Small Business Loans Offered By the Government of India

Are you a small business looking for capital to boost your business or start one? While there are several private banks that offer MSME loans, you could consider taking a look at these small business loans by the government of India.

What Kind of Loan Do You Need?

Broadly, there are three loan categories that you could borrow into. These loans are specific to what your business currently needs. You can also choose on the basis of the stage of business that you’re in.

Working Capital Loan:

Working capital is the money you need to meet your day-to-day business expenses like your monthly electricity bills. All your operational costs come under working capital and some loans are crafted to suit your working capital needs alone. The loans are offered typically for a 12-month tenure and have an interest rate of 12% to 16%. These can be either secured or unsecured.

Corporate Term Loan:

Term loans are used to start a venture or expand a business. Therefore, if you are starting up, you may want to look at term loans/funding. These are large sums of money borrowed from banks or financial institutions that are expected to be repaid over a longer period of time. These loans are secured (company assets) and have a longer tenure and the interest rate is negotiable. They can be converted into equity options and also have tax benefits.
Term Loan:

These loans are used to buy fixed assets. If you want to put up an office, you could consider borrowing a term loan. Typically, these loans are secured with a tenure of 1-10 years and a floating interest rate between 10 and 20%.

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