What is an MSME loan?

The MSME full form stands for the micro, small and medium enterprise. This act was introduced by the Indian government in agreement with the micro small and medium enterprises development act of 2006. According to this act, MSMEs are the enterprises involved in sectors like production, processing or preservation of goods and commodities. Sectors that are vital for economic growth and contribute around one-third of the country’s GDP by generating around 110 million employment of the population. 

MSME loans in India play a very important and effective role in the socio-economic development of the country as most of the enterprises are from the rural areas of the country. Recent reports according to the Government annual report of 2018 and 19 shows that more than 600000 MSMEs have operated in the country. 

A brief description of MSME classifications are –  

  • Microenterprise – in this enterprise investment in plant and machinery does not exceed more than one crore and the turnover should be more than 5 crores. 
  • Small enterprise – in this enterprise investment in plant and machinery should not exceed rupees 10 crores and turnover must not exceed rupees 50 crores. 
  • Medium enterprise – this enterprise investment in plant and machinery must not exceed more than rupees 50 crores and turnover should not exceed rupees 250 crores. 

You can easily get MSME registration by visiting the online web page and by filling in all the details. 

Some Common MSME Loan Providers

An unsecured business loan is a business loan facility that permits a borrower to borrow funds without assuring any asset or mortgage for collateral damage. As in MSME loan, there is the least collateral involved hence no time is wasted upon collateral verification as well as documentation. This system makes unsecured business loans hassle-free and easy due to minimal documentation. One of the major perks of MSME loans is they can be availed through online portals of various banks and you can get easy approval within 24 hours. 

  1. ICICI Bank provides MSME loans with an interest rate of 16.50%. 
  1. HDFC Bank provides MSME loans with an interest of 11.90%. 
  1. Induslnd Bank provides MSME loans with an interest rate of 13%. 
  1. BAJAJ Finserv provides MSME loans with an interest rate of 18%. 
  1. Bank of Maharashtra provides MSME loans with an interest rate of 14.50 %. 
  1. Bank of Baroda provides MSME loans with the rate of 14.10% 
  1. Punjab National Bank provides MSME loans with an interest rate of 12.65%. 

Eligibility criteria for applying for an MSME loan

To take advantage of an MSME loan, the client needs to fulfil certain eligibility criteria which are as follows: 

  • The business sector for which this particular loan will be availed must be set across the service or manufacturing sector.
  • The borrower’s investment in the manufacturing sector should not exceed rupees 10 crores. 
  • The borrower’s investment in the service sector should not exceed more than 5 crores. 
  • The borrower’s business should be in operation for more than 6 months in case the fund is borrowed for business expansion 
  • The borrower’s business should not fall under categories like blacklisted. 
  • The applicant who is applying for the MSME loan should be under the age of 25 years. 

Some brief MSME loan schemes 

Similar to other loans available in the banks, MSME loans are also offered to all its potential borrowers by the initiative of the Government of India. Schemes are funded by the ministry of micro, small and medium enterprises to fulfil the financing needs of all the budding businesses and to enhance the social-economic condition of the country. Some of the popular government-funded MSME loan schemes are listed below. 

  1. Mudra loan 
  1. Credit guarantee fund trust for micro and small enterprises or CGTMSE. 
  1. Prime minister’s employment generation programme or PMEGP. 

Documentation for MSME loan

  • Identify proofs like Aadhar card, pan card, voter ID card, driver’s licence, passport etc. 
  • Address proof like utility bills such as electricity, water or broadband bills, ration card, rent agreements etc.
  • And every document related to business like farmer registration certificate, professional certificate, business turnover proofs for sold properties, partnership agreements and momentum of association wherever applicable. 

The flexible availability of MSME loans with proper filter documents is very easy and can be approved within 24 hours through online facilities.