Working Capital Loan Subsidy

Over 90% of the over 98,000 businesses that are launched in India every year end up as a failure. That’s quite normal by global standards, but the main reason for a large number of these failures is working capital. To be specific, a major reason for failure is the lack of working capital for business. The good news is that the Government of India knows about this, and is taking active steps to help new small businesses and startups get access to working capital. There are many different government loan schemes that you can apply for as a small business in India. But the two main ones that can be used for working capital are the Standup India scheme and Mudra Loan Yojana.

1. Stand up India

Stand up India, part of the Startup India initiative, aims to provide working capital for business for scheduled caste and backward tribes.

It also aims at promoting employment and entrepreneurship opportunities among women. The Stand Up India Scheme provides collateral-free loans to applicants and is actually known as Credit Guarantee Scheme Stand Up India (CGSSI).

The working capital for business available under Stand up India is between Rs. 10 lakh to Rs. 1 crore, and can cover up to 75% of the project cost. The loan is repayable in up to 7 years, with a moratorium of up to 18 months. The rate of interest would be the lowest applicable rate of the bank for that category. A RuPay debit card will be issued to borrowers for the withdrawal of capital for operations. This initiative is supported by Google, LIC, and SBI.

Eligibility for Stand Up India Loan

• Applicant must be SC, ST, OBC, Women
• The application must be for the commercialization of products
• The company can an individual entity, partnership, or registered LLP
• The company must be less than 5 years old and must have a turnover of no more than Rs. 25 crores per year.
• DIPP certification is required

HOW TO APPLY FOR A STANDUP INDIA LOAN

You can apply for a loan under the Standup India scheme directly at any branch of Scheduled Commercial Banks in India. You can also apply online on the Standup India portal at www.standupmitra.in.

STAND UP INDIA LOAN DOCUMENTS REQUIRED

Have this list of documents ready before you apply;

• Proof of Identity: Voter’s ID Card / Passport / Driving License / PAN Card / Signature identification from present bankers of the proprietor, partner of the director ( if a company)
• Proof of residence: Recent telephone bills, electricity bill, property tax receipt /Passport/voter’s ID Card of Proprietor, partner of Director (if a company)

• Proof of Business Address
• The applicant should not be a defaulter in any Bank/F.I.
• Memorandum and articles of association of the Company / Partnership Deed of partners etc.
• Assets and liabilities statements of promoters and guarantors along with the latest income tax returns.
• Rent Agreement (if business premises on rent) and clearance from pollution control board if applicable.
• SSI / MSME registration if applicable.
• Projected balance sheets for the next two years in case of working capital limits and for the period of the loan in case of term loan
• Photocopies of lease deeds/ title deeds of all the properties being offered as primary and collateral securities.
• Documents to establish whether the applicant belongs to SC/ST Category, wherever applicable.
• Certificate of incorporation from ROC to establish whether majority stakeholding in the company is in the hands of a person who belongs to the SC/ST/Woman category.

For Cases With Exposure above ₹ 25 Lakhs

• Profile of the unit (includes names of promoters, other directors in the company, the activity being undertaken addresses of all offices and plants, shareholding pattern, etc.
• Last three years balance sheets of the Associate / Group Companies (if any).
• Project report (for the proposed project if term funding is required) containing details of the machinery to be acquired, from whom to be acquired, price, names of suppliers, financial details like the capacity of machines, the capacity of utilization assumed, production, sales, projected profit and loss and balance sheets for the tenor of the loan, the details of labor, staff to be hired, basis of the assumption of such financial details, etc.
• Manufacturing process if applicable, the major profile of executives in the company, any tie-ups, details about raw material used and their suppliers, details about the buyers, details about major-competitors, and the company’s strengths and weaknesses as compared to their competitors, etc.

(The checklist is only indicative and not exhaustive and depending upon the local requirements at different places addition could be made as per (necessity).

2.Mudra Loan Yojana

Mudra stands for the Micro Units Development & Refinance Agency Ltd (MUDRA). The Pradhan Mantri Mudra Yojana is for the small and micro scale industries, to help people who do not have financial stability and sizeable assets to start a business. Mudra Bank Loan Yojana will provide loans up to Rs. 10 lakh through Mudra cards so that it can be used in the business.

SLABS OF MUDRA LOAN

The initial products and schemes under this umbrella have already been created and the interventions have been named ‘Shishu’, ‘Kishor’ and ‘Tarun’ to signify the stage of growth/development and funding needs of the beneficiary micro unit/entrepreneur as also provide a reference point for the next phase of graduation/growth for the entrepreneur to aspire for.

1. SHISHU: Targeted towards start-ups and covering loans up to Rs 50,000. If a loan is applied under this scheme, the interest rate is 10% to 12%.
2. KISHOR: For existing businesses that lack exposure, covering loans above Rs 50,000 and up to Rs. 5 lakh. For this category, the interest rate is 14% to 17%.
3. TARUN: For businesses that have grown to a certain stage and have enough exposure, but need to reach another level. It covers loans above Rs 5 lakh and up to Rs. 10 lakh & has high-interest rates starting from 16% onwards, varying based on the bank to which you apply.

MUDRA LOAN APPLICATION FORM

The Mudra Loan application form is available for download from your bank’s website. You can apply for the loan by contacting any branch of the bank you prefer.