MSMED Act - A Complete Guide for Small Business Owners

The Micro, Small, and Medium Enterprises (MSME) sector is a vital pillar of India’s economy, contributing over 30% to the nation’s GDP, approximately 45% of manufacturing output, and nearly 40% of total exports. They provide employment to over 25 crore people and are key drivers of innovation and entrepreneurship.

For business owners, understanding the MSMED Act is crucial as it opens doors to valuable opportunities that can support your enterprise's growth and development.

Let us discuss what the MSMED Act is, the eligibility criteria for its benefits, and how MSMEs can leverage funding opportunities to scale their operations.

An Overview of the MSMED Act

The Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006 was introduced to support the growth of small businesses in India. It facilitates easier access to credit, promotes technology upgrades, and enhances market opportunities for MSMEs. It also enables MSMEs to participate in government procurement and benefit from financial assistance from various subsidies and grants.

In 2020, the government revised the MSME classification criteria, incorporating both investment in plant and machinery/equipment and annual turnover. This update provides greater clarity and inclusivity, ensuring that businesses can better determine their eligibility for MSME benefits.

Overall, the MSMED Act plays a significant role in helping small businesses grow, enhancing their competitiveness, and strengthening their contribution to India's economy.

Eligibility for MSMED Act Benefits

To qualify for the benefits under the MSMED Act, businesses must fall into one of three categories: Micro, Small, or Medium enterprises. The classification is as follows:

• Micro Enterprises: Businesses with an investment of up to INR 1 crore in plant and machinery/equipment and an annual turnover of up to INR 5 crore.
• Small Enterprises: Businesses with an investment of up to INR 10 crore and an annual turnover of up to INR 50 crore.
• Medium Enterprises: Businesses with an investment of up to INR 50 crore and an annual turnover of up to INR 250 crore.

In addition to meeting the investment and turnover criteria, businesses must be registered under the appropriate authorities, such as the Udyam Registration portal, to avail themselves of MSME benefits.

How SMFG India Credit Supports Your MSME Journey

Recognising the vital role of MSMEs in India’s economic growth and their unique financial needs, SMFG India Credit offers tailored MSME/SME loans without collateral. With loan amounts of up to INR 75 lakh*, MSMEs can invest in machinery, support working capital, or fund research and development, without worrying about pledging personal or business assets.

Our MSME loans come with competitive interest rates and flexible repayment tenures ranging from 12 to 48 months*, allowing businesses to choose a schedule that aligns with their cash flow cycles.

To ensure a hassle-free borrowing experience, we request only a few essential documents, which can be uploaded online. Estimate the maximum amount you may qualify for using our eligibility calculator and apply online today!