MSME (Micro Small Medium Enterprise) loan is ideal for business entrepreneurs running small or medium scale enterprises. According to the MSMED or Micro, Small and Medium Enterprises Development Act of 2006, the Indian Government launched the MSME enterprises that are usually involved in developing, manufacturing and processing goods or services.
This article gives a detailed account of the MSME loan – definition, features, benefits, interest rates, eligibility, documents needed and how to apply for it online. Read on!
MSME (Micro Small Medium Enterprise) or SME (Small Medium Enterprise) loan is a credit facility provided to small scale businesses. The MSME loan scheme offers you the opportunity to improve the financial status of your business alongside purchasing advanced equipment, machinery, stock, paying salaries to employees etc. Moreover, opting for this loan can help you enlarge your business.
The Indian Government declared an updated definition of MSME on May 13 2022. Following is the newly organised definition:
|Investment||Does not surpass Rs. 50 crore||Lesser than Rs. 10 crore||Lower than Rs. 1 crore|
|Turnover (Total Sales)||Can be up to Rs. 250 crore||Maximum limit is Rs. 50 crore||Lesser than Rs. 5 crore|
The vital features of MSME or Micro Small Medium Enterprises loan are discussed below:
The favourable factors that will make you go for this loan are:
While starting a new business, the most time-consuming factor involved is to avail of the initial capital. Similarly, an entrepreneur will face the same issue of raising capital at the time of running previous business. But when you take an MSME loan, the entire process could become easier.
Rate of Interest
Another feature of MSME loans is their low interest rates. Paying too much interest could be a hassle for many. Thus, if the interest rate gets a bit reduced, you can save that extra portion of the money. However, the final rate is decided by the lender based on several parameters.
Mainly, small scale companies take advantage of MSME loans for the betterment of their business. There is no long-term assurance in it, so it is flexible and efficient. Being short-term, it maintains smooth cash flow besides proper allocation of assets.
An MSME loan doesn’t require to pledge any collateral. MSME or SME loans are intended to aid the small, micro, and medium scale enterprises productively and financially.
After you apply for an MSME loan to scale your business, you don’t have to wait for a long time. All you have to do is visit their website, read the MSME loan details and necessary conditions and submit the essential documents. The loan amount would be credited to your account within a few days.
MSME loan interest rates offered by the top Indian banks are given in the table below:
|Name of the Bank||Interest Rates (Per Annum)|
|HDFC Bank||11.90% – 21.35% p.a.|
|State Bank of India (SBI)||7.65% p.a. onwards|
|ICICI Bank||13% p.a. onwards|
|Axis Bank||14.25% – 18.50% p.a.|
|Central Bank of India||11.25% p.a. onwards|
|Indian Bank||9.75% p.a. onwards|
|Syndicate Bank||Up to bank|
|UCO Bank||8.85% p.a. onwards|
|United Bank of India||10.25% – 16.25% p.a.|
|Punjab National Bank||Up to bank|
Financial institutions or loan providers have given some necessary eligibility conditions for individuals or companies to follow before taking MSME loans. They are:
You need to submit the following documents for an MSME loan:
Follow these steps to register as an MSME:
Go to Udyog Aadhaar Memorandum (UAM) portal.
Scroll down and click on ‘For New Entrepreneurs who are not Registered yet as MSME or those with EM-II’ option.
A registration form will open. Fill it out.
Scroll down. Click on ‘Validate & Generate OTP’.
An executive will go through the details and approve your application.
If your application gets approved, you will receive a certificate for MSME registration.
The following steps to apply for MSME loans are:
Indian Government have launched some MSME loan schemes to provide financial support to the small scale businesses ruined during COVID-19. The names of those schemes are:
MSME loan has been an incredible helping hand, particularly for small enterprises. It provides them with adequate financial support for improving production, thereby enhancing the business. But before taking any decision, always make a proper plan and follow the necessary criteria mentioned above.
Ans: Unfortunately, yes. The salaried individuals desiring to set up a new business must submit their previous year’s GST returns.
Ans: You don’t have to bear any charges for MSME registration fees alongside taking an MSME certificate.
Ans: The maximum validity period for a Micro Small Medium Enterprise (MSME) certificate is 5 years.
Ans: Self-employed individuals, business entrepreneurs, Micro, Small and Medium-scale Enterprises, partnership businesses, LLP, and sole-proprietorship organisations are eligible to take this loan.
Ans: Although it is not compulsory, having a credit rating facility can help borrowers get the advantage of lesser processing charges, reasonable interest rates, etc.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.