5 Popular Government Loan Schemes for Small Scale Businesses in 2025

Government loan schemes play a vital role in helping India’s entrepreneurs access affordable credit and expand their ventures. For small-scale business owners, arranging funds is often a challenge due to lack of collateral, high interest rates, or limited financial history. To bridge this gap, the Indian government has introduced a variety of loan initiatives over the past decade. These programs not only make financing more accessible but also encourage entrepreneurship, job creation, and innovation.

As of 2025, several government-backed business loan schemes remain highly relevant for startups, microenterprises, and small businesses. In this guide, we’ll look at five popular loan schemes designed to support small-scale businesses in India.

1. Pradhan Mantri Mudra Yojana (PMMY)

Among the most successful government loan schemes, the Pradhan Mantri Mudra Yojana (PMMY) was launched in 2015 to support non-corporate, non-farm small and micro businesses. Entrepreneurs can access loans up to ₹10 lakh without the need for collateral, making it particularly attractive for first-time business owners.

Key Features

• Loan Categories:

  • Shishu: Up to ₹50,000 for startups and early-stage businesses.

  • Kishore: ₹50,001 to ₹5 lakh for enterprises seeking growth capital.

  • Tarun: ₹5,00,001 to ₹10 lakh for established businesses planning expansion.

• Collateral-Free: No security or assets are required.

• Interest Rates: Competitive rates, generally between 8% and 12%.

Benefits

This small business loan scheme has been instrumental in helping traders, small manufacturers, and service providers access funds quickly. By simplifying the borrowing process, PMMY empowers entrepreneurs to start and grow their ventures with confidence.

2. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)

Another key program among MSME loan schemes is the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE). It addresses one of the biggest challenges faced by entrepreneurs: lack of collateral. By providing credit guarantees, it reduces the risks for lenders and improves access to finance for small-scale businesses.

Key Features

• Guarantee Coverage: Up to 85% of the loan amount is covered.

• Loan Limit: Loans of up to ₹2 crore qualify under the scheme.

• Eligible Lenders: Includes commercial banks, regional rural banks, and selected financial institutions.

Benefits

For entrepreneurs who lack property or assets to pledge, this loan scheme offers a lifeline. With reduced risk for lenders, banks are more willing to finance micro and small enterprises, thereby supporting growth and innovation.

3. Stand-Up India Scheme

The Stand-Up India Scheme is another notable government initiative that focuses on inclusive entrepreneurship. Launched in 2016, it supports women entrepreneurs and individuals from Scheduled Castes (SC) and Scheduled Tribes (ST) by helping them set up new ventures.

Key Features

• Loan Amount: Provides funding from ₹10 lakh to ₹1 crore for greenfield enterprises.

• Eligibility: At least 51% ownership must belong to a woman or SC/ST individual.

• Support Services: In addition to credit, entrepreneurs receive handholding support, training, and mentorship.

Benefits

This business loan scheme goes beyond financial aid. By empowering women and marginalized groups, it builds a more inclusive startup ecosystem and creates opportunities for communities that have historically faced barriers to business ownership.

4. National Small Industries Corporation (NSIC) Subsidy Scheme

The National Small Industries Corporation (NSIC) provides financial and non-financial support to entrepreneurs through its subsidy and facilitation programs. Unlike other government loan schemes, NSIC focuses on reducing costs, improving skills, and opening doors to procurement opportunities.

Key Features

• Subsidies: Discounts on purchasing machinery and equipment.

• Bank Credit Facilitation: Helps small enterprises connect with banks for loans.

• Skill Development: Offers training courses to improve entrepreneurial skills.

• Government Procurement: Through the Single Point Registration Scheme (SPRS), small businesses can participate in government tenders.

Benefits

This subsidy scheme is designed to reduce the financial burden on small-scale businesses while equipping them with skills and market access. It is particularly useful for enterprises aiming to expand their operations and participate in government projects.

5. Atmanirbhar Bharat Abhiyan Loan Scheme

Launched during the COVID-19 pandemic, the Atmanirbhar Bharat Abhiyan Loan Scheme continues to support small businesses in 2025. Its goal is to help enterprises recover from economic disruptions and become self-reliant.

Key Features

• Emergency Credit Line Guarantee Scheme (ECLGS): Provides loans up to ₹3 crore without collateral.

• Repayment Flexibility: A repayment period of 4 years, including a 1-year moratorium on principal repayment.

• Affordable Rates: Competitive interest rates set by lending institutions.

Benefits

This scheme offers much-needed relief to businesses facing liquidity problems. It allows them to stabilize operations, safeguard jobs, and prepare for long-term growth.

Why Small Businesses Should Explore Government Loan Schemes

Government loan schemes are not just financial programs; they are tools to empower small businesses and strengthen the economy. Small and medium enterprises contribute significantly to India’s GDP, exports, and employment. However, challenges like limited access to capital often hold them back.

By exploring loan schemes from the government, entrepreneurs can:

• Access funds without collateral.

• Receive favorable interest rates compared to private financing.

• Take advantage of training, mentorship, and subsidy support.

• Improve chances of business survival and expansion.

• Build resilience against financial disruptions.

Conclusion

Government loan schemes for small-scale businesses in India remain a cornerstone of entrepreneurial growth in 2025. Each program is tailored to specific needs:

• PMMY supports entrepreneurs at different stages of business growth.

• CGMSE provides collateral-free loans with credit guarantees.

• Stand-Up India promotes inclusive entrepreneurship for women and SC/ST communities.

• NSIC Subsidy Scheme reduces costs and builds capacity.

• Atmanirbhar Bharat Loan Scheme ensures resilience during tough times.

For small business owners, choosing the right government loan scheme can make the difference between struggling with limited funds and achieving sustainable success. By understanding the eligibility and benefits of each program, entrepreneurs can confidently take the next step in building their businesses.