Business Loans For Women Entrepreneurs By The Government of India
The decision to embark on a journey to financial independence by starting a business is inspiring. This is especially true in the case of women entrepreneurs who, for centuries, have been conditioned to think business isn’t for them. Today, India is booming with women entrepreneurs who have proven they can talk shop. However, lacking social and financial support can be a major hurdle in setting up and running a business. To overcome this, the Government of India has introduced various women-focused loans and schemes that make it easier than ever for budding women entrepreneurs to achieve their dreams. This blog post covers eight startup business loans that women entrepreneurs can avail and grow their businesses.
Implemented by the Women Development Corporation, the Udyogini Scheme is a Government of India initiative that offers monetary assistance to aspiring women entrepreneurs in India. Exclusively directed at women entrepreneurs, the scheme helps avail subsidized loans from private and public sector banks and leading NBFCs enrolled in the scheme. Currently, 88 small-scope industries are covered under the plan.
The eligibility criteria for the Udyogini scheme are as follows:
- Business Loan available only for women entrepreneurs
- Should not have defaulted on any past loan with any financial institution
- The applicant with good credit score and repayment capability
- Minimum age of 18 years and a maximum of 55 years
It must be noted that the loan limit and interest rates vary with each lender. For example, the Udyogini Scheme from Bajaj Finserv grants a maximum of INR 3,00,000 per borrower interest-free, while Saraswat bank grants up to INR 200 Lakhs at varying interest rates. As of today, the scheme claims to have empowered 44,000+ women-preneurs in India.
Some banks and NBFCs offering business loans under this scheme include Bajaj Finance, Saraswat bank, Punjab and Sind Bank, and Karnataka State.
Stree Shakti Yojana
Launched by the State Bank of India, Stree Shakti Yojana is uniquely tailored for women who wish to become entrepreneurs or are looking to expand their existing businesses. Women who are entrepreneurs or have a shared Capital of not less than 51% as partners /shareholders /directors of a private limited company or members of a cooperative society can apply for this business loan. Here’s a summary of the scheme:
- Loan Amount for Retail Traders: INR 50,000 to INR 2,00,000
- Loan amount for Business Enterprises: INR 50,000 to INR 2,00,000
- Loan amount for Professionals: INR 50,000 to INR 25,00,000
- Loan amount for SSI: INR 50,000 to INR 25,00,000
Under the scheme, you can get loans up to Rs. 20 lakh for industrial sectors such as housing, retail, and education. The ceiling limit for micro-credit finance is Rs. 50,000. The loans in both cases are offered without charging any processing fees, and banks usually offer a 0.5% rebate on the loans. The interest rates for the above-mentioned loans will depend on the prevailing interest rate at the approval time and the applicant’s profile. However, the bank allows certain concessions on the interest of women from certain categories.
To be eligible for the Stree Shakti Yojana benefits, the entrepreneur must meet the following criteria:
- The loan is provided for businesses solely held by women or at least have more than 51% stake
- The business must be in the retail, manufacturing, or services sector. Self-employed women are also welcome
- The applicant must be a part of/pursuing the Entrepreneurship Development Programmes (EDP) organized by state agencies
Mahila Udyam Nidhi Yojana
An initiative by the Small Industrial Development Bank of India (SIDBI), Mahila Udyam Nidhi Yojana, aims to empower women entrepreneurs through concessional financial assistance to grow and develop their businesses. The scheme can be leveraged by MSMEs to undertake service, manufacturing, and production-related activities.
Per this scheme, the project cost must be less than INR 10,00,000. Loan limit of up to 25% of project cost, subject to a maximum of Rs. 2.5 lakh per project is offered to deserving women entrepreneurs. The interest for the same differs from bank to bank, with a maximum repayment tenure of 10 years. The respective bank charges a service charge of 1% per annum, as per the sanctioned loan. The loan can be availed for activities like beauty parlors, internet cafes, dry cleaning, and more. Additionally, no collateral or security is required to avail of this scheme.
The eligibility criteria for this scheme are:
- Women entrepreneurs who have initiated existing and new MSMEs, Tiny Units, or SSIs
- The financial holding of women entrepreneurs should not be less than 51%
- Existing or new MSMEs engaged only in services, trading, and manufacturing sectors
- MSMEs or tiny enterprises with a minimum investment of at least INR 5,00,000
Mudra Loan for Women
A part of the Pradhan Mantri Mudra Yojana (PMMY) scheme, the Mudra loan for women is exclusively aimed at uplifting and supporting women entrepreneurs in India. Per this scheme, loans up to Rs 10 lakh are provided to women entrepreneurs without collateral and with a low-interest flexible repayment tenure. As of 2019, fifteen crore loans amounting to INR 4.78 lakh crore have been distributed to women entrepreneurs through this scheme. The scheme lends out loans in three categories:
- Shishu Loan: The maximum loan amount granted to businesses in the initial stage is Rs. 50,000.
- Kishor Loan: For businesses that are already established but wish to improve services. The amount of loan granted varies from Rs. 50,000 to Rs. 5 Lakhs.
- Tarun Loan: For well-established businesses planning to expand their reach and is short on capital, they can avail of as much as Rs 10 lakh for the purpose.
The age limit for women who can avail of loans under the Mudra scheme is 65 years. The minimum age requirement is 18 years. Here’s who all can avail of Mudra loans for women:
- Group or cluster of artisans, instead of individual artisans
- Self-help groups formed by artisans, weavers, and craftsmen
- Artisans who are registered under the Development Commission (Handicrafts)
- Women entrepreneurs who have trained themselves at R-SETIS or any other prescribed institution.
- Women or men recipients of any other Govt schemes are not eligible for Mudra loan
- Women entrepreneurs who are engaged in retail trade do not qualify for Mudra loan
A nominal processing fee and foreclosure fees are charged on the sanctioned loan amount for women entrepreneurs.
Launched by the Government of India, the Annapurna Scheme provides financial assistance to women entrepreneurs in the food and catering industry. The total loan sanction is INR 50,000 and can be utilized for various activities like purchasing utensils, cooking equipment, office necessities, etc. The country has many active cloud kitchens today, and this scheme can be highly beneficial for them.
The repayment tenure is three years, in which the first month of repayment is discounted for women entrepreneurs. The interest rate charged currently can go up to 12.25 % for a period of 7 years. The main eligibility criteria for this scheme are:
- The loan is provided for businesses solely held by women
- The age limit is between 18-60 years
- Should not have defaulted on any past loan with any financial institution
The State Bank of Mysore and Bharatiya Mahila Bank currently offers this scheme.
Dena Shakti Scheme
Implemented by Dena Bank, Dena Shakti Scheme is a financial assistance scheme aimed at women entrepreneurs in the agriculture, manufacturing, micro-credit, retail stores, or small enterprises sectors. The interest rate for these loans stands at 0.25% below base rates for women entrepreneurs who are the majority stakeholders in the company.
The loan amounts for the different industries under this scheme are:
- Agriculture: INR 20,00,000
- Manufacturing, retail trader, or small enterprises (Direct and Indirect Finance): INR 20,00,000
- Retail Trader and micro-credit: Up to INR 50,000 under micro-credit schemes
The loan is granted as a combination of working capital and term loan, with a repayment tenure of up to 7-10 years.
Bhartiya Mahila Bank Business Loan
Launched with the aim of financially supporting women entrepreneurs in 2013, Bhartiya Mahila Bank (BMB) is a public sector bank that offers women entrepreneurs loans up to INR 20 Crores for working capital requirements, business expansion, or manufacturing enterprises. The bank offers multiple plans under the scheme, some of which are:
Shringaar: The BMB Shringaar loan applies to self-employed women to meet their daily business expenses. The loan doesn’t require any collateral security.
Parvarish: BMB Parvarish loan is for self-employed women or homemakers to set up daycare creches. The upper limit of this loan can be ₹1 Crore without any collateral security under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGSTSM) scheme.
Annapurna: Aimed at women entrepreneurs between 18 to 60 years wanting to start or expand their small food businesses. Note that this scheme is very much similar to the Annapurna Scheme mentioned above but differs in the way that this scheme doesn’t require any collateral.
The following entities are eligible to apply for the loan under the scheme:
- Sole Proprietor
- Partnership Firms
- Public and Private Limited Companies
- Co-operative Society
- Minimum 2 years of work experience; in case of self-employed, minimum of 2 years of business continuity
- Minimum age of 21 years and maximum age of 60 years (loan completion age)
- Minimum take-home income of Rs. 25000/- per month
Cent Kalyani Scheme
Cent Kalyani Scheme was launched by the Central bank of India with the objective to encourage Women Entrepreneurs to start a new project or expand/modernize the existing unit. The maximum limit of loans provided under this scheme is INR 1,00,00,000. Existing and new women entrepreneurs operating in the Micro, Small, and Medium enterprises as per the MSME Act, 2006, can benefit from this scheme.
Loans under this scheme are available in four ways:
- Cash credit working capital limit
- Term loan
- Non-Fund based limit (for Working capital as well as term loan)
The interest rates for loans availed under this scheme are:
- For loans up to INR 10 Lakhs: The concession in rate of interest will be MCLR (Marginal Cost of Funds based on the Lending Rate) with 0.25 % of the loan.
- For loans above INR 10 Lakhs and up to INR 100 Lakhs: The concession in rate of the interest would Marginal Cost of Funds based on the Lending Rate ( MCLR ) with 0.50% of the loan
- Additional interest concession of 0.25% will be provided if the account is rated by an External Agency.
Documents Required for Availing Business Loans for Women
As mentioned throughout this article, the borrower will have to submit a set of documents while applying for the loan/scheme. Though the requirements might change from lender to lender, here are a few documents that are common for all lenders:
|Application form||Filled and duly signed|
|KYC Documents||Business entity proof, partnership deed, incorporation certificate, shops and establishment certificate, Articles of Association (AOA)|
|Financials||1. Projected turnover and current-year performance|
2. Tax audit reports, balance sheets, profit, and loss reports, VAT returns, audited and provisional financials, etc.
|Bank Statements||For the last 6 months|
|Photographs||Passport-size photograph of applicant/co-applicants|
|PAN Card||1. Of partners/directors/proprietors/promoters|
2. Of the business entity
|Address Proof||1. Of the business entity|
2. Of directors/promoters/partners/proprietors
At Velocity, we believe financial literacy is the first step to achieving greater heights for any business. In our journey to ensure every entrepreneur is fully aware of the options they have for funding their dreams, we constantly come up with crisp, informative, and enlightening content. You can check out our other blog posts on other funding sources here:
- Revenue-Based Financing – A Complete Guide
- 9 Types of Business Loans in India
- What Are Unsecured Business Loans: Guide For Startups And Small Businesses
- A Comprehensive Guide to Startup Business Loan in India 2022
- 25 Most Active Angel Investors for Indian D2C Startups
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