Any business organisation requires funds either for its expansion or maintaining daily operations like accounts payables, clearing bills, covering other wages.
Working capital is the fund that is utilised to operate the day to day expenses of a business. Thus, an organisation needs to hold enough liquid capital to run the business efficiently.
Contrary to any privately-funded businesses, small and medium business entities find it tougher to maintain such capital.
However, these small-scale enterprises not only provide several employment opportunities but also contribute to about 40% of the entire GDP. Thus, the government comes up with several loan schemes to help these organisations.
Here is a list of such loans-
Government loan schemes to manage working capital:
Working capital loans help businesses to cover the problems with general business expenditures because of inconsistencies in seasonal sales, sudden growth in business, buying equipment, etc.
Here is a businessman’s guide to working capital loans.
- Pradhan Mantri Mudra Yojana or PMMY
Its features include –
- The loan amount cannot be assigned to meet any personal requirements.
- Any business individual or entity without having any previous loan default history is eligible for Mudra loans. Borrowers can utilise the funds for generating employment and income by increasing the current working capital of agriculture, manufacturing, trading, and the service sector.
- Individuals can avail up to Rs.10 lakh of loan amount without pledging any collateral.
- Under this loan scheme, borrowers can apply for three types of loans depending on various stages of their business. These types include Shishu, Kishor, and Tarun.
- Most financial institutions provide Mudra loans at affordable interest rates based on the sanctioned loan amount.
- SIDBI Make in India loans
The primary objective of SMILE or SIDBI Makes in India loans for enterprises is to provide funding to the MSME sector.
- This loan scheme is typically designed to create infrastructure, promote innovation and investment, and strengthen skill development for small enterprises.
- As a part of the government’s Make in India campaign, SMILE comes with attractive interest rates and a loan amount ranging between Rs.25 lakh to Rs.50 lakh.
- Individuals can avail a working capital loan or cash credit for their manufacturing and service enterprises with the hassle-free approval process.
- MSME loans
Borrowers who require financial support to expand their current business can opt for these government-backed MSME loans.
- With its advanced technology backed system, individuals can avail a loan amount from Rs.1 lakh to Rs.5 crore within hours.
- Moreover, borrowers can also avail an extra 2% interest subsidy on the advance of up to Rs.1 core on submission of GST registration of the business organisation.
- This MSME loan comes with minimal documentation and the quickest approval process.
- Stand-Up India scheme
Stand-Up India loan scheme is explicitly designed to finance individuals who are from SC/ST category and women entrepreneurs helping them start their business.
- For joint-ownership businesses, the major stake or 51% of the enterprise should be owned by/with women or SC/ST individuals.
- Borrowers can avail a credit of Rs.10 lakh – 1 crore with up to 7 years for repayment.
- Any services, trading, and manufacturing enterprises are eligible to apply for this loan scheme.
- The loan amount includes both term loan and working capital so that entrepreneurs can start and operate their business efficiently.
However, individuals can always opt for other Business Loans from reputed NBFCs like Bajaj Finserv. Borrowers can avail a loan amount of up to Rs.30 lakh at affordable interest rates with flexible withdrawal and repayment facilities.
Moreover, this financial company also provides pre-approved offers that help the borrowers to go through a hassle-free approval process. Other than business loans, these offers are also applicable to different financial products like personal loans and more.
Furthermore, applicants can check their pre-approved offers only by submitting their phone numbers and names online.
So, individuals can opt for any of these government loan schemes mentioned above to manage their working capital from time to time. However, borrowers should assess the reasons to choose a working capital loan to utilise the advance effectively.