SME Lending: What You Should Know

Budget 2025 Updates:

• Revision of classification of MSMEs to include more businesses and companies under the purview of MSMEs.
• Micro-enterprises on the Udyam portal will get credit cards with a Rs. 5 lakh limit; 10 lakh cards will be issued in the first year.
• A new Rs. 10,000 crore Fund of Funds will be launched with an expanded scope.
• A scheme for 5 lakh women and SC/ST first-time entrepreneurs will offer term loans up to ₹2 crore over five years, along with online capacity building.

Many individuals will have ideas and business plans; however, these ideas remain unrealised due to inadequate access to finances. The possibility of ideas and plans incepting, growing, competing, and generating employment—depends on its ability to being funded at the right time.

New businesses entering the market will not only strengthen ideator but also contribute to the GDP of the country as well as employ a number of people, putting food on their plates. Currently, SMEs have been contributing over 40% of the nation’s GDP just next to the contribution of agriculture. In that case, how easy or simple is it for an individual to set up his own business/enterprise in this country?

1. Why is SME Lending Important?

After ideation and market research, securing funds is the crucial next step in starting a business. Not everyone has savings, so borrowing becomes essential—but it’s not as simple as borrowing from family or friends. You must pitch your idea to financial institutions, proving its viability.

To simplify this, the government offers various schemes to support small businesses, while banks provide financial assistance, including collateral-free loans. These initiatives help entrepreneurs focus on their goals instead of funding challenges.

2. Categories Under SME Lending

There are three main ways for an SME to raise working capital or capital for any other purpose. They are as follows:

1. SME Loans:

SME loans are financial products designed for small and medium enterprises, offered by banks and lending institutions. Each lender has its own loan schemes with specific terms. Some schemes cater specifically to women entrepreneurs, and many loans are available without collateral.

1. Government Scheme:

Other than the bank loans, the Government of India has come up with many schemes and programmes to encourage and support the SME sector. The government has defined the purpose of each of the schemes and has set up process flow and guidelines as to who can avail the benefits of the scheme. A few such schemes are:

• Pradhan Mantri Mudra Yojana (PMMY)
• Credit-Linked Capital Subsidy Scheme
• MSME Business Loan for Startups in 59 Minutes
• Credit Guarantee Scheme
• Stand-Up India
• SIDBI Make In India Soft Loan Fund

1. SME Resources:

SMEs can also raise capital to purchase raw materials or even finished goods from many other sources. Some of these sources are listed below:

• Merchant cash
• Invoice finance
• Business credit score
• Business credit card

3. How ClearTax Can Help You?

As a businessman, you’ve likely faced the lengthy loan approval process—visiting banks, submitting documents, and waiting days for a response. ClearTax simplifies this by connecting you with lenders for collateral-free, paperless loans. Just apply on our website, upload basic documents, and we'll share them with lenders. You'll get an update within 24 hours, with no processing fee!

Go ahead with your instincts and try our SME lending service now!