Micro, Small, and Medium Enterprises (MSMEs) form the lifeblood of the Indian economy, contributing to over 30% of the GDP and generating massive employment. Recognizing the importance of supporting this sector, the Government of India has launched several schemes to provide financial assistance and easier access to credit. These schemes are specifically designed to empower MSMEs by offering loans at attractive interest rates, with minimal documentation, and often without the need for collateral.

In this article, we explore the top government loan schemes that cater to the MSME sector, including MUDRA, CGTMSE, PMEGP, and others — their benefits, eligibility, and how to apply.

1. Pradhan Mantri MUDRA Yojana (PMMY)

Overview:

Launched in 2015, the Pradhan Mantri MUDRA Yojana (PMMY) provides financial support to micro and small enterprises, including small manufacturing units, vendors, artisans, and traders. Under this scheme, loans are provided by banks, NBFCs, and MFIs through MUDRA (Micro Units Development and Refinance Agency).

Loan Categories:

There are three categories under MUDRA loans based on the stage of the business:

Features:

• No collateral required

• Flexible repayment tenure up to 5 years

• Interest rates depend on the lender and credit profile

• Processing is quick and mostly paperless

Eligibility:

• Any Indian citizen with a business plan for a non-farm income-generating activity

• Existing small businesses, vendors, shopkeepers, artisans, etc.

2. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

Overview:

Established by the Ministry of MSME and SIDBI (Small Industries Development Bank of India), CGTMSE offers collateral-free credit to micro and small enterprises. In case of loan default, the trust covers up to 85% of the default amount to the lending institution.

Loan Amount:

• Loans up to ₹5 crore

• Available for both term loans and working capital

Features:

• No need to provide third-party guarantee or collateral

• Maximum coverage of up to ₹2 crore

• Interest rate varies (subject to bank/NBFC policy)

Eligibility:

• Micro and small enterprises (manufacturing or service-based)

• New and existing enterprises meeting bank/NBFC criteria

Benefits:

• Encourages new entrepreneurs to access funding

• Reduces risk for lenders, promoting easy access to credit

3. Prime Minister's Employment Generation Programme (PMEGP)

Overview:

PMEGP is a credit-linked subsidy scheme for setting up new micro-enterprises and self-employment ventures. It is administered by the Khadi and Village Industries Commission (KVIC) and implemented at the state level by KVIC, DICs, and NGOs.

Loan Subsidy:

Loan Amount:

• Maximum project cost: ₹25 lakh for manufacturing; ₹10 lakh for service

Eligibility:

• Individuals aged 18 years and above

• No income ceiling, but must have at least 8th-grade education for projects above ₹10 lakh

• Only new projects are eligible (no existing units)

Benefits:

• Provides both financial assistance and skill training

• Encourages rural entrepreneurship and self-employment

4. Stand-Up India Scheme

Overview:

Stand-Up India is aimed at promoting entrepreneurship among women and SC/ST individuals by facilitating bank loans for setting up greenfield enterprises.

Loan Amount:

• ₹10 lakh to ₹1 crore

• For manufacturing, trading, or service sectors

Features:

• Composite loan (inclusive of term loan and working capital)

• Repayment tenure up to 7 years with a moratorium period of 18 months

• Minimum 10% margin money required

Eligibility:

• SC/ST or women entrepreneurs above 18 years of age

• Greenfield (first-time) business only

• The borrower should not be in default with any bank or financial institution

5. SIDBI’s MSME Loan Schemes

SIDBI (Small Industries Development Bank of India) is a key institution for MSME funding and refinancing. It offers several direct loan schemes for startups, existing MSMEs, and green energy initiatives.

Key Offerings:

• SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)

• SIDBI-Loan for Purchase of Equipment for Enterprise’s Development (SPEED)

• SIDBI-Startup Mitra Platform

Loan Amount:

• Varies from ₹10 lakh to ₹50 crore depending on the scheme

Features:

• Customized repayment schedules

• Assistance in technology upgradation

• Refinancing support for banks/NBFCs to further lend to MSMEs

Eligibility:

• Registered MSMEs engaged in manufacturing or services

• Startups with a viable business model and financials

How to Apply for MSME Loan under Government Schemes

You can apply for MSME loans under these government schemes in the following ways:

✅ Online Portals:

• psbloansin59minutes.com – Quick approval from multiple banks

• udyamregistration.gov.in – Register your business under MSME

• Bank websites (SBI, HDFC, PNB, etc.)

✅ Offline Application:

• Visit your nearest bank or financial institution

• Submit the required documents

• Complete verification and eligibility checks

✅ Documents Required:

• Udyam Registration Certificate

• Business PAN and GST Registration

• KYC documents of the applicant

• Project report (for PMEGP)

• Bank account statements and ITRs

Conclusion

Government-backed MSME loan schemes like MUDRA, CGTMSE, PMEGP, and Stand-Up India are designed to make credit more accessible and affordable for small businesses across India. Whether you’re a budding entrepreneur or an established MSME, these schemes offer opportunities for business expansion, innovation, and employment generation.

Choosing the right scheme depends on your business size, purpose of loan, and eligibility. Platforms like Loan7d.com can help you understand your options, match you with the best lenders, and assist you with application and documentation.

Access to credit shouldn’t be a barrier — with the right scheme, your business can scale new heights!