Micro, Small and Medium Enterprises (MSMEs) are an important part of the Indian economy, contributing significantly to employment generation and GDP growth. However, lack of access to finance is a major challenge faced by MSMEs in the country. To address this issue, various state and central governments have launched loan schemes for MSMEs. In this blog, we will look at some of the loan schemes available for MSMEs in Tamil Nadu.
Annal Ambedkar Business Champions Scheme
The Annal Ambedkar Business Champions Scheme (AABCS) is a specific MSME loan scheme in Tamil Nadu aimed at fostering the economic development of entrepreneurs belonging to Scheduled Castes (SCs) and Scheduled Tribes (STs). The following are some of its features:
| Loan amount | 70% of project cost |
|---|---|
| Interest rates | 6% |
| Age | 18-55 years |
| Capital subsidy | 35% capital subsidy |
| Qualification | No minimum educational qualification |
New Entrepreneur cum Enterprise Development Scheme
The New Entrepreneur-cum-Enterprise Development Scheme (NEEDS) is an initiative by the Department of Micro, Small and Medium Enterprises (MSME), Government of Tamil Nadu. The main objective of the scheme is to promote the first entrepreneurial projects of first-generation entrepreneurs. The following are some of its features:
| Capital subsidy | 25% of the project cost |
|---|---|
| Interest rates | 3% |
| Project cost limit | Rs. 10 lakhs to Rs. 500 lakhs |
| Gender | Male/Female |
| Age | Between 21-45 |
Unemployed Youth Employment Generation Programme
The Unemployed Youth Employment Generation Programme (UYEGP) is a specific MSME loan scheme offered by the Tamil Nadu government. This scheme aims at mitigating the unemployment problems of socially and economically weaker sections of society. The following are some of its main features:
| Capital subsidy | 25%-35% of the project cost |
|---|---|
| Project cost limit | Rs. 15.00 lakh for trading activities and Rs. 25.00 lakh for manufacturing and service activities |
| Age | Between 18-45 |
| Qualification | Minimum 8th Pass |
| Gender | Male/Female |
Tamil Nadu State Government Credit Guarantee Scheme
The Tamil Nadu State Government Credit Guarantee Scheme is a scheme launched by the Tamil Nadu government to provide credit guarantees to MSMEs for loans taken from banks and financial institutions. The Tamil Nadu Industrial Investment Corporation (TIIC) implements the scheme. This scheme covers both term loans and working capital facilities. Following are some of its features:
| Loan amount | Upto Rs.2 Crore |
|---|---|
| Interest rates | Competitive interest rate depending on the bank |
| Guarantee cover | 80% |
| Gender | Male/Female |
The Tamilnadu Industrial Investment Corporation Ltd Loans
The Tamil Nadu Industrial Investment Corporation (TIIC) provides loans to MSMEs for setting up new projects or expanding existing ones. This scheme offers subsidies and loans under a single roof. Following are some of its features:
| Loan amount | Upto Rs. 5 crores |
|---|---|
| Interest rates | 3%-6% |
| Prepayment charges | Nil |
| Gender | Male/Female |
Credit Linked Capital Subsidy Scheme (CLCSS)
Credit Linked Capital Subsidy Scheme was launched in October 2000 by the Government of India. This scheme provides necessary funds to MSMEs for upgrading their existing technologies. Enterprises can use this scheme to upgrade their existing plant and machinery and increase profit. This scheme has no upper loan limit, but the subsidy is calculated on the loan amount sanctioned for P&M purchase only. The following are its main features:
| Loan amount | No upper limit |
|---|---|
| Subsidy | 15% of the loan amount |
| Annual guarantee fee | 0.75%-1.0% |
| Loan tenure | Flexible tenure depending upon the repayment capacity |
Pradhan Mantri MUDRA Yojana (PMMY)
The Pradhan Mantri MUDRA Yojana (PMMY) is a flagship central government scheme launched in 2015. It provides micro-loans to non-corporate, non-farm micro and small enterprises in both rural and urban areas.
PMMY offers loans under three categories, depending on the stages of business growth and funding needs:
- Shishu Mudra: Up to Rs. 50,000
- Kishore Mudra: Rs. 50,001 to Rs. 5 lakh
- Tarun Mudra: Rs. 5 lakh to Rs. 10 lakh
MUDRA loans are availed through various financial institutions, including Public sector banks, Private sector banks, Regional Rural Banks, Small Finance Banks, Microfinance Institutions, and Non-Banking Financial Companies (NBFCs).
Unlike other loan schemes, PMMY doesn’t have specific criteria for age, gender, tenure, interest rates, etc. All these factors can vary based on the category of the loan and the policies of the lending institution.
Prime Minister’s Employment Generation Programme (PMEGP)
PMEGP is a credit-linked subsidy scheme administered by the Ministry of Micro, Small and Medium Enterprises (MSME), which aims at creating job opportunities by establishing micro-enterprises. The main target of this scheme is Women, Traditional and prospective artisans and Unemployed youth. The following are some of its main features:
| Age | Minimum age of 18 |
|---|---|
| Interest rate | Between 11% -12% depending on the bank |
| Loan tenure | 3-7 years |
| Education qualification | VIII standard pass |
| Maximum Loan amount | Rs. 1 Crore |
| Subsidy | 15% to 35% |
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
CGTMSE is a joint initiative launched in 2000 by the Ministry of Micro, Small and Medium Enterprises (MSME), the Government of India, and the Small Industries Development Bank of India (SIDBI). It encourages financial institutions to provide collateral-free credit schemes to micro and small enterprises. In case of any default, the bank can file a claim with CGTMSE. The following are some of its main features:
| Loan amount | Up to 5 crore |
|---|---|
| Collateral | Not required |
| Loan tenure | 5-10 years |
| Annual Guarantee fee | 0.37%-1.35% |
| Age | Minimum age of 18 |
Stand-up India
Stand-up India is a central government scheme launched in 2016. It provides bank loans for entrepreneurship among women and members of Scheduled Castes (SCs) and Scheduled Tribes (STs). Existing businesses cannot avail loans through this scheme, as these are provided for starting new businesses. These loans are provided through various banks, including scheduled commercial banks, regional rural banks (RRBs), and small finance banks.
This scheme provides loan amounts ranging from Rs. 10 lakhs to Rs. 1 crore. The interest rates and tenure vary depending on the nature of the business and other factors such as the nature of the business, credit policies of the lender, etc.
SIDBI Make in India Soft Loan Fund for Micro, Small, and Medium Enterprises (SMILE)
SMILE is a scheme launched by the central government to provide financial assistance to 25 Identified sectors under the ‘Make in India’ initiative. This scheme promotes the ‘Make in India’ initiative among entrepreneurs. SMILE provides adequate funding for the setting up of new enterprises and also for the expansion of existing ones. The following are some of its main features:
| Loan tenure | Maximum 10 years |
|---|---|
| Loan amount | From Rs.10 lakhs to Rs.25 lakhs |
| Interest rates | Depending on enterprises’ requirement |
| Nature of loan | Quasi-equity and term loans |
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