MSME loan means, Micro, Small and Medium Enterprises loan. Know your eligibility on how the government categorized the MSME schemes for startups and small business firms. Though it is worth a initiative to encourage the youngsters to do more, the best is MSME loans do not need a collateral. Hence, MSME loan is a collateral free loan with low interest rates.
What is MSME Loan – MSME loan is a boon for those looking to expand their business and meet the ends. Every one has a dream of establishing their own firm and stay achieving. While in the process of meeting the business requirements, one needs to most important thing, the funding. Not every one can raise funds through venture capitalists and local unorganised lenders. So, the government of India has got the rarest of opportunity fulfilled by MSME Loans.
MSME loan aims for giving loans to those micro, small and medium sized firms either to..
- Buy machinery, etc
- Fulfil the infrastructure requirements.
- Paying different expenses to keep the enterprise running.
MSME Loan is granted to two sectors of Enterprises…
- Manufacturing – Manufacturing Enterprises can apply for MSME Loan. For manufacturing or production of goods for any industry or to establish one’s own plant and machinery.
- Service – The service enterprises which are engaged in rendering services like a restaurant can be granted MSME Loan.
For Manufacturing MSME Loan Limit –
a. Micro – Less than 25 lakh rupees, b. Small – 25 lakh to 5 crore rupees, c. Medium – 5 crore to 10 crore rupees.
For Service MSME Loan Limit –
a. Micro – Less than 10 lakh, b. Small – 10 lakh to 2 crore rupees, c. 2 crore to 5 crore rupees.
How can I apply for MSME loan?
Since the time there are MSME loans into existence, all the lenders in India, public and private aimed at sanctioning within 7 days.
Applying for MSME Loan is easy and simple as the loan doesn’t ask for collateral details. Collateral is any asset put as security in the bank.
So, all you need to do to get MSME loan is, apply for MSME loan in any bank near by. Give the complete and correct details with proper documentation. Get the MSME Loan availed for your need under different schemes available.
You can also apply online for MSME loan. Each bank or lender has a specific category for MSME Loan. Click on the category and check out MSME Loan facility section. Once clicked on it, you can check out apply now option. Check on it and provide all the correct details. You can get a call back from the bank or lender themselves to discuss about the MSME loan.
Common things you should know while filling the form.
‘MSME Loan in 59 Minutes’ – is what the government had announced for MSME Loan. However, one needs to first do the form filling correct to get the sanction on time whether in 59 minutes or within a week.
- The application asks for the kyc details like name, phone number, pan card number, aadhar number.
- You might get an OTP to ensure the end customer is genuine.
- You need to submit your GST number.
- Some NBFCs might ask to upload the ITRs and 6 month bank statements.
- You might need to provide details of directors, proprietors and company address.
- Select which kind of loan you need. Clearly, under MSME, be free to ask which category your requirement, your kind of loan belongs to.
- If filling online, check for a proper uploading of documents with self-attestation and submit after rechecking every detail.
- If filling offline, ensure you handover all the documents to avoid the delay in the process.
- Be available till the loan process is done.
What is MSME Loan Interest Rate –
MSME loan is similar to PMMY. Both don’t need collaterals. And the interest rate starts from 8%. And depends on the category your requirement belongs to. So, it is suggested to understand from the banker which interest rate category you fall under and get the best rate after discussing with all the lenders.
Are you eligible for MSME Loan –
The major criteria for MSME Loan are as follows.
- You are eligible for MSME Loan if you are 18 years old.
- You are eligible for MSME Loan if you have 8 th standard or grade passed and are eligible for 10 lakh and 5 lakh for manufacturing and service sector enterprises respectively.
- You can apply for MSME Loan if you are in any Self-help Group and have not availed any benefits from the government.
Also trusts which are doing charity and fall under different charitable societies and trusts, institutions under Societies Registration Act 1860, Production Co-operative Societies are all eligible for MSME Loan.
How much machinery cost is actually granted for MSME Loan?
So, you need to pay 40% of the machinery cost and you get the other 60% funded from the banks or lenders as MSME loan. And 20% of the advances for service enterprises and 60% for micro units.
However, you need to find out from the banker clearly before filling the form, how much actually your firm can get funded for the working capital expenses. Each sector has variations and each enterprise needs funds according to their working capital needs.
Do you need a guarantor while applying for MSME Loan?
Yes, you need not provide a collateral for sanctioning of loan but need a guarantor for sanctioning of MSME Loan.
What is the purpose of MSME Loan?
The first thing, Government of India wanted is, to give rise to the new ideas and encourage the professional talent by giving them the freedom of money.
When compared to the other loans like business loan, PMMY loan, etc, MSME Loan is fast in sanctioning the loan which even helps you to fulfil the urgent needs like buying the raw material.
And also collateral free MSME Loan, the government of India bearing the loss and bad debts.
Reduces the unauthorized sector lending as the process of MSME Loan is fast and officially approved by the government of India for low interest rates and collateral free loan.
What are the benefits of MSME Loan?
The key benefits of MSME Loan include
- Immediate processing and disbursal of loan.
- Investing in plant and machinery for scientific reasons or industry purposes
- Acquiring land or a factory for further development.
- Meeting working capital requirements and expenses
- Purchasing the raw materials required for the time.
- Additional monitory support for expansion of the business.
Do you need to register while applying for MSME Loan?
Yes, you need to register while applying for MSME Loan. Credit Guarantee Fund Trust is formed by Ministry of MSME, Government of India and SIDBI exclusively for Micro and Small Enterprises.
So, while you register for the MSME Loan, you are borne to pay the Credit Guarantee Fund Trust a minimal fee so that it acts as a third party guarantor to you to your lender. The Fund trust can recover the bad debts under this scheme upto Rs. 1 crore.
The fee to be paid is one-time guarantee fee of 1.5% and an annual service fee of 0.75% for credit facilities guaranteed.
For MSME loans upto 5 lakhs or less than that, the one-time guarantee fee is 1% and annual service fee of 0.5% for credit facilities assured.
MSME Subsidy –
PMMY could reach the need by funding their business only till 10 lakhs maximum and also gave a subsidy over the PMMY loan. But MSME loans never showed a subsidy scheme, yet recover the loss of the borrower by being the third party guarantor.
Learn and get MSME Loan –
Learn with Government courses under skill development and fly high with knowledge, training and MSME loans. There are many training programs held for skill development in order to increase the quality of the outputs in each sector and to increase the productivity. For example, AYUSH, an ayurvedic company joined hands with MSME Loan scheme.
What is the difference between MSME sector and MSME Bank?
MSME sector is funded by the banks, public and private, and NBFCs by various products under the scheme fulfilling multiple requirements. The banks even have the MSME branches too to fulfil the requirement of the applicants as fast as possible.
Importance of MSME Loan in India –
With MSME loans put your business on the fast tracks is what the slogan going on. MSME Loans are the engine for economic growth and self sustainability.
MSMEs have been established in almost all sectors in Indian industry like food processing, bio tech, pharmaceuticals, textile, fashion, leather, sports goods, meat products, software, engineering and electrical, etc.
According to 4th senses of MSME sector, MSME sector accounts for about 45% of manufacturing output and around 45% of total exports of the country.