Quick Summary
In today’s dynamic market, securing a business loan by government is essential for startups and MSMEs aiming to grow. The start-up business loan by Indian government offers affordable funding options tailored to various needs, including MSME loans, startup loan for new business by Indian government, and government subsidy loan for business. These government-backed schemes provide low-interest rates and flexible terms to empower entrepreneurs. Whether you’re launching a new venture or expanding an existing one, these loans from the Indian government pave the way for success by reducing financial burdens and fostering growth.
The Government has implemented robust policies to boost the growth of the Indian economy, including popular startup business loans through Banks and Non-Banking Financial Companies (NBFCs). Depending on the business type, various government business loans can be availed. Here are India’s top 6 government loan schemes in 2025.
| Loan Scheme | Description | Interest Rates | Loan Amount | Tenure | Special Features |
| Pradhan Mantri Mudra Yojana (PMMY) | Loans for small and micro non-corporate, non-farming businesses. | Starting from 7.30% | Up to INR 10,00,000 | 12 months to 7 years | Collateral-free low-cost credit, no processing fee. |
| MSME Loan Scheme | For new and existing micro, small, and medium enterprises for working capital or business expansion. | Starting from 7.65% | INR 50,000 to several crores. | Up to 15 years | Interest rates starting from 7.65% onwards. |
| National Small Industries Corporation (NSIC) Subsidy | Aids in developing MSMEs by providing funds for technology, market, finance, etc. | At the Bank’s discretion. | Depends on the scheme | Depends on the scheme | Various benefits include assistance in documentation, capital loans, and technical support. |
| Credit Guarantee Fund Trust For MSE (CGTMSE) | Offers credit guarantees to financial institutions offering loans up to INR 2 crores. | Depends on the bank | Upto INR 2 crores | Depends on the bank | Coverage up to INR 2 crores, fee concessions for SC/STs, 85% coverage for women. |
| Stans Up India | Empowers businesses run by women and SC/ST categories | Bank’s Base Rate + (MCLR) + 3% + Tenor Premium | INR 10 Lakh to INR 1 crore | Up to 7 years | Interest rate structure, tenure up to seven years, can cover up to 85% of the project cost. |
| Public Sector Bank (PSB) Loans | Online portal for MSMEs to apply for loans easily. | Starting from 8.59% | INR 10 Lakh to INR 5 crore | 1 to 15 years | Apply online, approval in 59 minutes, sanctioned in 7 to 12 days. |
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PMMY is one of the best Business Loans by the Government. The Mudra Loan (Micro Units Development & Refinance Agency Ltd.) is a scheme proposed and managed by the PMMY. The Mudra loan was introduced to give loans to small and micro companies that are non-corporate and non-farming.
This is one of the schemes for availing business loans by the Government without security. With the motto to “Fund the Un-funded,” you can avail of this loan from all the private/public sector banks, NBFCs, and Regional Rural Banks (RRBs). This loan can be used by business owners, startups, MSMEs, and self-employed professionals.
All Non-Corporate Small Businesses (NCSB) in the manufacturing, service, and trading sectors are eligible for Mudra loans. Some examples of the NCSB:
All NCSBs that satisfy the below-mentioned criteria are eligible for Mudra loans.
Mudra Loans are offered under three categories.
Here are some of the special features of the Mudra loan under the PMMY scheme.
The table below compares the different interest rates of various banks.
| Bank | Interest Rates | Tenure |
| State Bank of India (SBI) | Linked to MCLR | 1 to 5 years |
| IDBI Bank | Linked to Bank’s Base Rate and Rating | 1 to 5 years |
| UCO Bank | 8.85% p.a. onwards | At the bank’s discretion |
| Bank of Baroda | 9.65% p.a. | At the bank’s discretion |
| Indian Overseas Bank | As per the bank’s guidelines | At the bank’s discretion |
| Union Bank of India | 7.30% p.a. onwards | At the bank’s discretion |
| HDFC Bank | As per the bank’s guidelines | At the bank’s discretion |
| Canara Bank | As per the bank’s guidelines | Up to 7 years |
| Central Bank | As per the bank’s guidelines | At the bank’s discretion |
| Allahabad Bank | As per the bank’s guidelines | 1 to 5 years |
| Bank of Maharashtra | 9.25% p.a. | At the bank’s discretion |
| Bank of India | Linked to MCLR | 1 to 7 years |
| Vijaya Bank | 9.65% p.a. | At the bank’s discretion |
| Oriental Bank of Commerce | As per the bank’s guidelines | At the bank’s discretion |
| Tamilnadu Mercantile Bank | 8.95% p.a. onwards | 1 to 7 years |
The MSME scheme is introduced for business loans by the Government of India. It can be availed by new and existing micro, small, and medium enterprises. It provides businesses with working capital that is used for running the business. It aids in purchasing new equipment, maintaining inventory, paying salaries, or business expansion.
Any manufacturing and service industry can be classified as an MSME if they meet the below-mentioned criteria.
| Enterprises | Investment | Turnover |
| Micro | Not exceeding INR 1 crore | Not exceeding INR 5 crore |
| Small | Not exceeding INR 10 crore | Not exceeding INR 50 crore |
| Medium | Not exceeding INR 20 crore | Not exceeding INR 100 crore |
Here is a list of interest rates for MSME loans offered by different banks.
| Bank | Interest Rates |
| Allahabad Bank | At the Bank’s discretion |
| Oriental Bank of Commerce | 10.70% p.a. onwards |
| Andhra Bank | At the Bank’s discretion |
| Central Bank of India | 11.25% p.a. onwards |
| Indian Bank | 9.75% p.a. onwards |
| Punjab and Sind Bank | 9.95% p.a. onwards |
| Punjab National Bank | At the Bank’s discretion |
| State Bank of India | 7.65% p.a. onwards |
| Syndicate Bank | At the Bank’s discretion |
| UCO Bank | 8.85% p.a. onwards |
| Union Bank of India | At the Bank’s discretion |
| United Bank of India | 10.25% to 16.25% p.a. |
Some of the popular NBFCs offering MSME business loans by the Government are listed here.
SIDBI, or the Small Industries Development Bank of India, is one of the oldest institutions offering government-backed business loans. It primarily supports MSMEs (Micro, Small, and Medium Enterprises) in need of financial assistance.
SIDBI provides direct loans to businesses and also offers indirect loan schemes through NBFCs and Small Finance Banks (SFBs).
Key features include:
This makes SIDBI an essential resource for growing businesses.
The Government of India runs the NSIC to aid in developing MSMEs. The main goal of the NSIC is to support the MSMEs in technology, market, finance, etc. NSIC Subsidy helps MSMEs to improve their production and marketing quality. They provide business loans by the Government under different schemes.
Funds are provided under two different schemes:
Only enterprises with MSME certificates that have completed one year of operations are eligible. You can register via the single-point registration scheme for businesses that still need to complete one year.
All the MSMEs can register for the NSIC with a one-time registration fee payment. Some of the benefits of registering under NSIC are listed here.
The GOI established the CGTMSE to offer credit guarantees to financial institutions that offer loans up to INR 2 crore. A 75% to 85% guarantee coverage is offered to business loans by the Government throughout India.
Some leading institutions offering business loans under this scheme are mentioned here:
All new or existing SMEs are eligible for start-up business loan by Indian government under this scheme. However, educational institutions, Self-help groups, agricultural activities, etc., are not eligible.
2. Benefits of the CGTMSE Scheme
The Credit-Linked Capital Subsidy Scheme (CLCSS) is a government-backed loan designed to help businesses fund technological upgrades across various sectors, including marketing, supply chain, and manufacturing.
Eligible entities include:
A key benefit of the CLCSS is an upfront 15% capital subsidy, making it a preferred choice for businesses seeking financial assistance for technological advancements.
The GOI has initiated the Stand Up India scheme under the Small Industries Development Bank of India (SIDBI). The main purpose of the scheme is to empower businesses run by women and people belonging to SC and ST categories. They do so by offering a business loan by Government Scheme
Every bank branch must provide at least one loan to an SC/ST or women entrepreneur under this scheme. The candidate is eligible for a loan of INR 10 Lakh to INR 1 crore.
Some popular Banks offering a business loan by the government of India under the Stand Up India scheme are listed here:
The Government of India launched a dedicated online portal for MSMEs to apply for loans from banks easily. These are for business loans by the Government. The online portal allows applicants to get their loan applications approved in 59 minutes.
You can get loans from public/private banks, financial institutions, and NBFCs. A loan amount of INR 10 Lakh to INR 5 crore can be availed through this scheme. The partnering banks that have tied up with the portal can view your application and approve it immediately.
Any existing MSME business with a login ID for the PSG online portal can apply for PSB loans. You are eligible if you possess the following:
2. Features of PSG Loans
You have to produce certain documents to avail yourself startup loan for Indian businesses by the Indian Government. Here is the list of documents required:
Applying for a loan for a new business with the Government is very crucial since every piece of information will be cross-verified by the lending institution. You should follow the below-mentioned steps to apply for business loans.
| Feature | Government Business Loans | Private Business Loans |
|---|---|---|
| Interest Rates | Lower, subsidized | Higher, market-driven |
| Collateral | Often collateral-free or lenient | Usually required |
| Processing Time | Longer, due to documentation and eligibility checks | Faster, digital and streamlined |
| Eligibility Criteria | Strict, mostly MSMEs, startups, specific groups | Flexible, based on credit score and profile |
| Loan Amount | Limited as per scheme caps | Can be higher, depending on financials |
| Repayment Tenure | Longer tenure (up to 15 years) | Shorter, varies by lender |
| Subsidies/Incentives | Available (e.g., government subsidy loan for business) | Rarely available |
| Best For | Startups, MSMEs, businesses needing affordable funding | Businesses needing quick funds, larger amounts |
In conclusion, securing a business loan by government is a vital step for entrepreneurs seeking growth and stability. The start-up business loan by Indian government and startup loan for new business by Indian government schemes provide accessible financial support tailored for new ventures. MSMEs benefit greatly from specialized loans designed to boost working capital and expansion opportunities. Additionally, the government subsidy loan for business offers crucial relief by lowering repayment burdens. Together, these government-backed initiatives empower businesses to thrive, driving economic growth and innovation across India’s entrepreneurial landscape.
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The time for approval depends on the type of loan you are applying for and the lending bank. Most banks have reduced their processing time to less than a minute or a day. You can check the specific bank’s website to know the details about business loans by the government of India.
You should submit proof of the following documents to avail of a business loan in India.
1. Identity Proof
2. Address Proof
3. Ownership proof
4. Business continuity proof
5. Bank statement
6. Income proof
Please check the individual bank websites for more details.
You can get a business loan without collateral in India. For example, Mudra loans and Credit Guarantee Fund Trusts for SMEs are collateral-free loans.
As an MSME, you can borrow as much as INR 40 crores. Almost 20 financial institutions are offering tailor-made business loans in India.
A government business loan is financial assistance provided by central or state authorities to support entrepreneurs, MSMEs, or startups. These loans often come with subsidized interest rates and flexible repayment terms.
Eligibility varies by scheme, but generally includes Indian citizens with a registered business, a clear business plan, and good credit history. Specific schemes may target women entrepreneurs, SC/ST applicants, or rural enterprises.
It is a government initiative providing interest-free loans to support small businesses, startups, and farmers, aimed at promoting self-employment and economic growth without burdening borrowers with interest.
Government business loan interest rates vary by country and program but typically range from 3% to 8% annually. These loans often offer lower rates than private lenders to support small businesses and encourage economic growth.
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Authored by, Samiksha Samra
Digital Content Writer
Samiksha is a writer with a passion for sharing ideas and a knack for detail. She loves turning concepts into meaningful, engaging content. With a strong background in research and content strategy, she crafts clear, easy-to-understand narratives that resonate with readers. Her curiosity drives her to explore new subjects, ensuring every piece she creates is both insightful and impactful.
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Chegg India does not ask for money to offer any opportunity with the company. We request you to be vigilant before sharing your personal and financial information with any third party. Beware of fraudulent activities claiming affiliation with our company and promising monetary rewards or benefits. Chegg India shall not be responsible for any losses resulting from such activities.
