Top 7 Government Subsidy Loans for Business in India (Updated 2025)

Sanil Basutkar

Author

The Government of India has been highly supportive of small-scale business growth in India and has been creating sufficient schemes for that. The Indian government has provided an 80% subsidy to all the MSMEs (Micro Small and Medium Enterprises) as per the government reports under Make in India, from the Honourable Prime Minister of India. In this article, you will have a quick view of every government subsidy loan for businesses that the government provides.

Name of Bank	Rate of Interest
Central Bank of India	Base Rate + 0.50% till ₹10 lacs Base Rate + 1.0% above ₹10 lacs
UCO Bank	9.85%
State Bank of India	8.00%
Bank of Maharashtra	9.05%
HDFC Bank	11-12%
Axis Bank	12%

Government Business Loans for Business/Startups

In 2024, the Indian government extended a total of ₹ 841.8 crores to 217 incubator firms. Talking of the micro-enterprises, the Indian government has aided them too. Over 9.29 lakh micro enterprises were given subsidy loans by the government in 2023. The subsidy amount was ₹ 34,517 crores. This shows that the Indian government has provided subsidy loans to over lakhs of businesses or startups, and yet many businesses may not be aware of these facilities. Indian government currently provides 7 different subsidy based loans, here is a compact list: (image)

Mudra Loan Scheme
Coir Udyami Yojana
Poultry Venture Capital Fund Loan
Credit Linked Capital Subsidy (CLCS)
PM Employment Generation Program (PMEGP)
Credit Guarantee Scheme
Trade-Related Entrepreneurship Assistance And Development Scheme (TREAD)

Let us get to know each one of them individually and in-depth.

1. Mudra Loan Scheme

MUDRA subsidy loan is a government subsidy loan for businesses, mainly to develop entrepreneurs from underprivileged sections of society.

Scheme details	The MUDRA Loan scheme targets the micro-enterprises, mostly those businesses that deal with trading, manufacturing, and services. This was by the government in 2015 under the Pradhan Mantri MUDRA Yojana (PMMY)
Subsidy amount provided	i) Loan till ₹50,000 under Shishu category ii) Loan till ₹50,001 to Rs. 1 lakh under Kishore category iii) Loan till ₹1 lakh to ₹Rs. 10 lakhs under Tarun category
Main aim of this subsidy loan	Provide assistance to the Scheduled Caste, Scheduled Tribe, and Other Backward Classes who have much less economic privilege.
Eligibility to use this scheme	Any individual, a partnership firm, a private limited company, or any public company is eligible. Also the loan borrower should not have any history of loan default and needs to have a better credit record.

2. Coir Udyami Yojana

Indian coir entrepreneurs have been lacking proper funding support although India has exported $410.25 million in 2023-24, which has led the Indian government to launch Coir Udgyami Yojana.

Scheme details	This scheme is specifically meant for entrepreneurs who need funding support in setting up coir manufacturing
Subsidy amount provided	40% of total project value is subsidized, while bank credit is 55% credit and the beneficiary contribution is 5%
Main aim of this subsidy loan	This scheme aims to support the coir entrepreneurs of India as they have been lacking support for a longer time
Eligibility to use this scheme	Any entrepreneur, company, non-governmental organization or co-operative society can apply for this scheme

Get to know the process for business registration and its various types.

3. Poultry Venture Capital Fund Loan

Small-sized poultry farmers do not have sufficient credit access for strengthening their business, which is made easier by this scheme. Poultry Fund offers a large fund support for raising and maintaining the cattle at a highly subsidized rate.

Scheme details	This is a business loan offered by the Indian government meant for small poultry farmers, NGOs, and even cooperative societies
Subsidy amount provided	The government provides a 25% subsidy with a 10% margin, and the remaining 65% loan is provided by the bank
Main aim of this subsidy loan	This loan is majorly provided to farmers who need better poultry infrastructure, or need to buy livestock
Eligibility to use this scheme	No special eligibility is needed for this scheme, but the farmer needs to be trained in raising livestock

4. Credit Linked Capital Subsidy (CLCS)

In India, often the MSME businesses find it financially challenging to improve their technology. This escalates further when the startups try to approach commercial institutes for funding of their technology requirements. The Credit Linked Capital Subsidy (CLCS) subsidy is a business loan, which is meant to fund these businesses for improving their state-of-the-art technology. This form of credit assists firms in updating their existing technology, and also onboard new technology at a subsidized rate.

Scheme details	This type of credit is given by the government to partnership businesses, sole traders, and private and public limited companies
Subsidy amount provided	The eligible businesses get a 15% subsidy on the principal credit amount. The maximum credit that a business can apply to get in this scheme is Rs. 1 crore
Main aim of this subsidy loan	This loan scheme aims to empower businesses that need technological upgradation but cannot afford one. For example, a startup firm may lack the financial resources to install advanced energy conservation machinery, which this loan scheme helps to buy
Eligibility to use this scheme	Any sole proprietor, a partnership business, a public or private limited business, and even a cooperative society is eligible

5. PM Employment Generation Program (PMEGP)

The rural and urban population of India has a rising proportion of unemployed youth, such as artisans who do not get sufficient employment facilities. This loan facility with subsidy provides a better opportunity for them to establish their own business or manufacturing unit. Also, the Indian government started this subsidy loan to stop rural migration. As per the government reports, rural-to-urban migration is 18.9%, which is another reason behind launching this scheme.

Scheme details	Avail of credit of Rs. 10 lakhs - Rs. 25 lakhs depending on the industry. The government will extend a loan of 90% of business capital for the general category, and 95% for minorities
Subsidy amount provided	i) General category can get 25% subsidy in rural areas and 15% in urban areas ii) Minority class (SC/ST/OBC/Physically disabled) gets 25% subsidy in urban areas and 35% in rural areas
Main aim of this subsidy loan	Increase employment opportunities in rural and urban parts of the country, especially among the rural population of India
Eligibility to use this scheme	Any individual above the age of 18 and belonging to both the General category or Special category can apply

6. Credit Guarantee Scheme

As per media reports, in 2024 almost 72% of the Indian startups could not get easy funding access. All of these startups have thus sought external funding, which shows the poor funding infrastructure in India. The Indian government has turned this plight into an opportunity by launching the Credit Guarantee Scheme, which provides subsidized credit facilities.

Scheme details	This loan credit is meant to empower those entrepreneurs who are usually underprivileged, underserved and do not have easy access to funding opportunities
Subsidy amount provided	Per entrepreneur is allowed ₹10 crore applicable to the maximum limit as set by CGI or Credit Guarantee Scheme Trust
Main aim of this subsidy loan	Extend financial help to the rural and urban class who do not have sufficient funding opportunities of financing their own business or startup
Eligibility to use this scheme	i) Any Indian citizen is eligible for the scheme provided that they have IT PAN under 139A(5) and 272(C) of IT Act, 1961 ii) Self-help groups are not allowed to apply

7. Trade-Related Entrepreneurship Assistance And Development Scheme (TREAD)

Most of the women entrepreneurs are devoid of the deserving financial assistance, which makes it difficult for them to start their own venture. Major problems regarding credit assistance have surfaced frequently, especially in the rural Indian regions. TREAD was launched by the Indian government to mainly offer subsidised loans to these non-privileged women.

Scheme details	The Trade-Related Entrepreneurship Assistance And Development (TREAD) scheme offers subsidies to cover 70% of the project cost for all Indian women entrepreneurs
Subsidy amount provided	This scheme covers almost 70% of the project cost as extended credit, while the remaining 30% project cost will be covered by the government
Main aim of this subsidy loan	Provide better credit assistance to the women entrepreneurs in India
Eligibility to use this scheme	NGOs that have operated for at least 3 years and have a portfolio of managing funds

Read also business loan schemes for women entrepreneurs by the Indian government.

Benefits of Government Subsidy Loans for Business

Here are some major benefits that govt loans for small businesses provide:

Government loans are aimed at helping small-scale and micro enterprises, and startups in funding, and so the interest rate on these loans is usually very low. Moreover, the government provides 10 - 15% subsidy on average in most of these loans.
Applying for these loans is relatively easy as compared to loans given by private banks. The documentation process and also loan advancing time taken by banking institutes is much higher.
Businesses do not have the mandatory requirement for keeping high-value collateral as security against the loan taken. These government business credits often have relaxation on collateral security, making these loans relatively easy to avail of.
These types of subsidy business loan schemes generate employment. It is through these loan credit systems that the government helps unemployed youth generate a stable income and transform them into an entrepreneur.

Conclusion

To empower MSME businesses as well as startups, the Indian government has initiated multiple credit subsidy schemes. A government subsidy loan for business has multiple benefits, such as low interest rates, and no collaterals, making them a highly sustainable option. Not only do these loans have simple terms, but they also have helped underprivileged individuals to transform into entrepreneurs.