The government introduced Credit Linked Capital Subsidy Scheme or CLCSS to help the micro and small enterprises to implement the necessary technology and flourish in the current competitive market.
CLCSSs like CGTMSE and MUDRA Yojana are two of the schemes that provide loans to MSMEs at low-interest rates and administration charges.
What is Credit Linked Capital Subsidy Schemes (CLCSS)?
A credit-linked subsidy scheme is a government initiative that provides subsidized loans to MSMEs. They are specifically aimed at technological up-gradation with or without expansion. The primary regulatory body of this scheme is the Development Commissioner Ministry (DCM) of MSMEs. DCM operates this scheme with the help of nodal and primary lending institutions providing an upfront subsidy of 15% on MSME interest rates of these loans.
According to its official website, the initiative is operating with a vision to introduce state of the art technology for all MSMEs.
Eligibility: All MSMEs are eligible for this scheme provided they have a registered UAM number. If your enterprise does not have one, you can visit the official Udyog Aadhar Memorandum (UAM) portal where you will be guided through the registration process. However, the applicants must learn about checklists for a business loan application for easy approval.
How to apply: Potential applicants can apply for this scheme online through Primary Lending Institutions (PLI). The PLI then uploads the application through online tracking with the nodal agency, which then recommends your application to the office of DCM for MSMEs. Funds are disbursed after approval of the ministry by the nodal agencies. Funds are then transferred to the PLI’s beneficiary account.
Prime Minister MUDRA Yojana (PMMY)
PMMY is another essential government initiative that provides subsidised business loans besides additional assistance that enable the growth of micro and small enterprises of the country. This scheme was launched in the year 2015; the credit-linked subsidy scheme provides loans in three different categories.
- Shishu – Applicants under this category can avail loans up to Rs. 50,000.
- Kishore – Loans of value Rs. 50,000 to Rs. 5,00,000 are provided
- Tarun – The value of loans under this category ranges from Rs. 5,00,000 to Rs. 10,00,000.
MUDRA loans can be availed for various purposes. Equipment, plant, logistics can be improved by the beneficiaries with the help of these loans. There are many other facilities that applicants must learn about to demystify MUDRA loans. It has provisions for credit card facilities as well for easy withdrawal of cash through ATMs.
Individuals that do not satisfy the eligibility criteria for these loans can opt for a business loan from NBFCs. Companies like Bajaj Finserv offer financing up to Rs. 30 Lakh at competitive rate of interest.
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
The Credit Guarantee Fund Trust for Micro and Small Enterprises has become an essential institution providing collateral-free loans with credit guarantee to MSEs. The scheme rebooted in the year 2018; the initiative is now aiming to provide financial assistance that will benefit the new generation of entrepreneurs with best business ideas in India. More than 30 Lakh accounts have been sanctioned loans of total value Rs. 1.46 Lakh Crore. The trust has disbursed the loans through primary lending institutions.
Credit guarantee: The loans forwarded under this initiative are collateral-fee. They are secured through third-party guarantors. MSME loan interest rate under this scheme is calculated based on the marginal cost of funds based lending rate. Over the interest rates, the beneficiaries have to pay guarantee fees of 1.5% annually.
Eligibility: The following organisations are eligible for assistance under this scheme.
- New and existing MSMEs
- Educational institutions
- Agro-based undertakings
- Training institutions
However, the applicants must avail an IT-PAN before availing a loan under CGTMSE from the scheduled lending institutions.
These are the major schemes that provide collateral-free business loans. Such initiatives have played an essential role in the economic development and modernisation of the country. Applicants must know about the necessary requirements to get a business loan before applying for any of these loans.