Short answer: The main government-backed loan schemes for small businesses in India are PM Mudra Yojana (collateral-free loans up to ₹20 lakh), PMEGP (a capital subsidy on new micro-enterprise projects), Stand-Up India (₹10 lakh to ₹1 crore for SC/ST and women entrepreneurs), PM SVANidhi (small working capital loans for street vendors) and the CGTMSE guarantee that lets banks lend without collateral. The government does not lend directly: you apply through a bank, NBFC or MFI, which still checks your eligibility and repayment capacity.
Last updated: 13 October 2026.
This hub summarises each scheme as it stands in October 2026, flags what changed recently, and links to our detailed guides. Scheme terms change through budgets and cabinet decisions, so always confirm on the official portal before you apply.
Government loan schemes at a glance
| Scheme | Who it is for | Amount | Key feature |
|---|---|---|---|
| PM Mudra Yojana (PMMY) | Non-corporate, non-farm micro and small units, including allied agriculture | Up to ₹20 lakh | No collateral; four categories |
| PMEGP | First-time entrepreneurs setting up new micro units | Project cost up to ₹50 lakh (manufacturing) / ₹20 lakh (service) | Margin money subsidy of 15% to 35% |
| Stand-Up India | SC/ST and women entrepreneurs aged 18+ | ₹10 lakh to ₹1 crore | Greenfield projects; up to 7 years with 18-month moratorium |
| PM SVANidhi | Urban street vendors | ₹15,000, then ₹25,000, then ₹50,000 | Interest subsidy, digital cashback, RuPay credit card after repayment |
| CGTMSE | Micro and small enterprises | Guarantee cover up to ₹10 crore | Lets lenders skip collateral and third-party guarantees |
PM Mudra Yojana
Mudra is a refinance scheme: MUDRA does not lend to you directly, but member lenders such as banks, regional rural banks, small finance banks, NBFCs and MFIs do. According to the Government of India note on PMMY (April 2026), the categories are:
- Shishu: up to ₹50,000 for very early-stage units.
- Kishor: above ₹50,000 up to ₹5 lakh.
- Tarun: above ₹5 lakh up to ₹10 lakh.
- Tarun Plus: above ₹10 lakh up to ₹20 lakh, introduced in 2024 for borrowers who have successfully repaid a Tarun loan.
Mudra loans are collateral-free, but interest rates are set by each lender and are not subsidised by default. Over 57 crore loan accounts had been sanctioned by March 2026. Beware of agents who charge a fee to ‘get’ a Mudra loan; the application itself is free at the lender.
PMEGP (Prime Minister’s Employment Generation Programme)
PMEGP, run by KVIC, gives a one-time margin money subsidy on new projects. The maximum project cost is ₹50 lakh for manufacturing and ₹20 lakh for service units. The subsidy is 15% (urban) or 25% (rural) of project cost for general category applicants and 25% (urban) or 35% (rural) for special categories such as SC/ST, OBC, women, transgender persons, persons with disabilities and applicants from the North-East, aspirational and border districts. The bank funds the rest as a loan after your own contribution.
2026 status: the scheme was approved up to 31 March 2026. In August 2026 the government told Parliament that further subsidy releases depend on approval for its continuation. Check the KVIC PMEGP portal and your bank before counting on the subsidy in your project plan.
Stand-Up India
Stand-Up India supports greenfield enterprises in manufacturing, services, trading and agri-allied activities by SC/ST and women entrepreneurs. Loans of ₹10 lakh to ₹1 crore come from scheduled commercial banks, with repayment up to seven years including an 18-month moratorium. The borrower must bring at least 10% of project cost; margin money support of up to 15% can come from eligible central or state schemes. For a company or firm, at least 51% must be held by SC/ST or women promoters.
The Department of Financial Services lists the scheme as approved up to 31 March 2025 and notes that a new scheme of term loans up to ₹2 crore for first-time women, SC and ST entrepreneurs, announced in the 2025-26 Budget, is being prepared. Ask your bank which version is currently open.
PM SVANidhi for street vendors
In August 2025 the cabinet restructured and extended PM SVANidhi until 31 March 2030 (cabinet decision). The first loan rose to ₹15,000 and the second to ₹25,000; the third stays at ₹50,000. Vendors who repay the second loan can get a UPI-linked RuPay credit card, and digital transactions earn cashback of up to ₹1,600.
CGTMSE: the guarantee behind collateral-free MSME loans
CGTMSE is not a loan but a guarantee. When a bank or eligible NBFC lends to a micro or small enterprise without collateral, the trust covers a large part of the loss if the loan defaults. The ceiling has been raised to ₹10 crore and fees for larger guarantees were reduced, per CGTMSE. The lender pays an annual guarantee fee, which is often passed on to the borrower, so ask how it shows up in your KFS.
Worked example: how a PMEGP subsidy changes your loan
Illustrative: Rekha, a woman entrepreneur in a rural area, plans a ₹20 lakh food processing unit. As a special category applicant she contributes 5% (₹1,00,000) and is eligible for a 35% subsidy (₹7,00,000). The bank sanctions the balance of ₹19,00,000 as loan, and the subsidy is held in her account for a lock-in period and then adjusted against the loan. Her effective debt is about ₹12,00,000. Without the subsidy, the same project would need the full ₹19 lakh repaid with interest. (Own-contribution rules and subsidy handling vary; confirm with your bank.)
How to apply
- Get a free Udyam registration on the official Udyam portal using your Aadhaar.
- Prepare a simple project report with costs, expected sales and repayment plan.
- Apply at a bank branch, through the lender’s website, or through the relevant scheme portal.
- Keep KYC, bank statements, quotations for equipment and, for existing businesses, ITRs and GST returns ready. See our business loan documents checklist.
- Read the KFS before you sign. Scheme loans are still loans and missing EMIs hurts your credit score.
Not covered by a scheme? Compare business loan offers from RBI-regulated lenders.
Related guides
- Business loans in India: hub
- Types of business loans
- Loans for startups in India
- Bill discounting and TReDS for MSMEs
- Small business loans guide
- Government schemes for individuals (savings, pension, insurance)
- Common loan scams to avoid
Frequently asked questions
Does the government give loans directly?
No. Schemes such as Mudra, PMEGP and Stand-Up India are delivered through banks, NBFCs and MFIs. The government provides refinance, subsidy or guarantee support, while the lender decides on your application.
Is a Mudra loan interest-free?
No. Mudra loans are collateral-free, but the interest rate is set by the lending bank or NBFC. Some state schemes add interest subvention for specific groups.
Can a salaried person get a government business loan?
These schemes are for setting up or running a business. A salaried person planning a side business may qualify if the enterprise is genuine and meets the scheme rules, but not for personal expenses.
Someone is offering a guaranteed Mudra loan for a fee. Is it genuine?
Treat it as a red flag. Applying for government schemes is free at the lender, and nobody can guarantee approval. Report fraud at cybercrime.gov.in or call 1930.
What happens if I default on a scheme loan?
It is reported to credit bureaus like any other loan, and the lender can recover dues. A CGTMSE guarantee protects the lender, not the borrower.
Sources
- Government of India note on PMMY (Mudra), April 2026
- Department of Financial Services: Stand-Up India
- All India Radio News: PM SVANidhi restructured and extended
- CGTMSE
- Udyam Registration portal
Disclosure: FundsTiger (Gatimaan Finance Advisors Pvt. Ltd.) is a loan marketplace and lending service provider for RBI-regulated lenders. Aparampaar Finance Pvt. Ltd. (Omozing), one of those lenders, is a related party of FundsTiger. This article is general information, not financial advice. Read your loan agreement and KFS before you decide.