidy of 15% (limited to maximum Rs.15 lakhs) to SSI units for credit availed by them for the modernisation of their plant and machinery. All sole proprietorship, partnership firms, cooperative, private and public limited companies are eligible for this scheme. Since the inception of this scheme, more than 28,287 units have availed subsidy of Rs.1619.32 crore.

#3. Small Industries Development Bank of India (SIDBI)-Small Industries Development Bank of India (SIDBI) started its small business funding programs way back in 1990. Established by an act of Parliament, SIDBI is now one of the most illustrious names among the government financial institutions. This loan has played an active role in the promotion and development of the small business industry. Various schemes provided by SIDBI are enlisted below:
Direct Assistance Scheme
Indirect Assistance Scheme
Promotional and Development Activities
National Equity Fund, Scheme
Technology Development and Modernization Fund Scheme
Single Window Scheme
Mahila Udyam Nidhi (MUN)
Scheme and Equipment Finance Scheme
Integrated Development of Leather Sector Scheme (IDLSS)
FPTUFS – Scheme for Food Processing Industries.

#4. National Small Industries Corporation Limited (NSIC)-National Small Industries Corporation Limited (NSIC) came into effect in the year 1999 with an objective of encouraging the small scale industries in the country. The prime feature of NSIC is to import machines on hire-purchase terms. It lay emphasis on supplying and distributing both indigenous and imported raw material as well as on exporting the products of small business units. Besides, it also creates awareness of advancements occurring in the field of small scale industries.

#5. National Bank for Agriculture and Rural Development (NABARD)-National Bank for Agriculture and Rural Development or NABARD came into existence mainly for promoting agriculture-based rural business enterprises. NABARD mostly offers financial assistance to small scale industries viz; cottage and village industry.
#6. Market Development Assistance Scheme for MSMEs-To help Indian manufacturing SMEs gain traction in the international markets, the Market Development Assistance Scheme for MSMEs offers funding for participation in international trade fairs and exhibitions under MSME India stall. It also offers funding for sector-specific market studies by industry associations, export promotion councils, and FIEO. This scheme offers reimbursement of 75% of a one-time registration fee and 75% of annual fees (recurring) paid to GSI by SMEs for the first three years for the bar code.
#7. Technology and Quality Upgradation Support to Micro, Small and Medium Enterprises-This scheme aims at sensitizing the manufacturing MSME sector to use energy efficient technologies and manufacturing processes in order to reduce production cost and emissions of harmful gasses. The scheme also aims to improve the product quality of MSMEs to encourage them towards becoming globally competitive. For this, the Government of India provides financial support to the extent of 75% of the actual expenditure to help to manufacture MSMEs buy energy efficient technologies for production.

#8. Mini Tools Room and Training Centre Scheme-To assist state governments set up Mini Tool Room and Training Centres, the Government of India provides financial assistance in the form of one-time grant-in-aid. The financial aid equals to 90% of the cost of machinery/equipment (maximum to Rs. 9 crores) in case new Mini Tool Room has to be created and 75% of the cost (maximum to Rs. 7.50 crore) in case an existing room has to be upgraded. The main objective of this scheme is to develop more tool room facilities in order to provide technological support to the MSMEs and training facility in tool manufacturing and tool design to create a workforce of skilled workers, supervisors, engineers/designers, etc.

Startup India: All You Need To Know To Get Advantage Of It

Prime Minister Narendra Modi on
Saturday launched the "Start-Up
India Action Plan" that aims to
enable an eco-system to promote
and nurse entrepreneurship across the country. What exactly is the plan and the details of the scheme?
So what exactly is Startup India?
Startup India in an action plan to
develop an ecosystem to promote
and nurture entrepreneurship
across the country. This is based on an action plan aimed at promoting bank financing for start-up ventures to boost entrepreneurship and encourage startups with jobs creation. The campaign was first announced by Prime Minister Modi in his 15 August 2015 address from the Red Fort.

*What is a startup?

A startup is an entity, private,
partnership or limited liability
partnership (LLP) firm that is
headquartered in India, which was
opened less than five years ago and have an annual turnover less than Rs25 crore. To be eligible for
considering as startup, the entity
should not be formed by splitting
up or reconstruction and its
turnover should not have crossed
Rs25 crore during its existence.

*What are the advantages?

Under the Scheme, no inspection
would be carried out on start-ups
for three years regarding labour
laws. In addition, environment law
compliance is required only post-
self certification.

*Are there financial benefits?

In patent costs, the startups can
claim an 80% rebate. That means, if a startup applies for a patent, the government will fund the defence of the patent, and give rebate of 80% in the fees. The government will also pay fees of the facilitator for helping the startup obtain the patent. Faster patent registration and protection for Intellectual Property Rights (IPRs) is provided under the Scheme. Patent filing procedures to be simplified.Significant reduction in fees for filing Patents.

*What are the advantages for
startups regarding registration?

The government is launching a
mobile app on 1 April 2016 and a
portal that will allow companies to
register in a day. In addition, there would be a single point of contact for Start-up India hub. In addition, there will be single window clearance for clearances, approvals,and registrations.

*What is the government’s role in
boosting start ups?

The Ministry of Human Resource
Development (HRD) and the
Department of Science and
Technology have agreed to partner
in an initiative to set up over 75
startup support hubs in the
National Institutes of Technology
(NITs), the Indian Institutes of
Information Technology (IIITs), the
Indian Institutes of Science
Education and Research (IISERs)
and National Institutes of
Pharmaceutical Education and
Research (NIPERs).

*What are the special benefits for
startups in public procurement?
Startups in the manufacturing
sector are exempted from the
criteria of prior ‘experience/
turnover’ without any relaxation in
quality standards or technical
parameters in public procurement
(by government).

*How much funding is available
for this scheme?
Rs10,000-crore fund for new
enterprises, equal opportunity in
government procurement, a Rs500- crore credit guarantee scheme and easier exit norms. Japanese Softbank, which had already invested $2 billion in Indian startups, has pledged total
investments of $10 billion.

*What are benefits under the
provision on Income Tax?

Under the Scheme, Income Tax
exemption is available for first
three years. However, the startup
will be eligible for tax benefits only after obtaining certificate from the Inter-Ministerial Board, setup for this purpose.

*Is there any exemption in capital
gains tax?

Yes. If the money is invested in
fund of funds recognised by the
government, the investor can claim capital gains tax exemptions. In addition, existing capital gain tax exemption for investment in newly formed MSMEs by individuals shall be extended to all startups.

*What is the eligibility for
startups?

To become eligible as a startup and get a green signal from the Inter- Ministerial Board, the entity should be the one which aims to develop and commercialise, a new product
or service or process or a
significantly improved existing
product or service or process that
will create or add value for
customers or workflow. Products,
services or process, which do not have potential for commercialisation or is undifferentiated or have no or
limited incremental value will not
be considered under the Scheme.
To be considered as eligible as
startup the entity, should be
supported by a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator established in a post- graduate college in India an incubator, which is funded (in relation to the project) from GoI as part of any specified scheme to promote innovation a recommendation (with regard to innovative nature of business), in a format specified by DIPP, from an Incubator recognized by GoI or be funded by an Incubation Fund/Angel Fund/ Private Equity Fund/Accelerator Angel Network duly registered with SEBI that endorses innovative nature of the business or be funded by GoI as part of any
specified scheme to promote
innovation or have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.