Financial support is very helpful when starting your new business or managing your existing business. It is also necessary during the growth phase of your business.
For MSMEs and new businesses, it can be very difficult to get a loan. To counter this problem, the Indian government launched the PMEGP program in 2008.
Loan structure of the PMEGP scheme
The PMEGP loan has a limit that can be sanctioned for different companies. For example, companies in the manufacturing sector may have a maximum project amount of Rs 25 lakhs. However, the limit is Rs 10 lakh for companies in the service sector. The company contributes 5-10% of the amount of the project, and the bank provides the rest in the form of a term loan.
However, in reality, you only get 60% to 75% from the bank, and the rest of 15% to 35% will be paid to you as a cash margin through the PMEGP scheme. Margin money, in simple terms, is a grant that the government provides.
How to get a loan under the PMEGP scheme
The PMEGP program is managed by the Khadi and Village Industries Commission (KVIC).
To benefit from this scheme, you must complete the application form, where you must provide the necessary details regarding the nature of the business, the detail of the project, etc.
In addition, you must submit the necessary documents.
And for your loan to be successfully sanctioned, your application for your project or business must meet one of the four objectives of the PMEGP system.
The four objectives of the PMEGP system are:
1. Create employment opportunities in rural and urban areas by creating new businesses, startups, self-employment projects or by growing established businesses.
2. Create self-employment opportunities among young people in rural and urban India. It can also be to promote and support traditional handicrafts and artisans in India.
3. Create stable jobs for young people in rural India so that they do not migrate to urban cities in search of employability.
4. Increase the incomes of traditional artisans in rural and urban India by encouraging and offering them self-employment.
Documents required to apply for a PMEGP loan
* Aadhar Card
* PAN card
* Project report containing project details
* Caste certificate
any other special category certificate (if necessary)
* Rural area certificate
* Letter from the authority
* School Qualification Certificate
Skills development training certificate or EDP certificate.
* Loan security for the PMEGP scheme
In accordance with RBI guidelines, any project costing up to Rs 10 lakh does not require any collateral to obtain a loan. But if the cost of the project is over Rs 10 lakh, you may need to provide collateral depending on the needs of the lender.
Interest rate for the PMEGP loan
The interest rate for an PMEGP loan is 11% to 12% pa
Eligibility for the PMEGP plan
* A person must be over 18 years old.
* The individual must have passed the 8th standard in school for the manufacturing sector project which costs more than Rs 10 lakh
Service sector project that costs more than Rs 5 lakh
* Support groups are eligible.
* Charitable trusts
* Registered companies
* Cooperative companies that are involved in the production business
The companies covered by the PMEGP regime are:
* Agriculture & Agri-food
* Forest products
* Handcrafted paper and fiber
* Mineral Products
* Polymeric and chemical products
* Rural Engineering and Bio-Tech
* Service and Textile
How businesses can apply for an PMEGP loan online
Visit the Khadi Commission and Village Industries (KVIC) website – kviconline.gov.in
* Then click on the online application form for individuals or the online application form for non-individuals (whichever suits you).
* Then complete the form by entering the necessary information.
* Now click on “save application data”
* Then upload the documents and get ready for the final submission.
* After final submission you will receive an application ID and password, it will be sent to your registered mobile number.