- Date : 19/08/2019
- Read: 3 mins
What are the salient aspects of the Standup India scheme launched by the Central Government in 2016?
What is Stand up India Scheme?
Taking the entrepreneurial plunge is no easy task. One of the most daunting challenges that newbie entrepreneurs face is access to timely finances by way of loans at attractive interest rates. Funds are the lifeline of every business venture, especially greenfield setups that require considerable capital investment in the initial stages.
Note: A greenfield project is one in which a new facility would be constructed for commercial exploitation on previously undeveloped or unexplored lands without the presence of an already existing structure.
Additionally, it becomes difficult for the hitherto marginalised segments like female and SC/ST entrepreneurs to obtain loans at suitable terms. Addressing the pain points of these groups, the Government launched the Stand Up India scheme that facilitates bank loans between Rs 10 lakhs to Rs 1 crore for establishing a greenfield venture in the manufacturing, services or trading segments, by a commercial enterprise which comprises of at least a single female and/or SC/ST entrepreneur as a promoter and a minimum shareholding of 51%.
Additional eligibility criteria to avail bank loans under this scheme include age limit of at least 18 years by the loan applicant, without any past record of loan default.
Features of a bank loan under the Stand Up India scheme
The features of a bank loan under the Stand Up India scheme are as follows:
- The loan may be extended by commercial scheduled banks covering term loan as well as working capital assistance
- Broadly the loan coverage would be 75% of the project cost with an exception in case the contribution from the borrower or any other source exceeds 25% of the cost of the venture.
- The interest rate is linked to the MCLR, thus subsidising the loan for the specified sections of borrowers.
- All loans sanctioned would fall under the CGSSI (Credit Guarantee Scheme for Stand-Up India Scheme) or collateral as specified by the lender.
- The repayment period would range up to a maximum tenure of 7 years, including a moratorium period of 18 months.
- The scheme also provides technical support and relevant know-how in the area of the venture, benefitting first-time entrepreneurs with limited experience in the proposed line of business.
The recent Budget 2019 allowed extension of the Stand Up India scheme till 2025 to help entrepreneurs convert their entrepreneurial dreams into reality with the provision to avail business loans to purchase capital goods like machinery as per the demand cycle. Further banks have been directed to disburse loans to at least one women entrepreneur per branch towards setting up a new venture.
In conclusion, have a look at why women-led start-ups are a better investment since with the right amount of hand-holding from the Government and the target beneficiary group being women who make up about half the population, the Stand Up India scheme has the potential to change the course of entrepreneurship with enhanced participation in the coming years.