Small-Scale Industry Loans Complete Guide

Small-scale industries or MSMEs (micro, small and medium enterprises) play a crucial role in shaping a country’s economy. In India, the sector contributed around 29% to the gross domestic product (GDP). Meanwhile, small-scale industries generate about 360 lakh jobs in the country.

The government offers small-scale industry loans at low interest rates and low to zero collateral to support the businesses established in this sector. Read on to learn more about the lending schemes, their eligibility and required documents.

Top 5 Small-Scale Industry Loan Schemes

On April 2, 1990, the Small Industries Development Bank of India, or SIDBI, was founded as a significant lending organisation to provide MSMEs with funding for their growth and advancement. Through its various direct loan programs for MSMEs, SIDBI manages a sizable portfolio to provide funds to MSMEs.

SIDBI’s cumulative loan disbursal in 2022 stood at Rs.266,541 crore, with more than 1,000  lakh active loans and 5 crore active unique borrowers.

The organisation offers loans for small-scale industries ranging up to Rs 25 crore. It also monitors other banks and financial institutions that provide financing to MSMEs. 

The various lending schemes offered by SIDBI are:

1. SPEED loan

This type of loan is specifically designed to help MSMEs meet their equipment needs. The pace, quality, and efficiency of production can all be increased with the correct tools, which this loan scheme promises to provide.

Equipment financing is offered by SIDBI through the SPEED loan. It can be disbursed quickly, has a one-page application form, and has low-interest rates. Additionally, a maximum 5-year repayment period is included. Under this SIDBI loan scheme, borrowers get the option to borrow the entire equipment value as a loan of up to Rs 2 crore.

Also read :- Small Scale Industries in India (SSI) – List, Types, & Eligibility

2. EXPRESS 2.0

As the name suggests, this fast-paced financing offers small-scale industry loans in a fast manner. Under this scheme, MSME owners can obtain a loan of up to Rs 1 crore with the option of 100% financing for a tenure of 60 months.

MSMEs in the manufacturing and service sectors with proper GST and UDD documentation and a good credit score can apply for a loan under this scheme. The application process is quick and automated, adding to the benefits.

Also Read :- Complete Process to GST Number Search Online by Name or PAN No.

3. SAATH

SAATH is a term loan designed to provide SC/ST business owners with financial support for their small-scale business operations. MSMEs in the manufacturing and service industries can use this loan to expand or modernise their current operations or to start a new unit. Borrowing limits for loans under this scheme range from ₹25 lakh to ₹3 crore.

However, to be able to borrow under this scheme, borrowers need to have a positive repayment track record and a good credit score. Further, SIDBI itself bears up to 50% of the credit guarantee fee.

4. ARJANA

ARJANA is another manufacturing business loan that was started to assist female entrepreneurs operating small-scale manufacturing businesses. Additionally, there are term loans available for greenfield projects and business expansion up to ₹3 crore.

To obtain financing under this scheme, borrowers need to be an MSME as defined by the MSMED Act, and a minimum of 51% of the business ownership has to be held by women in the company. Additional requirements include meeting the CIBIL score criteria.

5. TULIP

The TULIP program was introduced by SIDBI to provide instant top-up funding to MSMEs. These loans are approved in 7 days, taking into account the intended use of the funds, and the only collateral needed is an FD. Additionally, 100% financing is offered with 10% FD and extension fees. Thus, small business owners can easily use the TULIP loan to pay for working capital requirements, construction projects, and the purchase of machinery.

The basic eligibility criteria for this scheme is to have a minimum of one year of SIDBI customer service with a positive track record.

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How to Apply for Small Scale Industry Loans?

To obtain a loan for your MSME setup, you can follow these steps:

Step 1: Visit your preferred lender; this can be either SIDBI or a bank or NBFC

Step 2: Fill in the loan application form with all correct details

Step 3: Choose the loan scheme you wish to apply for

Step 4: Submit the needed documents and submit the application

After this, the lender will verify your details and check your eligibility before approving your application. Note that the loan disbursal may take a few more days.

Eligibility to Apply for Small-Scale Industry Loans

The eligibility to obtain small-scale industry loans depends on the scheme and the lender’s parameters. However, a few basic eligibility criteria include:

  • Applicant must be between 25 and 66 years of age
  • Existing or new industries can apply
  • Applicant must be an Indian citizen
  • Borrower needs to have a good CIBIL score

Documents Needed to Apply for Small-Scale Industry Loans

A few documents applicants need to apply for MSME loans are:

  • KYC documents, such as Aadhaar card, PAN card, Ration card, and address proof
  • Business registration documents, including GST documents
  • Audited profit and loss statement of the business, IT returns of the previous three years or bank account statements of the past two years.

Summing Up

MSME business owners can easily obtain sizable financing for their needs through the various small-scale industry loans available at disbursal. However, it is essential to choose a scheme according to one’s needs and meet the needed eligibility parameters for a smooth application process.

By indifi

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