The modern day women have proven their worth in many fields, including business. They have achieved great heights and risen to the position of CEOs and senior executives in global corporations like ICICI Bank, PepsiCo, HSBC, and JP Morgan Chase to name a few. However, entrepreneurship in women other than those backed by established business families is not very high, and the reasons are not very difficult to comprehend. Access to seed funding and working capital is restricted for the women folk. To encourage them, the government and financial institutions have allocated schemes and best Business Loans for budding women entrepreneurs.
So, what would qualify as a Business Loan?
Business Loans are loans explicitly extended for a business purpose. Like all other loans, these loans are also involved in the creation of debt and repayment with a specific rate of interest added to the principal amount. These types of loans are typically extended to set up a new venture or to expand the existing business.
How to avail a Business Loan for women entrepreneurs? And what are the criteria and perks for the same?
Banks like HDFC and ICICI banks have taken the initiative of doing away with the need of any co-applicant. If you are an existing customer of ICICI bank and you need an ICICI Bank Business Loan of Rs. 30 Lakhs or more for your business, you can obtain the loan at the interest rate of 15-15.5%. On the other hand, if you are a new customer and you require a loan for a smaller amount; the interest rate is 17.5%. Similarly, HDFC Business Loan is extending business finance to their existing women customers who need a loan of Rs. 15 Lakhs and above at 15.5% and 16% interest rate.
Let’s look at the 5 best Business Loans available in India for women entrepreneurs:
- Dena Shakti Scheme: Dena bank has launched the Dena Shakti Scheme to encourage women entrepreneurs working in the priority sector.
What does qualify as a priority sector?
As defined by the Reserve Bank of India (RBI), if you are associated with agriculture and allied activities, small enterprises in manufacturing, service, retail trade, microcredit, education and housing, you can avail this loan. The maximum loan amount that can be availed under the scheme varies depending on the sector, and the priority is given to it. If you wish to obtain a loan for retail trade, education and housing, you can avail loan up to Rs. 20 Lakhs. The rate of interest for this loan will be determined as per the bank guidelines and RBI directives prevalent at the time of availing the loan. If you are applying a credit for your existing business, you get an additional 0.25% rebate in the interest rate.
- Cent-Kalyani Scheme: Central Bank of India’s Cent-Kalyani scheme encourages women entrepreneurs to start new projects or expand/modernise existing units. This loan is targeted at new and existing businesswomen associated with small and micro enterprises who are engaged in manufacturing and service activities, food, education and housing. If you are a professional, like a doctor, accountant or an engineer, you can also avail this scheme. You can use this loan to meet either capital expenditure, for example, buying machinery or meeting day to day working capital requirements. Maximum quantum of credit that can be availed is Rs. 1 Crore and interest rates are MCLR (Marginal Cost of Funds Based Lending Rate) + 0.25% for loans up to Rs. 10 Lakhs and MCLR + 0.5% for loans above Rs. 10 Lakhs and up to Rs. 1 Crore No collateral security is required for women entrepreneurs to avail such loans. Also, the bank does not charge any processing fee or upfront charges for the Cent Kalyani Scheme.
- Udyogini Scheme from Punjab and Sind Bank (PSB): As the name suggests, PSB has launched this Udyogini scheme to promote women entrepreneurship in the areas of direct agriculture activities, small and micro enterprises, professionals and self-employed women by offering them loans on liberal terms and attractive interest rates. Woman entrepreneur who individually or jointly holds more than 50% share in partnerships, private limited companies, and co-operative societies are eligible to avail this loan.The quantum of credit that can be sanctioned is decided on a case to case basis. You can avail the loan in the form of term loans or working capital loans. No security or margin is required for loans up to Rs. 25,000, and also collateral security requirement is waived for loans up to Rs. 25 Lakhs under Credit Guarantee Fund Scheme for MSME. The processing fee is not applicable, and interest rates are as per the guidelines of MSME (Ministry of Micro, Small and Medium Enterprises).
- Stree Shakti Package from State Bank of India (SBI): SBI has launched this scheme with a focus on promoting women in business. If you are a woman entrepreneur and own business as per the definition of the MSME department of India, you are eligible to apply for this loan. Under Stree Shakti package, loans up to Rs. 1 Crore are sanctioned with liberal terms such as relaxation in margin and security requirements.
- Stand-Up India Scheme: ICICI bank’s Stand-up India scheme for Women is aimed at extending credit facility to women entrepreneurs for setting up new ventures in manufacturing, services or trading sector. Businesses have to be owned and run by women entirely in case of individual concerns and at least 51% stake to be held by women in case of partnerships and limited companies. Loan up to Rs. 1 Crroe can be sanctioned under this scheme. However, your total loan cannot exceed 75% of the cost of the project. Loans can be secured by first security of machinery, stock and receivables up to Rs. 25 Lakhs under Credit Guarantee Fund Scheme for MSME but loans above Rs. 25 Lakhs will require additional collateral security.
It is important to carefully understand the terms of the loan such as margin, tenure, interest rate, other charges, their eligibility requirements, documentation requirements, and collateral requirements before you Apply for Business Loan. Women often face hardships in the business world but increased access to financing through formal banking channels is a good step in the direction of promoting women entrepreneurship in the country.