MSMEs’ are the heart and soul of the Indian economy. They are the second-largest employer, second to only agriculture and contribute to approximately 24.6 percent of the service sector GDP of our country. Their contribution to our economy is notable. Financing in the form of loans can help them upgrade themselves, seize opportunities and make sure that they thrive in today's competitive business scenario.
What is An MSME Loan?
The MSME sector is the backbone of the Indian economy and contributes significantly to its GDP. The MSME loan is financial assistance provided by the government to help small and medium enterprises (SMEs) in setting up or expanding their businesses. The loan is also known as the Micro- and Small-Enterprise Loan.
The main objective of the MSME loan is to promote entrepreneurship and support the growth of small businesses in India. It helps SMEs meet their working capital requirements and invest in their plants and machinery. It also helps them expand their business operations, upgrade their technology, and improve product quality.
MSME loans are available from a number of financial institutions, including lending institutions, NBFCs, and SIDBI. The interest rate on MSME loans is generally lower than that on other types of business loans, making it easier for small businesses to repay the loan.
Eligibility Criteria to Apply For an SME/MSME Loan
Loan providers have laid down basic business loan eligibility criteria for individuals as well as companies to be able to apply for an MSME loan. People who can avail MSME loan are as follows:
- An individual should be at least 22 years of age while applying for the loan and a maximum of 65 years at the time of maturity.
- Private companies, sole proprietors, private companies engaged in trading, manufacturing or services sector are eligible to apply for an SME loan.
- The applicant should be engaged for a minimum of 3 years in the business concerned and at least 5 years of experience in the business.
- The business should generate a basic income of at least Rs. 2 lakhs a year, should have a turnover of Rs. 10 lakhs a year and should have generated profits for at least two years.
- The business should be registered as an MSME in the Udyaan portal and should provide the MSME registration certificate.
What Documents do I require to Submit while Applying for an MSME Loan?
The documents required to apply for an MSME loan include:
- The PAN card of the applicant and company desirous of applying for the loan.
- Proof of address of the business and the applicant.
- Bank and income statements in addition to Form 16.
- Income tax returns of the company for the previous two years and audited financial statements of the company that demonstrate profit for at least two years.
- Assessing your requirements accurately and opting for the right provider helps in ensuring that it does not adversely affect your finances in the long run.
How to Apply for an MSME loan?
Follow these simple steps to avail for an MSME loan:
- Log into the website of your loan provider and fill in the application form by accurately filling in the required details. A designated representative from the loan provider will get in touch with you shortly with all the possible permutations and combinations related to your loan and the options that could be the best fit for your requirements.
- Post determination of your eligibility, you are required to submit the documents for verification. The required documents can be scanned and submitted online.
- You can choose to go the offline route and request the loan provider to collect physical copies of the relevant documents. Once all the relevant documents are collected, they are forwarded to the relevant team for verification.
- Post verification of the documents and approval of your loan, the loan provider creates and shares the loan agreement. Post signing the agreement, the funds are disbursed to the applicant’s account within 48 hours.
What are the Advantages of Opting for an MSME Loan?
This is why you should consider opting for a loan to meet your financing needs:
- Loan providers understand your need for urgent financing and strive to ensure quick and hassle-free processing and disbursal of funds on the occasion that the loans borrowed are less than Rs. 75 Lakhs*.
- Most prominent loan providers allow the option of applying online to reduce the hassle of excessive documentation. Log into the website of your provider, enter the required details, upload the documents required and avail of customized plans based on your borrowing requirements.
- Avail of an attractive repayment tenure as per your convenience that ranges from 12 to 60 months and opt for foreclosure if you desire at no extra cost.
- MSMEs can avail of business loans at interest rates ranging between 17 to 21 percent, entrepreneurs can avail of loans at a rate of interest starting 11.99 percent. The interest payable is computed on various parameters that range from income, location, loans payable, etc.
- You can access tools like business loan eligibility calculator to calculate your eligibility & also check documents required etc. to help you reassess your requirements and help you plan your finances better.
- There are also a number of schemes by the Government of India which have been introduced to help the indigenous industry of India and MSMEs in particular. Such loans are distributed by the government. through various banks and NBFCs. For instance, the Pradhan Mantri Mudra Yojana scheme provides collateral-free MSME loans up to INR 10 lakhs to small businesses. Under some of these schemes, eligible applicants can also get a moratorium for a few months.
SMFG India Credit offers MSME loans to such businesses for various purposes, including working capital, business growth & expansion, and equipment purchases. The interest rate on SMFG India Credit's MSME loans are competitive. Loan tenures range from 12 to 48 months. There is no collateral requirement for loan amounts up to INR 75 Lakhs*.
This makes it an ideal choice for those looking for financing to start or grow their business. With that said, make sure you understand your eligibility before applying for an MSME loan through our online business loan eligibility calculator and understand your monthly obligations for repayment through our online EMI calculator.