How to Get Loans and Government Grants for a Textile Business

India’s textile industry is one of the oldest and largest in the world, contributing nearly 2% to the nation’s GDP and employing millions across spinning, weaving, handloom, and garment units. Valued at over US$200 billion, the sector is growing steadily thanks to domestic demand, exports, and government initiatives like the Technology Upgradation Fund Scheme (TUFS) and the Production-Linked Incentive (PLI) scheme.

Yet, despite such promise, many entrepreneurs struggle to access finance. Whether you’re running a small power loom unit, a designer apparel brand, or a large manufacturing plant, finding the right loan for textile business can be a challenge. Thankfully, banks, NBFCs, and government schemes provide multiple options to fund working capital, machinery upgrades, and expansion.

Types of Loans Available for Textile Businesses

When it comes to a loan for textile business, entrepreneurs can choose from several products depending on their needs:

MSME Loans – Designed for micro, small, and medium enterprises with lower interest rates and flexible repayment.
Working Capital Loans – Ideal for covering raw material costs, payroll, or seasonal cash flow gaps.
Term Loans – Longer-tenure loans for expansion, infrastructure upgrades, or opening new units.
Equipment Financing – Specifically for buying modern machinery to improve efficiency and product quality.
Invoice Financing – Helps bridge cash flow when clients delay payments.

In addition, digital lenders and NBFCs now provide fast, collateral-free loans, making the process smoother for small textile players.

How to Apply for a Loan

Getting a loan for textile business requires preparation and clarity:

Check eligibility – Lenders evaluate turnover, credit score, and repayment capacity.
Prepare documents – GST registration, financial statements, ITRs, and bank records are essential.
Compare lenders – Banks, NBFCs, and fintech lenders differ in interest rates and processing speed.
Understand terms – Always check EMI schedules, penalties, and hidden charges.
Apply online or offline – Today, most banks allow easy digital applications.

Tips to Secure a Loan for Textile Business

Maintain a good credit score by paying EMIs on time.
Present a strong business plan with growth projections.
Keep financial statements accurate and updated.
Use government schemes like PM Mudra Yojana or CGTMSE for collateral-free loans.
Build long-term relations with lenders for better terms.

Avoid common mistakes such as incomplete paperwork or overestimating loan needs, as they often lead to rejection.

Government Schemes and Grants for Textile Businesses

The Indian government actively supports textile entrepreneurs with funding and subsidies:

Technology Upgradation Fund Scheme (TUFS/ATUFS)

Encourages adoption of modern machinery.
Offers capital subsidy instead of interest reimbursement.
Garment and technical textile units can get up to 15% subsidy.

Production-Linked Incentive (PLI) Scheme

Boosts domestic manufacturing of man-made fibres and technical textiles.
Incentives up to 15% for eligible units with investments above ₹100 crore.

Credit Guarantee Scheme for MSMEs (CGTMSE)

Provides collateral-free loans up to ₹10 crore.
Lower guarantee fees for women, SC/ST, and ZED-certified entrepreneurs.

Pradhan Mantri Mudra Yojana (PMMY)

Loans under Shishu, Kishor, Tarun, and Tarun+ categories (up to ₹20 lakh).
Perfect for small handloom units, home-based textile artisans, and small factories.

Export Credit Guarantee Corporation (ECGC)

Provides credit insurance for exporters.
Covers risks of overseas buyers defaulting on payments.

Choosing the Right Funding Option

Not every loan for textile business is the same. For short-term needs, working capital loans are suitable. For expansion, term loans and equipment financing work better. If you’re eligible for TUFS or PLI, subsidies can significantly reduce costs. Exporters should definitely look at ECGC to reduce international trade risks.

StartupFlora : Your Success Partner

StartupFlora is connected with 50+ Govt., Private, Semi-Govt., Urban Co-operative banks and NBFCs, giving you a single, trusted window to compare offers and secure the best loan for textile business or grants without running pillar to post. From working capital to machinery finance, term loans to invoice discounting, we map your requirement to the right lender and scheme—TUFS/ATUFS, CGTMSE, PM Mudra, PLI, ECGC support for exporters, and more. Our team handles end-to-end support—eligibility check, documentation, application, and follow-ups—so approval becomes faster and hassle-free. If you’re looking for loan or funding for textile business, talk to StartupFlora and unlock curated options with better rates, higher approval odds, and smarter subsidy benefits.

Conclusion

Getting the right loan for textile business can be the turning point for entrepreneurs. With proper documentation, strong financial discipline, and awareness of schemes like TUFS, PLI, CGTMSE, Mudra, and ECGC, textile units can modernise operations, improve productivity, and scale globally.

If you are planning to start or expand your textile venture, explore all funding options carefully. Government grants combined with the right loan can give your textile business the competitive edge it needs in today’s fast-evolving market.