Starting a small business in India can be a life-changing step, but one of the biggest roadblocks is funding. To support budding entrepreneurs, the Indian Government offers many small business loan schemes with low interest rates and easy application processes. These loans are designed to help you start, grow, or expand your business. In this guide, we explain the best government loan schemes for small businesses in 2025, their features, interest rates, documents required, and how to apply — all in a simple, step-by-step manner.
Top Government Loan Schemes for Small Business (2025)
Here’s a comprehensive table of the most popular government business loans:
| Loan Scheme | Interest Rate | Loan Amount | Collateral | Best For |
|---|---|---|---|---|
| MUDRA Loan (PMMY) | 7% to 12% | ₹50,000 – ₹10 Lakhs | No | Micro and small businesses |
| Stand-Up India Scheme | 6.5% onwards | ₹10 Lakhs – ₹1 Crore | Yes (with subsidy) | SC/ST/Women Entrepreneurs |
| Credit Guarantee Scheme (CGTMSE) | Depends on lender | Up to ₹2 Crores | No (covered by Govt) | MSMEs with no collateral |
| PMEGP Loan | 11% to 12% | Up to ₹25 Lakhs | Partial | Rural/agro/handicraft businesses |
| SIDBI Make in India Soft Loan Fund | 8.5% to 9.5% | ₹10 Lakhs – ₹50 Lakhs | May vary | Manufacturing/startups |
| National Small Industries Corporation (NSIC) | Varies | Equipment & Marketing Aid | Yes/No | Tooling, marketing, raw materials |
| Udyogini Scheme | 0% to 6% (subsidized) | Up to ₹3 Lakhs | No | Women-led small businesses |
Detailed Overview of Each Loan Scheme
1. MUDRA Loan under Pradhan Mantri Mudra Yojana (PMMY)
- Types:
- Shishu: Up to ₹50,000
- Kishor: ₹50,001 – ₹5 Lakhs
- Tarun: ₹5 Lakhs – ₹10 Lakhs
- Eligibility: Non-corporate, non-farm small businesses (e.g., kirana shops, small units, artisans, food vendors).
- Documents Required:
- ID & address proof
- Business plan
- Bank statement
- Apply via: Local banks, NBFCs or MUDRA portal.
✅ No collateral required. Ideal for micro-startups.
Also Watch: How To Get a 10 Lakh Loan Without Any Collateral?
2. Stand-Up India Scheme
- Purpose: Loans for SC/ST and women entrepreneurs.
- Loan Amount: ₹10 Lakhs to ₹1 Crore
- Usage: For greenfield businesses in manufacturing, services, or trading.
- Interest Rate: Around 6.5%–9%
- Documents Required:
- Caste certificate (SC/ST)
- Identity proof
- Project report
- Apply via: www.standupmitra.in
⭐ Best for first-time entrepreneurs from disadvantaged groups.
3. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
- Coverage: Collateral-free credit to MSMEs.
- Loan Amount: Up to ₹2 Crores
- Eligibility: New or existing micro & small enterprises.
- Documents Required:
- KYC documents
- Proof of business activity
- Business plan
- Apply via: Partner banks and NBFCs.
📌 Note: The Government offers a credit guarantee, so you don’t need property as security.
4. Prime Minister’s Employment Generation Programme (PMEGP)
- Loan Limit: Up to ₹25 Lakhs (Manufacturing) and ₹10 Lakhs (Services)
- Subsidy: 15% – 35% depending on region and category
- Interest Rate: 11–12%
- Eligibility: Any Indian aged above 18, with an 8th pass education.
- Apply via: www.kviconline.gov.in
💡 Especially beneficial for rural entrepreneurs.
5. SIDBI’s SMILE Scheme (Small Industries Development Bank of India)
- Loan Size: ₹10 Lakhs to ₹50 Lakhs
- Interest Rate: 8.5% to 9.5%
- Purpose: To support “Make in India” manufacturing startups.
- Apply via: www.sidbi.in
⚙️ Best for setting up new tech/manufacturing units.
6. Udyogini Scheme
- Offered by: Various State Governments and NGOs.
- Eligibility: Women aged 18–55 with family income < ₹1.5 Lakhs/year.
- Loan Amount: Up to ₹3 Lakhs
- Interest Rate: Often 0% or subsidised up to 6%.
- Best For: Women-run handicrafts, tailoring, and food businesses.
7. NSIC Credit Support Scheme
- Facilities: Raw material assistance, marketing support.
- Target Audience: Registered small industries (SSI/MSME)
- Interest Rate: Based on commercial bank terms.
- Apply via: www.nsic.co.in
Documents Required for Small Business Loans
Here’s a general checklist (may vary per scheme):
- Aadhaar & PAN Card
- Business registration certificate
- Project/business plan
- Bank statements (6–12 months)
- ITRs (for existing businesses)
- Caste or income certificate (for special categories)
ALSO READ | Government Loan for Dairy Farming: Schemes, Benefits, Eligibility & More
How to Apply for a Small Business Loan from the Government
- Identify the right loan scheme based on your business size and needs.
- Visit the official portal of the scheme or your nearest public sector bank.
- Prepare all documents in advance.
- Fill out the application online or offline.
- Wait for approval & disbursement. Track status online.
ALSO READ | 8 Best Banks For Small Business Loans in India (2025)
Tips to Get Your Business Loan Approved Faster
- Keep your CIBIL score above 700.
- Submit a clear and profitable business plan.
- Ensure all documents are valid and updated.
- Apply with a recognised public or cooperative bank.
Click for e-book on the schemes of MSME
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Conclusion
Getting a small business loan in India is no longer complicated, thanks to multiple government schemes tailored for every entrepreneur. Whether you’re a woman, a rural craftsman, a tech founder, or a first-time trader, there’s a scheme waiting for you. With low interest rates, zero collateral options, and a step-by-step online application, 2025 is a great time to start or grow your dream business.
Frequently Asked Questions (FAQs)
MUDRA Loan (Shishu or Kishor) is ideal for new businesses due to no collateral and low interest.
Yes, under schemes like MUDRA and CGTMSE, you can get loans without any collateral.
Yes, a CIBIL score of 650+ increases chances of approval.
Up to ₹25 Lakhs for manufacturing and ₹10 Lakhs for services.
Yes, most schemes offer online applications through their official websites.
Ranges from 7% to 12%, depending on the lender and loan category.
You must be at least 18 years old.
Yes, schemes like Udyogini and Stand-Up India cater to women-led businesses.
Yes, for most schemes, a business registration is mandatory.
You can apply at nationalised banks, NBFCs, or online via official portals like MUDRA, Stand-Up Mitra, or SIDBI.
