In the modern era, financing your business is no longer a difficult feat to achieve; since there are plenty of options available in the market. MSME loans are one of the best options for entrepreneurs to dive into business and make their brand globally competitive.
Banks and NBFCs offer MSME loans to individuals and companies if they meet certain criteria. They are unsecured loans and the repayment tenure varies from lender to lender from the MSME loans.
MSME (Micro, Small and Medium) loan is the business loan, it is offered by financial institutions and banks to individuals, SEMS, MSMEs and Startups. These kinds of loans are mainly used by enterprises to meet their capital needs to manage cash flow in the business.
MSME loan scheme is a great way to fund your business. Below are some points to show how you can utilize the fund of MSME finance:
Working Capital Management: MSME loan amount is widely used to maintain working capital management and maintain the business grow.
Inventory Management: Secure your supply chain with the fund of MSME finance; invest in buying new stocks and products, etc.
Buy New Machinery: Another way to utilize MSME loan to fuel your business is by buying new machinery and equipment.
Invest in Marketing: Use the MSME fund to expand your business by marketing your product or services to new consumers. Today, marketing needs a lot of funds that can be fulfilling using MSME loan online.
Repay Small Debts: Take advantages of availing of MSME loan by repaying all your small debts.
While MSME loan comes up with a variety of benefits, here are some major advantages of opting for an MSME to meet your financing needs:
Lenders understand your requirement 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. 50 lakh.
Under the MSME loan, most of the loan providers offer the option to apply online and get rid of excessive documentation. Just need to log into the website of your lender, provide important details, upload the documents and avail the customized plan as per your needs.
You can get access tools like a business loan eligibility calculator to measure your eligibility and also go through the needed documents to reassess your requirements and plan your finances better.
The Government of India has launched multiple schemes to help the indigenous industry of India and MSMEs in particular. These kinds of loans are distributed by the government through banks and NBFCs.
For example, there is a scheme, the Pradhan Mantri Mudra Yojana schemes; it provides collateral-free MSME loans up to 10 lakhs to small business. Some MSME related schemes provide a moratorium for a few months.
Loan providers have fixed some basic business loan eligibility criteria for the individual as well as companies to be able to apply for this loan. The basic qualification to avail of an MSME loan is as follows:
An individual should be at least 22 years of age to become eligible for the loan and a maximum of 65 years at the time of maturity.
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 must be registered as an MSME in the Udyaan portal and should have the MSME registration certificate
The business should be able to generate a basic income of at least Rs. 2 lakhs a year, should have a turnover of Rs. 10 lakh a year and should have generated profits for at least two years.
Follow the below steps to avail of 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 contact you with all the possible permutations and combinations related to your loan and the options that could be the most suitable for your needs.
After the determination of your eligibility, you need to submit the documents for verification. The needed documents can be scanned and submitted online.
At this stage, you can choose either to go online or offline. If you decided to process your loan application offline, you need to 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 purpose.
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.
The documents required to apply for an MSME loan include:
The PAN card of the applicant and company
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 last two years and audited financial statements of the company showing the profits for at least two years.
The MUDRA loan provides fund to MSMEs without collateral. The schemes are mainly focused on priority sector lending, with maximum lending of 10 lakh.
CGTMSE or Credit Guarantee Funds Trust for Micro and Small Enterprise is a Government of India’s popular MSME loan scheme that provides collateral-free loans to the existing and new Micro and Small scale industries. Under this loan scheme, the loan amount is granted for a maximum amount of 1 crore.
Prime Minister’s Employment Generation Programme or PMEGP is an integrated subside scheme linked with Prime Minister Rojgar Yojana. It was launched in 2008 and it is focused on offering business opportunities for the unemployed youth.
Working Capital Loan
Banks provide these kinds of loan to fulfil daily cash needs. Working capital loans example care Cash Credit Loan, Bills Discounting Facility and Letter of Credit.
Term Loan on other hand can be used for capital expansion capital expense or purchasing fixed assets. It can be secured and unsecured.