Top 5 Govt Loan Schemes for Small Business in India (2025 Guide)
Starting a business in India is easier with Govt Loan Schemes for Small Business, thanks to several government-backed loan schemes designed to support startups and MSMEs.
Many entrepreneurs are turning to Govt Loan Schemes for Small Business as a lifeline for their ventures.
If you are looking for capital to start a shop, a small factory, or a service business, you do not always need to rely on private banks with high interest rates. The Government of India offers collateral-free loans with low interest rates to encourage entrepreneurship.
Here are the top 5 government loan schemes you should know about in 2025.
Understanding Govt Loan Schemes for Small Business
Pradhan Mantri Mudra Yojana (PMMY)
This is the most popular scheme for small business owners. It provides loans up to ₹10 Lakh without any collateral (security). The loans are divided into three categories:
- Shishu: Loans up to ₹50,000 (For beginners/starting a shop).
- Kishor: Loans from ₹50,000 to ₹5 Lakh (For expanding an existing business).
- Tarun: Loans from ₹5 Lakh to ₹10 Lakh (For established businesses needing growth capital).
- How to Apply: Visit any commercial bank or apply online via the Udyamimitra portal.
PM Vishwakarma Yojana
Launched specifically for artisans and craftspeople (carpenters, blacksmiths, tailors, etc.), this scheme offers loans at a very low interest rate of just 5%.
- Loan Amount: Up to ₹1 Lakh in the first tranche, and ₹2 Lakh in the second tranche.
- Benefits: Includes a toolkit incentive of ₹15,000 and skill training with a daily stipend.
- Eligibility: Must be an artisan working with hands/tools in one of the 18 specified trades.
Stand-Up India Scheme
This scheme is designed to support SC/ST and Women entrepreneurs. Every bank branch in India is required to facilitate at least one borrower from these categories.
- Loan Amount: From ₹10 Lakh to ₹1 Crore.
- Purpose: For setting up a greenfield (new) enterprise in manufacturing, services, or trading.
- Repayment: Repayable in 7 years with a moratorium period of 18 months.
PMEGP (Prime Minister’s Employment Generation Programme)
If you want to start a manufacturing unit, this is the best scheme because it offers a subsidy (government pays part of your loan).
- Loan Limit: Up to ₹50 Lakh for manufacturing and ₹20 Lakh for service sectors.
- Subsidy: You can get a subsidy of 15% to 35% of the project cost, depending on your category (General/SC/ST/OBC) and location (Urban/Rural).
- How to Apply: Online via the KVIC website.
CGTMSE Scheme
The biggest hurdle for small businesses is “Collateral” (giving property papers as security). This scheme solves that.
- Feature: The government stands as a guarantor for your loan.
- Limit: Collateral-free loans up to ₹5 Crore (limit increased recently).
- Eligibility: Available for both New and Existing Micro and Small Enterprises.
Quick Comparison Table
| Scheme Name | Max Loan Amount | Key Benefit |
| Mudra Loan | ₹10 Lakh | No Collateral Required |
| PM Vishwakarma | ₹3 Lakh | Very Low Interest (5%) |
| Stand-Up India | ₹1 Crore | For SC/ST & Women |
| PMEGP | ₹50 Lakh | Up to 35% Subsidy |
Conclusion : Apply for Govt Loan Schemes Today
Before applying for private loans that charge 20-30% interest, always check your eligibility for these government loan schemes. Not only are the rates lower, but schemes like PMEGP effectively give you free money through subsidies.
If you need funds urgently while waiting for approval, check out our guide on Best Instant Loan Apps.