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    Table of Contents

    Announced on 1 February 2024, the Interim Budget spoke of several financial provisions that aim to aid small businesses (MSMEs) stimulate growth. It highlighted the provisions for unsecured loans for MSME growth, 50-year interest free loans (under infrastructure development), interest subsidy, and other measures to expand credit access to the underserved sectors. The Interim Budget 2024 also highlighted key initiatives in taxation and compliance to strengthen regulatory frameworks, mitigate risks and maintain transparency. These credit guarantee and financing options are designed to empower entrepreneurs, reduce financial burdens, and foster inclusive economic development.

    Also read: Key highlights of Interim Budget 2024

    In the next sections, we will take a look at the key initiatives mentioned in the Interim Budget on MSME loan provisions. We’ll also understand how MSMEs and businesses can secure SME business loans and take a practical step to solve evolving financial needs and bolster economic resilience.

    Interim Budget highlights – Unsecured loans for MSME growth, interest subsidy, credit guarantee

    From extending ₹43 crores loans under PM Mudra Yojana (aggregating to a total of ₹22.5 lakh crore) to direct benefit transfer of ₹34 lakh crores through Jan Dhan accounts, there were several announcements made to foster MSME growth.

    Some of the key mentions of provisions and achievements in collateral-free business loans, credit assistance, and interest subsidy include:

    Loans and financing:

    • Direct Benefit Transfer of ₹34 lakh crores through PM-Jan Dhan accounts, leading to savings of ₹2.7 lakh crores for the Government. This has been achieved by avoiding leakages that took place earlier. This has enabled the government to provide more funds for empowering the poorer sections of the society (‘Garib Kalyan’).
    • Credit assistance to 78 lakh street vendors has been provided under the PM-SVANidhi Yojana scheme. In addition, 2.3 lakh of them have also received credit for the third time.
    • End-to-end support to artisans across 18 trades through the PM-Vishwakarma Yojana.
    • Direct financial assistance to 11.8 crore farmers through PM-Kisan Samman Yojana.
    • Crop insurance to 4 crore farmers under PM Fasal Bima Yojana.
    • Sanction of ₹43 lakh crores (aggregating to a total of ₹22.5 lakh crores) under the PM Mudra Yojana for the youth to explore and live their entrepreneurial aspirations. (Also read: Mudra loan eligibility).
    • ₹30 crores loans under Mudra Yojana have been given to women entrepreneurs (Also read: Business loans for women entrepreneurship).
    • A corpus of ₹1 lakh crore has been allotted for technology R&D. These are 50-year interest free loans for long-term financing and/or refinancing. These will also come with low to NIL interest rates.

    Also read: Initiatives for technology adoption, research and innovations in Interim Budget

    Economic management:

    • The financial sector has been strengthened resulting in making savings, credit, and investment more efficient.
    • A robust gateway for global capital and financial services is being created in collaboration with GIFT IFSC and IFSCA.
    • Housing scheme to deserving middle-class living in rented accommodations, slums or chawls, to buy or build their own houses.
    • 4 lakh SHGs and 60,000 individuals have been helped with credit linkages under the Pradhan Mantri Formalisation of Micro Food Processing Enterprises Yojana.
    • There are numerous other schemes that compliment efforts towards reducing post-harvest losses, and improving productivity and income.

    Whether it’s access to credit or reduced interest rates on MSME business loans, it’s clear that the government recognises the importance of funding and unsecured loans for MSME growth. With the vision to make India a developed nation by 2047, these economic initiatives are expected to promote inclusivity, socio-economic transformation and MSME growth.

    Also read: Interim Budget highlights – Tax reforms, GST and compliance initiatives

    How to access unsecured loans for MSME growth

    Access to collateral free business loans is one of the easiest ways for MSMEs to avail funds for business growth. Most lenders in India, offer unsecured loans for MSME growth. However, these loans often come with high interest rates making it often challenging for small businesses to avail funds when needed.

    The initiatives outlined in the Budget Interim 2024-2025 demonstrates the core areas the government was to focus on – i.e., prioritising access to finance, technology and training to MSMEs. In this respect, we take a closer look at some of the general methods how MSMEs can avail unsecured business loans and other financing options for growing their business.

    1. PM Mudra Loans

    When discussing the various avenues for MSMEs to avail loans without collateral, the Pradhan Mantri Mudra Yojana (PMMY) is among the first that comes to mind. As highlighted in the Interim Budget, financial assistance worth ₹43 lakh crores under the PMMY scheme has been offered to the youth to enable them to explore their entrepreneurial ventures.

    The Mudra loan scheme was launched in 2015 and aims to provide finance up to ₹10 lakh to micro-enterprises. Under the scheme, loans are categorised as:

    • SishuLoans up to ₹50,000 (ideal for start-ups and entrepreneurs starring their business journeys)
    • KishoreLoans ranging between ₹50,000 – ₹5 lakhs (for businesses seeking working capital for growth and expansion or any other)
    • TarunFor high value loans between ₹5 lakhs – ₹10 lakhs (for established MSMEs seeking additional funding)

    The scheme, set up by the Government through MUDRA (subsidy of SIDBI) is designed to offer financial assistance and a catalyst for inclusive growth. You can check with selected financial institution (public and private sector banks, regional rural banks, cooperative banks, NBFCs, small finance banks, MFIs) and avail the loan, if eligible.

    Also read: A guide to SBI e Mudra loans – Features, eligibility, how to apply

    2. PSB loans in 59 minutes

    In an attempt to extend easy access to credit for MSMEs, Public Sector Banks introduced the PSB loans in 59 minutes. The digital platform for PSB 59 loan was recognised as India’s largest lending platform and offers loans in two main categories:

    • Business loan – MSME loan (between ₹10 lakh and ₹5 crores) and MUDRA loan (up to ₹10 lakh)
    • Retail loan – Home loan, personal loan, auto loan

    The loan scheme was designed to process MSME loan applications with speed and proficiency, with the digital approvals being done within 59 minutes. Depending on the loan option being availed, these can be secured or unsecured loans. This is an innovative loan scheme with features tailored to meet the diverse needs of small businesses. The eligibility criteria is loan specific, allowing a wide range of MSMEs to avail the credit assistance.

    3. Startup India scheme

    The Interim Budget 2024 also highlights that other government loan schemes, such as Fund of Funds, Start Up India, and Start Up Credit Guarantee schemes are assisting the youth and making them ‘rozgardata’.

    Start Up India scheme was founded in 2016 and is designed for innovative startups. It enables them to avail tax exemptions (under 80 IAC), seed funding (through incubators funds up to ₹20 lakhs for validation proof of concept and ₹50 lakhs market entry can be provided) etc. It also allows them to avail relaxed norms in public procurement, and in regulatory compliance.

    Also read: Other Pradhan Mantri Yojana business loans for MSMEs

    Steps to increase chances of availing unsecured business loans

    In the world of micro-financing and credit guarantee, MSMEs stand at a crucial junction. In their business growth and expansion journeys, they often require financial assistance, and the wide range of government MSME loans on offer is a reliable place to begin.

    To navigate this terrain and avail the best loan options, MSMEs must adopt innovative strategies to ensure that they can benefit from these government financing options.

    1. MSME digitisation

    While this may sound mundane, MSME digitisation and technology adoption is the first step for MSMEs to proactively stay aware and avail the benefits of government financing. Transition from paper-based applications to digital platforms can significantly help MSMEs to streamline the loan application process. This also enables MSMEs to create an online presence and get familiar with online banking services.

    PMEGP scheme:

    For instance, MSMEs can avail the benefits of the PMEGP scheme by visiting the special online portal hosted by the KVIC.

    Launched in 2008, PMEGP is a credit linked subsidy scheme that aims to generate employment by establishing small businesses in the non-farm sector. It brings together dispersed artisans and the youth (from rural and urban sectors) to provide self-employment opportunities.

    Considering the government’s priority on MSMEs, development of the youth, and technology adoption in MSMEs, it can be assumed that going digital is the way forward.

    Moreover, utilising digital tools in accounting, inventory management, billing, tax filing, etc. not only increases operational efficiency but also provides transparency and easy-to-verify data that makes it convenient for lenders to process applications for unsecured loans, faster and better.

    2. Planning and strategising

    When offering zero collateral business loans, having a formal business plan is always a gamechanger. A business plan is more than just financial projections on how investments will be spent and the returns expected. The document should explain the vision of the business’s future, risk assessment, market analysis and marketing strategy for the MSME.

    A business plan when complemented with projections of the business’s profitability and societal impact details, and aligned with the government’s broader economic and social goals can enable faster loan processing.

    Stand-Up India scheme

    Another popular loan scheme that MSMEs can avail is the Stand-Up India scheme. Under this scheme, SC/STs and women entrepreneurs can avail business loans for greenfield business. These entrepreneurial endeavours can be in manufacturing, trading, services, or agricultural-allied fields.

    These collateral free business loans (under the Credit Guarantee Fund Scheme) and borrowers can borrow loans from ₹10 lakhs to ₹1 crore for their business. These can be availed at low-interest rates (interest subsidy), usually fixed at the lending bank’s MCLR + 3% tenor premium.

    A business plan therefor is the concreate way for women entrepreneurs to showcase their plans on their business growth and how they will utilise the unsecured loans for MSME growth.

    As highlighted in the Interim Budget, women empowerment is a priority for the government.

    • With funding assistance through Mudra scheme, more than 30 crore loans have been given to women entrepreneurs.
    • 83 lakh SHGs with 9 crore women are helping to bring change in the socio-economic canvas of rural India through empowerment and self-reliance. This has resulted in nearly 1 crore women to be recognised as Lakhpati Didi.
    • The goal is to continue the initiative and increase the number of Lakhpati Didi’s to 3 crores.

    3. Collaborating and forming partnerships

    And finally, another key aspect of business growth comes from forming strategic partnerships especially those in the same industry or supply chain. MSMEs can gain from market and customer knowledge, shared resources, marketing efforts, and research.

    Also read: Interim Budget 2024 – Initiatives in digital technology for logistics

    Applying for government unsecured loans, backed by a partnership demonstrates commitment to growth and also mitigates risks.

    For instance, for Stand-Up India loans, if the business is a non-individual business, at least 51% of it should be owned by a women entrepreneur or SC/ST.

    Seeking the right financial assistance for business growth

    As can be seen here, there can be little debate on the direction the government is rooting for in the next few years. MSMEs are a priority for the government, considering MSMEs contribution to rural development, employment, exports and GDP, and the government is taking a strategic approach to provide the required support the sector requires.

    Over the years, the government has relentlessly introduced relevant schemes on financial assistance, technology support, innovation and training (e.g., MSME Champions programme, MSME Prerana, RAMP scheme, etc.) to foster growth and global competitiveness.

    The financial assistance programmes, mainly for unsecured loans (collateral-free), interest subsidy, and credit guarantee (e.g., CGTMSE scheme) have been designed to build an ecosystem of relevant aid and guidance to MSMEs for their growth.

    At Tata nexarc we have built a digital platform that offers affordable and reliable solutions for MSME growth. You can buy steel at the best prices, get logistics services across multiple locations, and more. For more, register now on Tata nexarc and begin your growth journey.

    Sohini Banerjee

    Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.