How the ₹10,000 Cr SME Fund and Digital Employee Benefits are Redefining India’s MSME Landscape

On 1 February 2026, Union Minister for Finance and Corporate Affairs Smt Nirmala Sitharaman introduced a ₹10,000 crore SME Growth Fund as part of the Union Budget for 2026-27. The programme is intended to give MSMEs (Micro, Small, and Medium Enterprises) the capital, confidence, and capacity they need so that they can grow, innovate, and compete in the global marketplace. Uniquely, the fund will not restrict itself to just loans; it will offer equity support as well, help in the adoption of modern technologies, and a formalisation route for the undeclared industry seeking export possibilities. 

Key takeaways

• The ₹10,000 crore fund empowers SMEs to scale using long-term capital that completely replaces the burden of EMI-driven bank loans.
• Mandatory TReDS registration for CPSEs forces faster invoice payments and immediately removes the chronic cash flow pressure that kills small businesses.
• Dedicated ‘Corporate Mitras’ simplify complex compliance and formalisation hurdles for businesses operating far outside the major metro cities.
• Performance indicators like export volume and technology adoption now dictate exactly how much funding a business can actually unlock.
• Establishing a secondary market for receivables provides instant liquidity and slashes the overall borrowing costs for modern MSMEs.

Small business owners and entrepreneurs watching the pulse of Indian economic reform should view this Union Budget as a source of concrete expansion rather than political rhetoric.

Finance Minister Smt Nirmala Sitharaman stated clearly in Parliament that MSMEs demand a new growth fund model to compete within the shifting global economy. She introduced the ₹10,000 crore SME Growth Fund as the primary engine for a much larger package of deep systemic reforms. 

Understanding India's MSME sector

The MSME sector accounts for 30.1 per cent of India's GDP, 35.4 per cent of manufacturing output, and 45.73 per cent of exports. With millions of registered MSMEs, the sector represents India's economic backbone. 

What is the SME Growth Fund?

The SME Growth Fund serves as a massive investment corpus providing essential equity to small enterprises for business expansion and technology adoption. This capital growth fund allows business owners to strengthen their balance sheets without the constant pressure of immediate repayment found in traditional credit schemes. The fund has the ability to focus on long-term advancement of its investments, similar to a high-quality mid cap growth fund, which is much different from how other credit guarantee programmes operate.

This initiative also coincides with the 2026-27 budget and will include an additional ₹2,000 crore  to be added to the existing Self-Reliant India (SRI) Fund to help identify future mid-cap growth companies as well as help provide them with the necessary capital to compete internationally. 

How is it different from the usual MSME loan?

In India, most small businesses have relied on loans to finance their growth, but debt financing is not always the most effective method of scaling a business. The SME Growth Fund represents a new focus in providing long-term capital in support of businesses, rather than traditional short-term repayment of debt financing. It is aimed more at capital growth, for sustainable expansion and innovation and the stimulation of mid-cap growth strategies for MSMEs, rather than day-to-day financial requirements. Here’s a table to help you understand better:

Why the SME Growth Fund is a true game-changer for small businesses?

For many years, small business operators throughout the Indian economy have been stuck in a debt cycle that does not allow them to scale and be sustainable. The Small-Medium Enterprise (SME) Growth Fund changes the cycle of debt to include long-term, equity-based capital. The way capital is provided by the SME Growth Fund aligns more with capital growth fund thinking and mid-cap growth strategies for MSMEs than the way traditional lending works. 

Together with additional systemic reforms, the SME Growth Fund generates a stronger and more supportive ecosystem for Indian SMEs to grow. 

Smt Nirmala Sitharaman, in the 26-27 budget, proposed a three-pronged approach to help MSMEs grow as ‘Champions’: 

Equity Support

The majority of the policy-led MSME support has for years revolved around loans, subsidies and credit-linked schemes to mitigate short-term cash pressure. And although they helped with survival, they did little to help these businesses scale in a healthy way. The SME Growth Fund is a shift in structure, as it removes the focus from short-term borrowing to long-term expansion, leading small businesses toward a trajectory of growth more familiar to formal capital-based models.

• Enables the shift from early-stage ideas to scalable, compliant businesses
• Focuses on growth-oriented capital instead of repetitive working capital borrowing
• Introduces long-term investment participation rather than purely transactional lending

Liquidity Support

Persistent liquidity challenges for SMEs are often rooted in delayed receivables rather than weak business fundamentals. To address this, the SME Growth Fund is supported by systemic reforms that aim to improve cash flow efficiency across supply chains. These initiatives are geared toward accelerating the payment cycle, easing cash flow challenges and allowing businesses to function in a more stable and predictable manner.

• Mandates the use of the Trade Receivables Discounting System (TReDS) for Central Public Sector Enterprises
• Permits securitisation and secondary trading of TReDS receivables to unlock additional liquidity

Professional Support (Check Govt Helpline)

Providing only access to capital does not guarantee long-term success, as many businesses do not have adequate knowledge or expertise in their operations and finances or in governing their companies. With this in mind, the ‘Corporate Mitras’ model, funding integrated with structured and professional support, will help businesses to deploy and manage capital in a more effective manner. It will also help enhance their compliance and long-term durability, particularly in areas outside the major urban centres.

• Provides trained professionals to assist with compliance, finance, and governance
• Offers targeted support for SMEs operating in Tier-II and Tier-III towns
• Lowers the cost and complexity of accessing expert advisory services

What are the steps for MSMEs to access the ₹10,000 crore SME Growth Fund? 

Securing access to this massive growth fund requires a business to be completely ready for professional investment because your growth roadmap serves as your primary asset. 

According to the Ministry of Finance, the fund is designed specifically to create "Future Champions" by providing equity support to MSMEs that meet select performance and export-readiness criteria.

Step 1: Secure Udyam and DPIIT recognition

You must first ensure your business holds valid Udyam and DPIIT recognition before attempting to access any government-backed daughter funds. These registrations represent the absolute baseline requirements for any entrepreneur seeking to enter the official growth fund ecosystem. 

Step 2: Connect with a "Corporate Mitra"

The government now certifies professionals from organisations like ICAI to serve as accredited ‘Corporate Mitras’ for businesses located outside major urban centres. Engaging a ‘Corporate Mitra’ allows you to conduct a comprehensive formalisation audit and prepare an equity pitch that will actually impress the investment committee.

Step 3: Financial benchmarking

Unlike a loan, a capital growth fund looks at your future scalability. You must prepare three years of audited financial statements that demonstrate consistent growth in productivity or export volume to qualify for this incentive-based capital.

Step 4: Application via SIDBI / Jan Samarth

The fund operates on a "Mother-Daughter" fund model managed by SIDBI.

1. Log in to the Jan Samarth portal or the SIDBI NVCFL equity platform.
2. Choose the SME Growth Fund category.
3. Upload your business expansion plan, highlighting how you will achieve mid-cap growth.

Step 5: Due Diligence and Valuation

Once your application is shortlisted, the fund's investment committee will perform:

• Due Diligence: Verification of legal titles, GST filings, and labour law compliance.
• Valuation: The valuation phase determines the specific equity stake that the SME Growth Fund secures in exchange for the substantial capital your business requires to scale.

Funding & compliance checklist to keep in mind: 2026 

It has now become even more important to be compliance-ready with all the new rules and shifts that have taken place in MSME funding towards growth capital and structured investments. This year, MSMEs seeking loans or access to this growth fund must make sure they’re meeting the regulatory requirements and financial benchmarks before they raise capital.

Wrapping up

The announcement of the ₹10,000 crore SME Growth Fund is a clear signal that India is betting on its entrepreneurs. It’s a shift from "survival support" to "growth acceleration". However, while the government provides the capital, the responsibility of managing a growing workforce and their morale remains with the HR and business leaders.

As your business scales with the help of small cap growth funds, managing employee happiness becomes as crucial as managing cash flow. This is where partners like Pluxee come in. We offer digital meal cards and employee benefit solutions to help you professionalise your HR practices, ensuring that your team grows with your company. 

FAQs

1.Can service-based SMEs apply for this fund? 

Yes. While there is a strong push for manufacturing, the fund is intended to support high-potential MSMEs across sectors that demonstrate scalability and innovation.

2.Will the government take control of my business if I take equity? 

No. Equity funding usually involves taking a minority stake. You remain the primary owner, while the fund acts as a strategic partner to help you achieve capital growth fund objectives.

3.Is there a specific location requirement? 

The fund is national, but the 2026-27 budget places a special emphasis on developing "Corporate Mitras" in Tier-II and Tier-III cities to help businesses in those regions access such schemes.