What is MSME Business Loan and how to apply for it? 2021

Micro, Small, and Medium Enterprise (MSME) loan is a type of business loan provided by financial institutions to people, MSMEs, and startup businesses with the goal of expanding their businesses and promoting the MSME sector. MSME loan schemes are primarily utilized by business owners and enterprises to meet their working capital needs, manage or boost cash flow, and expand their businesses, among other things. Most banks and non-bank financial institutions (NBFCs) offer MSME loans without requiring collateral or security from borrowers. 

Interest Rate	Depends on applicant’s profile and business requirements
Loan Amount	Minimum Limit to borrow is Rs. 30,000 and Maximum is up to Rs. 1 crore, can exceed as per business requirements
Repayment Tenure	1 year – 5 years
Collateral	Not required for Unsecured Business Loans
Processing Fee	From Nil to 4% of the loan amount
Foreclosure Charges	From Nil to 5% of the outstanding principal amount
Part-payment Charges	From Nil to 4% of the outstanding principal amount
Loan Cancellation Charges	Varies from bank to bank
Subsidy	Offered by selected financial Institutions
Credit Facilities	Working Capital Loan, Bill discounting, Overdraft, Cash Credit, Letter of Credit, Bill of Purchase, Merchant Cash Advance, etc.

 MSME Loan Eligibility Criteria 

• An applicant’s minimum age should be of 18 years old and the maximum of 65 years old. 
• Individuals, SMEs, MSMEs, business owners, women entrepreneurs, self-employed professionals, and those from the SC/ST/OBC categories are all eligible. 
• Limited liability partnerships, sole proprietorships, partnership firms, and limited liability partnerships engaged solely in selling, services, or manufacturing are also eligible. 
• Business Turnover: For established businesses, a minimum of Rs. 10 lakhs is required, albeit this varies per bank. 
• Financial stability and a good repayment history 
• Lenders consider a credit score of 750 or higher to be excellent. 

 Documents Needed to Apply for an MSME Business Loan 

• Application form filled out completely with passport-sized photos 
• Passport, Aadhar card, Voter’s ID card, Driving License, PAN Card, and Utility Bills are examples of KYC documents for applicants and co-applicants (Telephone, Electricity) 
• Bank statement over the last 12 months 
• Any further documents requested by the lender, such as a certificate of incorporation or a letter of establishment 

MSME Loans Government Schemes 2021 

Various banks and NBFCs offer Micro, Small, and Medium Enterprises (MSMEs) SME/MSME programs launched by the Ministry of MSME. The following are some of the most popular MSME initiatives offered by financial institutions and established by the Indian government:  

• CGTMSE: Credit Guarantee Fund Trust for Micro and Small Enterprises 
• CLCSS: Credit Linked Capital Subsidy Scheme 
• Credit Guarantee Scheme 
• MUDRA Yojana under PMMY 
• National Small Industries Corporation (NSIC) Subsidy 
• PMEGP: The Prime Minister Employment Generation Programme 
• PMRY: Prime Minister’s Rozgar Yojana 
• PSB Loans in 59 minutes 
• Standup India 

No Collateral/Security MSME/Business Loan 

• MSME Business Loan amount can be used to cover their operating capital needs as well as to expand the businesses. MSME loans for new businesses are often unsecured business loans issued by financial institutions that do not require the borrower to provide any collateral or security to the bank.

• MSME company loans without collateral are available at affordable interest rates and can be repaid over time in the form of EMIs. Collateral-free loans are usually short-term loans with a 12-month repayment period, although they can last up to five years depending on the business needs. 

• The loan amount will be determined by the applicant’s creditworthiness, repayment capabilities, and financial stability. MSME Loans are available without collateral from most financial institutions, including private and public sector banks, non-banking financial companies (NBFCs), regional rural banks (RRBs), small finance banks (SFBs), and microfinance institutions (MFIs). 

MSME Loans Have a Purpose 

• To meet the needs for working capital 
• To purchase or install new equipment or machinery To purchase raw materials, cars, tools, and other similar items 
• To replenish inventory 
• To pay rent, salary, hire and train employees, and much more. 

Categorization of the New MSME Scheme 

The distinction between manufacturing and service businesses has been eliminated by lowering the investment amount and annual turnover for both types of businesses. 

MSME – Merged Criteria: Investment and Annual Turnover
Sector/Enterprise Type	Micro Enterprise	Small Enterprise	Medium Enterprise
Manufacturing & Services Sector, Both	Investment less than Rs. 1 crore  Turnover less than Rs. 5 crore	Investment less than Rs. 10 crore  Turnover up to Rs. 50 crore	Investment less than Rs. 50 crore  Turnover up to Rs. 250 crore

 How Do I Get an MSME Loan? 

Applicants can evaluate and compare numerous loan choices that meet their business needs when applying for a business loan. By going to the website’s homepage and clicking on “Business Loan,” you can apply for a business loan.  

• Step 1: Complete all required information, including the loan amount, employment status, annual gross sales or turnover, city of residence, years in present business, collateral type, and mobile phone number. 

• Step 2: Check the box below to agree to the terms and conditions. To “Unlock Best Offers,” simply click the “Unlock Best Offers” button. 

• Step 3: You must also include the following information: Company type, nature of the business, industry, gross annual profit, bank account, any outstanding EMIs, full name, gender, PIN code, PAN card, date of birth, and email address. 

• Step 4: After you’ve submitted all of your information, a bank representative will call you to finalize the loan process. 

• Step 5: Once your loan application is approved, the approved loan amount will be deposited in your specified bank account within a certain number of working days. 

 The MSME loan interest rates offered by various private and public sector banks, NBFCs, Small Finance Banks (SFBs), Regional Rural Banks (RRBs), and Micro Finance Institutions (MFIs) are determined by a number of factors, including the desired loan amount, repayment tenure, nature and tenure of the business, and the applicant’s profile, financial history, creditworthiness, and repayment capability. 

Conclusion: 

To conclude, you can do MSME registration online at home. All you need is to fit into the eligibility criteria and minimal documents. And if you want the process simpler come to Afinoz.