Step 1 — Confirm eligibility before writing anything
PMEGP funds new micro-enterprises only. A unit already in operation, or one that has taken assistance under another government subsidy scheme, is out. That check costs a minute and saves a wasted week.
- Applicant aged 18 or above; no income ceiling applies.
- Class VIII pass required where project cost exceeds ₹10 lakh (manufacturing) or ₹5 lakh (service).
- New unit only — existing units are not eligible.
- No other government subsidy already availed for the same unit.
Step 2 — Fix the category and location, because they set the subsidy
Two variables decide the margin-money subsidy: whether the beneficiary is general or special category, and whether the unit is rural or urban. Special category covers SC, ST, OBC, minorities, women, ex-servicemen, differently abled applicants, and those in NER, hill and border areas. Get this wrong and every downstream figure in the means of finance is wrong.
| Location | General category | Special category |
|---|---|---|
| Rural | 25% subsidy, 10% own contribution | 35% subsidy, 5% own contribution |
| Urban | 15% subsidy, 10% own contribution | 25% subsidy, 5% own contribution |
Step 3 — Size the project against the ceiling
Maximum project cost eligible for margin money is ₹50 lakh for manufacturing and ₹20 lakh for service or business activities. A project can cost more, but the subsidy is computed only on the eligible portion — so a report that quietly assumes subsidy on the full cost of a ₹60 lakh manufacturing unit will not survive scrutiny.
Step 4 — Build the fixed-asset schedule from quotations
Every asset line needs a supporting quotation, and the quotation has to match the figure in the schedule. Mismatches here are the most common single query, because they are the easiest thing for a credit officer to check. Land, building, plant and machinery, furniture, electrical installation and preliminary expenses each get their own line rather than being lumped together.
Step 5 — Derive revenue from capacity, not ambition
Projected sales must be traceable to installed capacity and a stated utilisation percentage. A bakery with one oven running a single shift has an arithmetic ceiling on output; a report projecting revenue above that ceiling invites the question that sinks the file. State the capacity, state the utilisation ramp across years, and let the revenue fall out of the arithmetic.
Step 6 — Make the five schedule links hold
This is where manual spreadsheets break, usually after a late revision. Each link has to reconcile in every projected year:
- Fixed assets → depreciation chart → depreciation charged in the P&L → net block in the balance sheet
- Term loan → repayment schedule → interest in the P&L → closing loan liability in the balance sheet
- Profit after tax → reserves and surplus in the balance sheet
- Working capital assumptions → current assets and current liabilities in the balance sheet
- Cash flow closing balance → cash and bank in the balance sheet
Step 7 — Check DSCR before you submit, not after
Debt service coverage ratio is net cash accrual available for debt service divided by the instalment and interest falling due. Banks generally want an average between 1.5 and 2.0 across the tenure and will query any single year that drops near 1. If the ratio is thin, the honest fixes are a longer tenure or a larger promoter contribution — not a more optimistic revenue line.
Step 8 — State your assumptions
An assumptions page is not filler. It tells the credit officer why the numbers are what they are — capacity utilisation ramp, price per unit, wastage, salary growth, holding periods. A report with defensible assumptions and modest numbers clears faster than one with impressive numbers and no stated basis.