How to Avail of a Loan For Your Micro Business?
Micro, Small, and Medium Enterprises can acquire MSME loans for the extension of their businesses or the set-up of new enterprises. Interest rates on MSME loans lay between 7.95% and 16.25%. There is ordinarily a limit on the maximum loan amount, which can reach up to ₹ 500 crores. Nevertheless, some banks do not have any such borders.
he micro, small, and medium enterprises (MSME) is currently contributing a huge share to the economy. As the labor concentration is much higher in the MSME sector as compared to that of large businesses, this division is considered as the generator of economic growth. With its agility and dynamism, the sector has shown worthy innovativeness and managed to survive the recent economic recessions, and is expected to grow a lot in the future.
That is why this sector is presently receiving support from various organizations, like granting loans for those who are involved in or intending to set about a micro-business or to expand one.
You might probably be wondering what MSME is, and hence, first, let's see what it implies.
What is MSME?
According to the Ministry of Micro, Small, and Medium Enterprises (MSME):
A microenterprise is an enterprise where investment in plant and machinery does not exceed ₹ 25 lakhs.
A small enterprise is an enterprise where the investment in plant and machinery is more than ₹ 25 lakhs but does not exceed ₹ 5 crores.
A medium enterprise is an enterprise where the investment in plant and machinery is more than ₹ 5 crores but does not exceed ₹ 10 crores.
MSME loans are typically used to fund in a firm's infrastructure, meet working capital demands, Launch of new product range, expansion of business, or to install new sets of machinery.
If you are applying for a loan at a physical location, you will have only limited choices, or maybe even one lender, and it would so much hassle. And that is why it is always better to apply for a loan online, as you will have a wide range of lenders (Banks, NBFCs, and SFBs).
However, before starting the process, there are concerns like eligibility, documentation which you should be aware of.
Are you eligible to apply?
If you are planning to apply for an MSME loan, make sure you meet the following eligibility criteria.
An established firm that has been in operations for at least 3 years (and 6 months for some NBFCs) is eligible to apply.
The business should not come below the blacklisted/excluded list.
You must be within the age group of 25 to 55 years.
You should have your business’ IT returns filed for at least the past 1 year.
Some NBFCs demand a minimum turnover of ₹ 90,000 or more in the 3 months preceding your loan request.
Trusts, NGOs, and charitable organizations are not eligible for small business loans.
What are the documents required to apply for an MSME loan?
The following documents are needed while you apply for an MSME loan.
Bank statement of the past 12 months.
Proof of your business vintage/business registration proof.
KYC documents include PAN card copy and Aadhar card copy (records of all the partners if the firm is a partnership).
Partnership deed copy in case of partnership and Pan card copy of the company in case of a Pvt. Ltd., LLP, or One Person Company.
For all those who are wondering how simple it is to apply for an MSME loan, here are some more interesting revelations.
MSME loans do not require collateral security!
You can avail of an MSME loan up to ₹ 5 Crores that is the maximum limit (some banks do not have these limits too)!!
The interest rates begin at 8%!!!
Subsidies and incentives are granted by the Government of India to promote an active business (https://udyamimitra.in/page/subsidy-schemes).
How to apply?
You can appeal for an MSME loan online by following the given steps.
Fill the application form provided on the organization website with your personal, business, and financial information.
Upload the digital copies of the documents required.
You will receive the loan amount within 3 days regarding the type of organization where you have applied.
You can simply register at Udyamimitra, fill the application form, and upload documents (https://site.udyamimitra.in/Login/Register#NoBack) where you would have multiple options of lenders to choose the one that matches with your requirements.