MSME Loans also known as Micro, Small, and Medium Enterprise Loans are types of loans which you can avail if you own a business or is an entrepreneur. This type of loan provides you working capital which you can use for various purposes such as purchasing new inventory, buying new equipment, paying your staff their salary, or aid yourself in expanding your business. There are multiple lenders in India who offer MSME loans to their customers. The interest charged also differs from banks to banks.
The definition of MSME was altered, and was announced by the Government of India on 13th May 2020. Given below is the new definition of MSME:
- The criteria for MSME classification have been changed from Investment to Investment and Annual Turnover.
- The Government of India also increased the investment limit for classification of MSME units. This means, that more firms and enterprises can now avail MSME schemes.
- Criteria for the classification of MSMEs is now uniform for Manufacturing and Services Enterprises which is given below in the table below:
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| Manufacturing and Services Enterprises | Investment does not exceed Rs.1 crore and Turnover does not exceed Rs.5 crore | Investment does not exceed Rs.10 crore and Turnover does not exceed Rs.50 crore | Investment does not exceed Rs.20 crore and Turnover does not exceed Rs.100 crore |
Micro, Small, and Medium Enterprises can avail MSME loans for the expansion of businesses or for setting up new enterprises. The interest rates on MSME loans start at 7.65% p.a. The loan amount sanctioned ranges from as low as Rs.50,000 and can go up to a few crores. On the basis of the sanctioned loan amount, the loan repayment tenure can go up to 15 years.
MSME registration
Given below are the steps you will have to follow to register for MSME as a new user
- Click on the link given https://udyamregistration.gov.in/Government-India/Ministry-MSME-registration.htm.
- If you have not registered before, click on ‘New Entrepreneurs who are not Registered yet as MSME or those with EM-II'.
- You will have to provide your name and Aadhaar details and click on ‘Validate and Generate OTP’. A One-Time Password (OTP) will be sent to your mobile number. Enter the OTP to authenticate. You will then have to provide the details of your PAN, organisation you are a part of and validate it.
- In the next step, provide your personal details and the details of the industry or plant you are a part of.
- After entering all the details, click on ‘Submit and Get Final OTP’. An OTP will be sent to your mobile number. Enter the OTP following which you will receive a message for the successful registration of MSME.
Registration For Entrepreneurs Already Having UAM
- If you have already registered as an UAM then you will have to click on the link https://udyamregistration.gov.in/Government-India/Ministry-MSME-registration.htm.
- Click on either ‘For those having registration as UAM’ or ‘For those already having registration as UAM through Assisted filing’.
- Enter your Aadhaar number.You can choose to receive the OTP either on your registered mobile number or email ID.
- Once you have provided the OTP, click on and ‘Validate and Generate OTP’.
- Enter the OTP and your registration process will be completed.
What are the eligibility criteria for availing a MSME Loan?
You’re required to fulfil the eligibility criteria set by your lender to get approved for an MSME loan. The requirements will vary from bank to bank, and even changes with the type of scheme offered. However, listed below are the general criteria you will have to meet:
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| Type of business | - Manufacturing Sector
- Service Sector
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| Size of business (in terms of investment) - Manufacturing Sector | - Micro - < Rs.25 lakh
- Small - < Rs.5 crore
- Medium - < Rs.10 crore
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| Size of business (in terms of investment) - Service Sector | - Micro - < Rs.10 lakh
- Small - < Rs.2 crore
- Medium - < Rs.5 crore
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What are documents required to apply for a MSME Loan?
Listed below is a generic list of documents that you can keep in hand for your application:
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| Proof of Identity | PAN card, Aadhaar card, Voter’s ID, passport |
| Proof of Residence | Rental agreement, ration card, utility bills |
| Proof of Business Address | Rental agreement, lease agreement, utility bills |
| Proof of Income | P/L account and balance sheet copies of last 2 years |
| Tax documents | IT returns, sales tax return, PAN card |
| Proof of securities provided | Photocopies of title deeds/lease deeds offered as securities |
| Other documents | Projected balance sheet, project report, etc. |
Note: The list of documents mentioned above is indicative only. Applicants might be required to provide other documents as well as per the requirement of the lender.
How to apply MSME Loan?
There are two ways of sending in your application for an MSME loan. If the lender has an online facility, you can fill the form with the required details and submit the application via the website.
Alternatively, you can visit the nearest branch and request them for an application form. You can call ahead and ask them what the documentation requirements are.
Collateral for MSME Loan
Most of the lenders in India will offer you an MSME loan without you having to provide any collateral or security. MSME loans are considered unsecured loans for which collateral is not required. However, in case any lender does ask for a collateral, do get in touch with them and ask for the details of the security you may need to provide.
