5 popular government loan schemes for small scale businesses in 2025

Small industries contribute a significant portion to the Indian economy and provide a major source of employment in the country. However, this sector also faces immense competition from major multinational companies. Some businesses may find it difficult to access funds in favourable terms. 

Therefore, the government of India has several loan schemes to finance small industries. These loans can be availed by the SMEs (small and medium enterprises) to fund their day-to-day operations, expand their business, purchase new equipment, etc.

Top government loan schemes for small businesses in 2025

Credit Guarantee Scheme for Micro and Small Enterprises (CGSMSE)

• CGSMSE scheme offers collateral-free credit to the micro and small enterprise sectors.
• It provides working capital as well as term loans to eligible entities.
• The scheme provides guarantee cover of up to 85% of the sanctioned loan amount.
• Under this scheme, up to 80% guarantee cover will be provided for micro-enterprises approaching for a loan of up to ₹5 lakh, including Micro and Small Enterprises owned and operated by women and loans in the Northeastern region.

SIDBI Make in India Loan for Enterprises (SMILE)

• SMILE is designed to promote innovation, facilitate investment, protect intellectual property, enhance skill development, and build the best infrastructure for MSMEs.
• Under the scheme, both soft loans and term loans are offered.
• Compared to other loans, the repayment period under the SMILE scheme will be longer.
• This credit is available to 25 selected sectors at competitive interest rates, aligning with the government of India's 'Make in India' campaign.
• The scheme will prioritise new ventures and smaller businesses in the country.

Pradhan Mantri Mudra Yojana (PMMY)

• Pradhan Mantri Mudra Yojana (PMMY) is a flagship scheme of the Government of India, providing loans up to ₹10 lakhs to businesses engaged in the non-farm sector including manufacturing, trading or service sectors including activities allied to agriculture such as poultry, dairy, beekeeping, etc.
• These are unsecured loans, which means they do not require any collateral as a guarantee to avail of this loan.
• Under this scheme, three types of loans are available based on the stages of business, namely, Shishu, Kishor, and Tarun.
• Mudra loans are provided by public, private, and cooperative banks, Regional Rural Banks (RRBs), foreign banks, Non-Banking Financial Companies (NBFCs), and Micro Finance Institutions (MFIs).

Stand-Up India Scheme

• Stand-Up India was launched to provide credit for Scheduled Caste (SC), Scheduled Tribe (ST), and women entrepreneurs.
• Loans can be availed to set up greenfield enterprises in manufacturing, services, the trading sector, and activities allied to agriculture.
• Under this scheme, banks will provide loans between ₹10 lakh and ₹1 crore to at least one SC, ST or woman borrower per bank branch to set up a greenfield enterprise.
• If the enterprise to be set up is non-individual, the controlling stake (51%) should be held by either an SC, ST, or women entrepreneur.
• The loan will be composite, including working capital and a term loan.

Bank Credit Facilitation Scheme

• National Small Industries Corporation (NSIC) facilitates loans under this scheme. NSIC signed a Memorandum of Understanding (MoU) with banks to offer loans to meet the credit requirements of small and medium enterprises.
• NSIC aims to provide loans at lower interest rates.
• MSME units have the option to choose between private and public sector banks.
• The loans are available as working capital and term loans.

In conclusion, loans for small industries are a source of growth and sustainability within the sector. They provide capital for expansion and innovation in the sector. However, businesses must check interest rates, repayment periods and other related terms to avoid defaults.

(Note: Raising a loan comes with its own risks. So, due caution is advised)