Summary
- In 2025, Indian government business loans like PMMY and MSME offer low-interest rates from 7.30%, ideal for startups and MSMEs.
- Schemes provide collateral-free loans, flexible terms, and subsidies for easy growth.
- Popular options include Mudra, SIDBI, CGTMSE, and Stand Up India loans.
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.
Best Business Loans By Government and Schemes for Businesses and Startups
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. |
Read More:
1) Pradhan Mantri Mudra Yojana (PMMY)
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:
- Small Manufacturing businesses
- Small Services Businesses
- Shopkeepers, Food Service Units, and fruit/vegetable vendors
- Machine and truck operators
- Repair shops
- Artisans, etc.
1. Eligibility Criteria for Mudra Loan
All NCSBs that satisfy the below-mentioned criteria are eligible for Mudra loans.
- The applicant should be between 18 to 65 years of age
- They should not have any past loan defaults, with a good loan repayment history
2. Loan Categories
Mudra Loans are offered under three categories.
- Shishu Loans – Upto INR 50,000
- Kishor Loans – INR 50,000 to INR 5,00,000
- Tarun Loans – INR 5,00,000 to 10,00,000
3. Special Features of Mudra Loan
Here are some of the special features of the Mudra loan under the PMMY scheme.
- Collateral-free loans
- low-cost credit option
- No processing fee or repayment charges
- Interest rates start from 7.30% onwards
- Tenure can be from 12 months to 7 years
- Loan amount maximum of INR 10,00,000
4. Mudra Loans Interest Rates by Different Banks
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 |
2) MSME Business Loan By the Government Scheme
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.
1. New Definition of MSME (May 2020)
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 |
2. Special Features of the MSME Loan Scheme
- MSME Business Loan interest rates starting from 7.65% onwards
- Loan amounts starting from INR 50,000 to a few crores
- Tenure can go up to 15 years
- The processing fee depends on the Bank
3. MSME Loans Interest Rates by Different Banks
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.
- Lendingkart
- Fullerton India
- Mahindra Finance
- Muthoot Fincorp
3) SIDBI Business Loan by Government
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:
- Loan amounts ranging from ₹10 lakhs to ₹25 crores
- Loan tenure up to 10 years
- No collateral is required for loans up to ₹1 crore
This makes SIDBI an essential resource for growing businesses.
4) National Small Industries Corporation (NSIC) Subsidy
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:
- Raw Material Assistance Scheme: Used by the business to purchase ingenious or import raw materials with credit support for 180 days.
- Marketing Assistance: Used to market their business offerings with a competitive advantage.
1. Eligibility Criteria for NSIC Registration
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.
2. Benefits of NSIC Registration
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.
- Continue operations through loans under different schemes
- Helps in the documentation process
- Avail capital loans at the best interest rates
- Digital and technical support for skill development
- Boosts domestic exports
- Improve your scalability and suitability
5) Credit Guarantee Fund Trust For MSE (CGTMSE)
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:
- Scheduled Commercial Banks
- RRBs
- Small Financial Banks
- NBFCs
- SIDBI
- NSIC
- North Eastern Development Finance Corporation Ltd.
1. Eligibility Criteria
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
- Coverage up to INR 2 crores
- The guarantee Fee is very small
- Concessions in fee for SC/STs
- The guarantee is fee further reduced by 10% and 85% coverage for women
6) Credit-Linked Capital Subsidy Scheme (CLCSS)
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:
- Partnership firms
- Private or public limited companies
- Sole proprietorships
- Cooperative companies
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.
7) Stand Up India
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.
Features of Stand Up India Scheme
- The Interest Rate is Bank’s Base Rate + (MCLR) + 3% + Tenor Premium
- Tenure of up to seven years, including an 18-month moratorium period
- Can cover up to 85% of the project cost
- Secured by the Credit Guarantee Fund Scheme for Stand Up India Loans (CGFSIL)
- Agriculture allied industries are also eligible
Some popular Banks offering a business loan by the government of India under the Stand Up India scheme are listed here:
- ICICI Bank
- IDBI Bank
- Indian Bank
- Indian Overseas Bank
- Jammu and Kashmir Bank Ltd
- Punjab and Sind Bank
- PNB Bank
- State Bank of India
- Union Bank of India
- UCO Bank, etc.
8) Public Sector Bank (PSB) Business Loan By Government Scheme
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.
1. Eligibility Criteria
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:
- GST and IT-compliant
- Last 6 months’ bank statement
- Know your eligibility from psbloanin59minutes.com on the following factors:
- Revenue
- Repayment capacity
- Existing credit facilities
- Other factors set by the lending institution
- You can choose from a list of lending institutions tied up with the portal.
2. Features of PSG Loans
- Easily apply for loans with minimum documentation
- Apply online and get it approved in 59 minutes and sanctioned in 7 to 12 days
- The analysis is done by the portal from various sources like GST, IT, etc.
- You can apply for term loans, working capital loans, MSME loans, and Mudra loans
- Interest rates starting from 8.59% p.a. onwards
- Tenure from 1 to 15 years
- Processing fee of 0.1% to 6% of the sanctioned loan amount
Documentation Required for Startup Loan for New Business by Indian Government Scheme
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:
- Application forms for the particular loan, duly filled with two passport-size photographs
- Applicant’s KYC document
- PAN card, Passport, Aadhar card, Driving license, voter ID card, and Utility bills
- Last 6 months’ bank statement
- Copy of the business incorporation
- Other documents required by the lending institution
Steps to Apply for Business Loan by The Government
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.
- Choose the type of loan and the lending institution
- Check your credit score
- Fill in the Loan application form
- Prepare a Business Plan or Project Report
- Prepare all the Documents Required
- Analyze the Terms of the Loan
What Are the Key Differences Between Government and Private 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 |
Conclusion
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.
Innovative, low-investment ideas for the hidden entrepreneur in you! Explore our guide on Business Ideas.
Related Topics
Frequently Asked Questions (FAQ’s)
How long does it take to get a startup loan for new business by Indian government?
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.
What are the documents required for a business loan by the government in 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.
Can I get a business loan without collateral in India?
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.
How much can I borrow for a business loan in India?
As an MSME, you can borrow as much as INR 40 crores. Almost 20 financial institutions are offering tailor-made business loans in India.
What is a government business loan?
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.
Who is eligible for a business loan from the government?
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.
What is the Prime Minister’s Interest-Free Loan Scheme in India?
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.
What is the interest rate for a business loan by government?
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.
Read More :
