MSME Business Loans
In India Micro, Small and Medium Enterprises/companies are the largest employment providers. 69% is the total contribution of MSME to overall employment in the country. MSME also holds a share of almost 45% of the manufacturing industry and 40% of our total exports in the country. As the contribution is major, therefore, the growth of MSMEs can lead to the growth of Indian economy.
However, MSMEs need funds & investment to grow, same as any other business in the market.
To encourage MSMEs, the government of India, Banks and other financial institutions such as non-banking finance companies (NBFCs) have started different schemes offering business loans to the MSMEs in India.
However, opting for an MSME loan is not that easy, MSME needs to pass a number of financial litmus tests to get an unsecured business loan or a working capital loan from a bank or NBFC. However, the eligibility criteria to qualify for the MSME loan is lower than what it is required to qualify for a normal business loan from any lender. For a normal business loan, only those business are given priority which is considered risk-free and profitable. This is why MSME loans are considered best for a small business owner as it has minimal eligibility criteria to fulfil along with many added benefits.
Why MSME loans are the ideal choice for small Business Owners?
- Minimal eligibility criteria to qualify for the loan
- Benefits on the certain taxes
- Government based MSME loans are available
- Provides equal opportunity to all kind of business
- Provides funds for capital growth
- Funds from MSME loans can be used for any kind of business requirement.
Government Schemes offering Loans to MSME & Start-ups in India
- Standup India
- Pradhan Mantri Mudra Yojana (PMMY)
- MSME Business Loans For Startups In 59 Minutes
- Credit Guarantee Scheme (CGS)
- 42 (End to End Energy Efficiency)
- Bank Credit Facilitation Scheme
- Credit Linked Capital Subsidy for Technology Upgrades
- Coir Udyami Yojana
- SIDBI Make in India Soft Loan Fund for MSMEs (SMILE)
- Sustainable Finance Scheme
What do you need to qualify for these schemes or for MSME Loans?
- A proper Business plan: Having a proper business plan is the most important thing which you need to qualify for any MSME loan.
- A registered business: In any case whether it be a startup or a small enterprise which is there from any number of year, business registration is a must to qualify for any kind of government scheme or any other business loan.
- Profit and loss statement: If the business is already existing you may be asked P&L statement of your business to show how previously your business was doing before getting funds.
- Last year’s ITR filed for your business: ITR documents shows your taxes and lenders check it to know whether you have paid all your taxes or not?
- A good credit history: It shows your history towards all your previous borrowing. So, if you have a good repayment history you can qualify for this loan easily.
- Certificate from all the authorized bodies: GST and other registrations for the business provide a compliance check to your business. Lenders gets comfortable to allot a business loan to an entity registered within the required bodies.
- Your permanent address proof: It is mandatory to be submitted when availing any kind of loan.
- Sign of co-borrower (if any): In case you have a co-borrower for your loan then, you need to get signed your loan documents with your co-borrower.
- Collateral documents (if required): If you are giving a collateral against your loan you need to submit documents regarding it.
- Bank Statement: To know your income and expenses lenders ask for bank’s statement.
- The Business should have a realistic projection.
- The business should have end use of funds.
Government loans for small industries are one of the many initiatives taken by the Government of India to promote ease of doing business in the country. India was ranked 77th position in 2018 in World Bank Matrix in ease to do business.
The Indian government has been working hard and aims to promote entrepreneurship and opening up international startup corridors between India and the world. Schemes such as Startup India & Mudra Yojana has encouraged a number of MSMEs to work hard and avail the benefits offered by these schemes.
The government’s efforts to offer business loans to startups and MSMEs even at the micro-level will definitely support entrepreneurs and business owners of small and medium enterprises to grow and flourish their business.