Small Business Loans: The ‘How-To’ For Women Entrepreneurs In India

Posted: May 16, 2018

Are you an entrepreneur looking for small business loans to start or boost your business? Do you face a dilemma while deciding on the various business loan schemes available in the market?

Indeed, planning for a business loan is a big decision. Following the below mentioned do’s and don’ts should help you:

  • Understand your real financial need. How much funding do you require?
  • Do you have a business plan ready to justify your loan repayment capability? Most lenders or banks might be asking for it.
  • What assets are at stake? Most business loans require a security or collateral.
  • How much interest would you be paying on the loan amount? Opt for the scheme with the lowest interest rate
  • What is the ratio of your EMI to your income? Ensure that it is not more than 25% to avoid risk.

What kind of small business loans can be availed?

Loans are usually secured or unsecured. If your lender knows you well and is convinced of your business productivity, then you might be able to get unsecured small business loans for your business. The three major loan facilities that can be availed are:

  • Working Capital Loans: Crafted to meet your day-to-day business expenses or the operational costs, these can either be secured or unsecured loans with interest rate up to 12-16% for a tenure of 12 months.
  • Term Loans: You can opt for a term loan of 1-10 years tenure with interest rate between 10-20% if you are planning to buy fixed assets such as machinery, building etc.
  • Corporate Term Loans: These are term loans of longer tenure and negotiable interest rate useful while starting up or expanding a business venture.

Government offered Small Business Loan Schemes for Women Entrepreneurs

Since a lot of women are entering entrepreneurship, the government of India has come up with below mentioned schemes for small business loans to support and ease out the process for them:

Stree Shakti Package

Run by SBI bank, this scheme is offered to women having 50% share in the ownership of a firm or business. The key features are:

  • Discounted interest rate by 0.5 percent if the loan exceeds Rs. 2 lakh.
  • No security for loans up to Rs. 5 lakhs in tiny sector units.

Cent Kalyani Scheme

Run by the Central Bank of India, this scheme is for women involved in cottage, micro, small, medium, retail or agriculture industry or for self-employed women.

  • Maximum loan of Rs 100 lakh.
  • No collateral security and processing fees.

Dena Shakti Scheme

Run by Dena bank for the women entrepreneurs in the fields of agriculture, manufacturing, micro-credit, retail stores, or small enterprises, it offers a maximum loan of Rs 20 lakhs with discounted interest rate by 0.25%.

Bhartiya Mahila Bank Business Loan

This scheme is for budding women entrepreneurs planning to start new ventures in retail, property, MICRO or SME industries. The key features are:

  • Maximum loan up to Rs 20 crores for manufacturing industries with a 0.25 % concession in interest rate.
  • Interest rate range of 10.15% and higher.
  • No collateral security for a loan up to 1 crore under CGTMSE scheme.

MUDRA Yojana Scheme

Launched for individual women planning to start beauty parlors, tailoring units, tuition centres etc, this loan doesn’t require any collateral security and can be availed in 3 schemes:

  • Shishu – offers maximum loan of Rs 50,000 to businesses in their initial stages
  • Kishor – offers loan ranging from Rs 50,000 to Rs 5 lakhs to well established businesses
  • Tarun – offers loan of Rs 10 lakhs to well established business planning to expand

A Mudra card is provided once the loan is sanctioned having funds limited to 10% of the loan amount.

Apart from these schemes, we also have Mahila Udhyam Nidhi, Oriental Mahila Vikas, or Annapurna Schemes offered by the Government of India. Further, most major private sector banks or financial institutions like Bajaj Finserv, Fullerton etc. also offer business loan schemes.

I hope you explore all these schemes for small business loans and make your decision wisely.

Image via Unsplash

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  1. With more and more women opting to be their own boss and wearing Solopreneurs, entrepreneurs hats, this article is just what they need. Thanks Sonalika, for putting up everything in one place.

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