What is MSME Loan?
Entrepreneurs and business owners can apply for MSME Loans (also known as Micro, Small, and Medium Enterprise Loans). This type of MSME loan provides you with operating capital that you can use for a variety of purposes, like purchasing expensive equipment, paying your employees’ wages, expanding your MSME loan business, or purchasing new products. In India, various lenders provide MSME loans to their customers. However, banks charge varying interest rates.
On May 13, 2020, the Indian government updated the definition of an MSME loan and made the changes public. The following is an updated definition of an MSME loan:
- MSME category now requires merely investment, rather than investment plus yearly turnover.
- The Indian government has recently increased the investment cap for MSME unit category. This means that more businesses and organizations can now benefit from MSME programs.
Classification Of MSME Loan
Micro, Small, and Medium Enterprises (MSME) can apply for loans to expand existing businesses or create new ones. Interest rates on MSME loans begin at 7.65% per year. Loans range from Rs. 50,000 to many crores. Depending on the accepted MSME loan amount, the MSME loan repayment period could continue up to fifteen years.
MSMEs (Micro, Small, and Medium Enterprises) are categorized in two ways:
- Manufacturing enterprises are involved in the manufacture or production of items when the industry intends to expand plant and machinery in the process of adding value to the final product.
- Enterprises interested in offering or rendering services.
Important Steps Of MSME Loan
The processes for joining up as a new user for MSME loan are as follows:
- Visit the Ministry-MSME-Registration page at https://www.incometax.gov.in/iec/foportal/.
- If you’ve never registered, select “New MSME loan Businesses who have not yet been Accredited as MSME or those who hold EM-II”.
- Before clicking “Validate and Generate OTP,” enter your name and Aadhaar information. A one-time password (OTP) will be texted to your cellphone number. Enter the OTP to authenticate. Following that, you must establish it by supplying your PAN and organizational details.
- In the following step, include your contact information as well as details about the business or facility where you work MSME loan.
MSME Classification
| S.NO. | Investment in Plant & Machinery or Equipment | Annual Turnover |
|---|---|---|
| Micro | Not more than Rs. 1 Crore | Not more than Rs. 5 Crore |
| Small | Not more than Rs. 10 Crore | Not more than Rs. 50 Crore |
| Medium | Not more than Rs. 50 Crore | Not more than Rs. 250 Crore |
What are the Eligibility requirements for an MSME loan?
- The age limit should be a minimum of 18 and a maximum of 65 years.
- Individuals, SMEs, MSMEs, business owners, women entrepreneurs, self-employed professionals, people falling under the SC/ST/OBC category, Private or Public Limited, Sole Proprietorship, Partnership Firm, Limited Liability Partnership engaged solely in trading services, and manufacturing sectors are eligible for this scheme.
- MSME loan Business turnover: Minimum of Rs. 10 lakh for existing firms.
- Good repayment history.
- CIBIL score exceeds 700
What Documents Required For An MSME Business Loan Application?
- Self-drafted MSME loan business plan or project report.
- Completed Application form.
- Passport-size pictures
- KYC documents for applicants and co-applicants include passports, Aadhar cards, voter ID cards, driver’s licenses, PAN cards, and utility bills (telephone and electricity).
- Last 12 months’ bank statement
- Copy of MSME loan Business Incorporation or Company Establishment
- Any further documents required by the lender
Government Schemes Under MSME Loan – 2024
Popular MSME initiatives launched by the Ministry of MSME loan and offered by banks or NBFCs are listed below:
- CGTMSE: Credit Guarantee Fund Trust for Micro and Small Enterprises.
- Credit Linked Capital Subsidy Scheme (CLCSS) and Credit Guarantee Scheme
- The MUDRA Yojana falls under PMMY and is administered by the National Small Industries Corporation. Subsidy
- PMEGP: Prime Minister’s Employment Generation Programme
- PMRY: The Prime Minister’s Rojgar Yojana
- PSB Loans in 59 minutes.
- India’s startup community
Purpose of MSME Loans
- Answer the working capital requirements.
- For new MSME loan business growth.
- Maintain business financial flow.
- Introduce new equipment or machines.
- Purchase raw supplies, vehicles, tools, etc.
- Stock up inventory.
- Pay off rent and salary, hire and train employees, MSME loan etc.
