The Karnataka economy depends on small businesses as they contribute to local development and employment, as well as innovation. The state has launched a variety of initiatives in a bid to facilitate the growth of the industries and one of the most notable is the Karnataka government loan scheme for small business. This scheme provides financial support to start ups, entrepreneurs and MSMEs to establish, grow or revive their business. Are you a young entrepreneur or a small business owner seeking funds? This blog has everything you need to know about the Karnataka government loan scheme for small business, including eligibility and benefits, and how to apply.
What is the Karnataka Government Loan Scheme for Small Business?
Karnataka Government Loan Scheme for Small Business is a scheme sponsored by the Karnataka Government to help micro, small and medium enterprises (MSMEs) by providing them easy finance, low interest loans and subsidies. The program will also encourage self-employment, women entrepreneurship, and rural entrepreneurship development by providing different funding alternatives and financial incentives that suit different requirements.
Some of the main characteristics and plans under this plan are:
- Karnataka MSME Subsidy Scheme: Provides capital investment subsidy and interest subsidy to the eligible MSMEs to cut down the startup and operational expenses.
- KSFC Loan Without Collateral: This is a loan offered by Karnataka State Financial Corporation (KSFC) to the owners of the small businesses without the requirement of asset-based security, which makes credit easier to access.
- Government Subsidy Loan to Business in Karnataka: It includes a variety of business loans that have a government-subsidized interest rate and capital of subsidy to stimulate entrepreneurship in the rural and urban sectors.
- Shramashakthi Scheme: This scheme is aimed at providing financial support, entrepreneurial training, and mentoring to young people (belonging to economically weaker sections) who are not in employment.
- Subsidy Loan for Women in Karnataka: The objective of this scheme is to empower women entrepreneurs by providing them benefits under concessional interest rates, capital subsidy and business development with a focus on women led ventures.
Together, these programs form a strong support system for small businesses, helping to drive economic growth and create employment across Karnataka. The important Karnataka government loan scheme for small business are;
- Karnataka State Finance Corporation (KSFC) Scheme
- Karnataka Small Scale Industries Development Corporation (KSSIDC) Loan Scheme
- Shramashakthi Scheme MSME Loan Karnataka
- Credit Linked Capital Subsidy Scheme (CLCSS)
- Pradhan Mantri MUDRA Yojana (PMMY)
- Prime Minister’s Employment Generation Programme (PMEGP)
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
- Stand-up India
- SIDBI Make in India Soft Loan Fund for Micro, Small, and Medium Enterprises (SMILE)
- Karnataka MSME Sarthak Scheme
- Udyogini Scheme (For Women Entrepreneurs)
- Micro Credit Promotion Scheme (MCPS)
Karnataka State Finance Corporation (KSFC) Scheme
Karnataka government loan scheme for small business includes the KSFC scheme, which provides financial assistance to MSMEs through various loan schemes. They offer term loans, working capital loans, and loans for setting up new businesses or expanding existing ones. The scheme is available for all categories of entrepreneurs, including women, SC/ST, and minorities. The following are some of its highlights:
| Loan amount | Up to 8 crore |
|---|---|
| Collateral | Required |
| Loan tenure | 3-8 years |
| Processing fee | 0.50%+ Service Tax |
| Promoters Contribution | Between 10% and 22.5% |
Karnataka Small Scale Industries Development Corporation (KSSIDC) Loan Scheme:
The Karnataka government loan scheme for small business includes initiatives like the Karnataka Small Scale Industries Development Corporation (KSSIDC), which offers loans to MSMEs for the establishment, expansion, and modernization of their businesses. The scheme is open to all eligible MSMEs in Karnataka, including women entrepreneurs. The following are its main highlights:
| Loan amount | 5 lakh to 5 crore |
|---|---|
| Interest rates | 9.5% to 11.5% |
| Loan tenure | Up to 7 years |
| Age | Minimum age of 18 |
| Promoters Contribution | Between 15% and 25% of the project cost |
Shramashakthi scheme MSME loan Karnataka
Karnataka government loan scheme for small business, Shramashakthi is a Karnataka state government MSME loan scheme launched under the Karnataka Minorities Development Corporation. This scheme was launched to support the religious minorities in the state through training and financial assistance. The following are some of its highlights:
| Loan amount | Up to 50,000 |
|---|---|
| Interest rates | 4% |
| Loan tenure | 36 months |
| Residency | Permanent resident of Karnataka |
| Age | Between 18 and 55 years of age |
Credit Linked Capital Subsidy Scheme (CLCSS)
The Karnataka government loan scheme for small business includes initiatives like the Credit Linked Capital Subsidy Scheme, which was launched in October 2000 by the Government of India. This scheme provides necessary funds to MSMEs for upgrading their existing technologies. Enterprises can use this scheme to upgrade their existing plant and machinery and increase profit. This scheme has no upper loan limit, but the subsidy is calculated on the loan amount sanctioned for P&M purchase only. The following are its main features:
| Loan amount | No upper limit |
|---|---|
| Subsidy | 15% of the loan amount |
| Annual guarantee fee | 0.75%-1.0% |
| Loan tenure | Flexible tenure depending upon the repayment capacity |
Pradhan Mantri MUDRA Yojana (PMMY)
The Pradhan Mantri MUDRA Yojana (PMMY) is a flagship central government scheme launched in 2015. It provides micro-loans to non-corporate, non-farm micro and small enterprises in both rural and urban areas.
PMMY offers loans under three categories, depending on the stages of business growth and funding needs:
- Shishu Mudra: Up to Rs. 50,000
- Kishore Mudra: Rs. 50,001 to Rs. 5 lakh
- Tarun Mudra: Rs. 5 lakh to Rs. 10 lakh
MUDRA loans are availed through various financial institutions, including Public sector banks, Private sector banks, Regional Rural Banks, Small Finance Banks, Microfinance Institutions, and Non-Banking Financial Companies (NBFCs).
Unlike other loan schemes, PMMY doesn’t have specific criteria for age, gender, tenure, interest rates, etc. All these factors can vary based on the category of the loan and the policies of the lending institution.
Prime Minister’s Employment Generation Programme (PMEGP)
PMEGP is a credit-linked subsidy scheme administered by the Ministry of Micro, Small and Medium Enterprises (MSME), which aims at creating job opportunities by establishing micro-enterprises. The main target of this scheme is Women, Traditional and prospective artisans and Unemployed youth. The following are some of its main features:
| Age | Minimum age of 18 |
|---|---|
| Interest rate | Between 11% -12% depending on the bank |
| Loan tenure | 3-7 years |
| Education qualification | VIII standard pass |
| Maximum Loan amount | Rs. 1 Crore |
| Subsidy | 15% to 35% |
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
Karnataka government loan scheme for small business includes several central and state-supported initiatives like CGTMSE. CGTMSE is a joint initiative launched in 2000 by the Ministry of Micro, Small and Medium Enterprises (MSME), the Government of India, and the Small Industries Development Bank of India (SIDBI). It encourages financial institutions to provide collateral-free credit schemes to micro and small enterprises. In case of any default, the bank can file a claim with CGTMSE. The following are some of its main features:
| Loan amount | Up to 5 crore |
|---|---|
| Collateral | Not required |
| Loan tenure | 5-10 years |
| Annual Guarantee fee | 0.37%-1.35% |
| Age | Minimum age of 18 |
Stand-up India
Karnataka government loan scheme for small business includes various central initiatives, and Stand-up India is one such scheme launched in 2016. It provides bank loans for entrepreneurship among women and members of Scheduled Castes (SCs) and Scheduled Tribes (STs). Existing businesses cannot avail loans through this scheme, as these are provided for starting new businesses. These loans are provided through various banks, including scheduled commercial banks, regional rural banks (RRBs), and small finance banks.
This scheme provides loan amounts ranging from Rs. 10 lakhs to Rs. 1 crore. The interest rates and tenure vary depending on the nature of the business and other factors such as the nature of the business, credit policies of the lender, etc.
SIDBI Make in India Soft Loan Fund for Micro, Small, and Medium Enterprises (SMILE)
SMILE is a scheme launched by the central government to provide financial assistance to 25 Identified sectors under the ‘Make in India’ initiative. This scheme promotes the ‘Make in India’ initiative among entrepreneurs. SMILE provides adequate funding for the setting up of new enterprises and also for the expansion of existing ones. The following are some of its main features:
| Loan tenure | Maximum 10 years |
|---|---|
| Loan amount | From Rs.10 lakhs to Rs.25 lakhs |
| Interest rates | Depending on enterprises’ requirement |
| Nature of loan | Quasi-equity and term loans |
Karnataka MSME Sarthak Scheme
The MSME Sarthak Scheme is a Karnataka government initiative launched to strengthen micro, small, and medium enterprises (MSMEs) across the state. It focuses on providing financial and infrastructure support for businesses, especially in Tier-2 and Tier-3 cities. The scheme encourages manufacturing, technology upgrades, and skill development to boost local entrepreneurship.
Key Features:
- Eligibility: Registered MSMEs in Karnataka, especially in backward and rural regions.
- Loan Amount: Financial assistance up to ₹1 crore.
- Support: Covers infrastructure, marketing, raw material assistance, and cluster development.
- Subsidy: Interest subsidy provided on loans depending on project category.
- Training: Skill development programs for entrepreneurs and workers.
- Focus Area: Priority for SC/ST, women entrepreneurs, and first-generation business owners.
Udyogini Scheme (For Women Entrepreneurs)
The Udyogini Scheme is a financial support program for women entrepreneurs, launched by the Karnataka State Women Development Corporation. It provides collateral-free loans to economically weaker women, helping them start or expand small businesses across different sectors such as retail, trade, and services.
Key Features:
- Eligibility: Women aged 18–55 with a family income below ₹1.5 lakhs (general) and ₹2 lakhs (SC/ST).
- Loan Amount: Up to ₹3 lakhs based on the business type.
- Interest Rate: Subsidized or zero interest for certain categories (SC/ST, physically challenged).
- Collateral: No collateral required for loans under ₹1 lakh.
- Subsidy: 30% to 50% subsidy depending on category and business.
- Focus Area: Special preference for widows, disabled women, and rural entrepreneurs.
Micro Credit Promotion Scheme (MCPS)
The Micro Credit Promotion Scheme (MCPS) is a targeted initiative for Scheduled Caste and Scheduled Tribe (SC/ST) women, encouraging group-based entrepreneurship through Self-Help Groups (SHGs). This scheme supports small-scale ventures through microloans, promoting financial independence and inclusion at the grassroots level.
Key Features:
- Eligibility: SC/ST women in Karnataka who are part of registered SHGs.
- Loan Amount: Up to ₹10,000 per member for income-generating activities.
- Subsidy: ₹15,000 subsidy per member upon successful loan repayment.
- Repayment Period: Flexible tenure of 1–2 years.
- Training: Entrepreneurial and financial literacy training provided.
- Focus Area: Empowerment of rural and marginalized women through micro-enterprise support.
Create Best Project Report for Bank Loan By Using Finline!
Karnataka Government loan scheme for small business is an excellent source of support to businesspeople looking to expand or start a business. The government is assisting the small industries with the necessary capital through subsidies and low-interest loans and easy credit through different schemes such as KSFC, KSSIDC, Shramashakthi, Udyogini, etc.
However, to secure these loans, you must have a good business plan and that is where Finline comes to your rescue. Finline is a web based platform that enables you to write professional financial reports and business plans within 10 minutes in your own language. All the public and private banks in India accept these reports.
Click now to create your report and take the next step for your business.