The Government of India has given a great opportunity to Micro, Small and Medium Enterprises (MSME) to avail of special kind of loans called MSME loans. MSME loan is a boon for those who want to expand their business and cannot afford borrowing from banks and financial institutions.
The unique feature of an MSME loan is that it is a collateral-free loan with low-interest rates.
If you are seeking an MSME loan, then you need to figure out the purpose of your loan. It may be to buy machinery or expand infrastructure or meet various expenses and overheads to ensure that your business is sustained. You can avail an loan, whether you are in the manufacturing business or in the service sector.
You need to keep in mind the following aspects before applying for an MSME loan:
- MSME loan Limits: Limits for manufacturing and service sectors are given below:
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.
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.
- ‘MSME Loan in 59 Minutes’is the phrase the government had announced for Loan. To ensure that the loan amount is sanctioned in 59 minutes, you need to provide the necessary details asked for by the lenders. If filling online, check for proper uploading of documents with self-attestation and submit after rechecking every detail. Information normally asked are KYC details, GST number, ITRs and bank statements.
- Interest Rate – The interest rate starts from 8% and depends on the category your requirement belongs to:
- Eligibility criteria for MSME Loan:
- You should be 18 years old
- You should have passed 8th standard and are eligible for 10 lakh and 5 lakh for manufacturing and service sector enterprises respectively.
- You can apply for 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, and Production Co-operative Societies are all eligible for Loan.
- Investment in machinery Loan:
In case you are availing an MSME loan for the purchase of machinery, then you need to pay 40% of the machinery cost and you get the other 60% funded from the banks or lenders as an loan. You would need to pay 20% of the advances for service enterprises and 60% for micro-units.
- Guarantor: You would need a guarantor for sanctioning of MSME Loan.
- Registration: You would need to register before applying for the loan.
In conclusion, MSME loans are attractive borrowing options as they provide key benefits such as:
- Immediate processing and disbursal of loan.
- Investing in plant and machinery
- Acquiring land or a factory for further development.
- Meeting working capital requirements and expenses
- Procurement of raw materials required
- Additional monitory support for the expansion of business.
An MSME loan is very beneficial to give your business the right kind of boost. It can be availed for various purposes and there are different Government schemes that facilitate the same. Depending on what the scheme offers, you can apply for an loan that suits your business requirements.