Micro-Small-and-Medium Enterprise Loans or MSME Loans are a significant part of the Indian economy. They help small businesses and entrepreneurs to broaden their horizons. In this article, we will discuss how to get an MSME Loan in India.
About MSMEs and MSME Loans
As per the Micro, Small, and the Enterprises Development Act 2006, MSME stands for Micro, Small, and Medium Enterprises involved in producing and managing commodities. A business falls under the micro-enterprise category when it has invested less than one crore with a turnover of up to Rs. 5 crores.
A business with an investment of up to 10 crores and a turnover of up to 50 crores comes in the category of a small enterprise. However, to be classified under the medium enterprise category, one must invest less than 50 crores, and the maximum turnover should be around 250 crores.
Usually, the enterprises registered under the MSME scheme are expected to meet the eligibility criteria for an MSME Loan to develop the operations and scope of their business.
Eligibility criteria for applying for an MSME Loan
- You have to be at least 22 years old at the time of applying for the loan. At the time of maturity, one has to be not above 65 years of age.
- One must possess a minimum of 5 years of total experience and a minimum of 3 years of experience in the concerned business.
- Private enterprises, sole proprietors, partnership firms, and private enterprises involved in production and trading are qualified to apply for MSME Loans.
- A business enterprise with a basic income of 2 lakhs per year and a yearly turnover of 10 lakhs can apply for an MSME Loan.
- Enterprises with a history of good repayment of loans and financial stabilities are eligible for the loan. A record of previous loan default with any bank or NBFC will lessen the chances of getting a loan for the enterprise.
- The enterprise should be registered under MSME in the Udayan Portal.
Note: The eligibility criteria for MSME Loans can vary from lender to lender.
How to apply for MSME Loans?
- Before applying for the MSME Loan, do thorough research about your lender. Consider the different rates, eligibility criteria, and detailed information about the lenders to understand how to get MSME Loans.
- Pick out your preferred bank or the Non-Banking Financial Company and visit their official website.
- In case you are a current customer of the bank or NBFC, log in to your account to know more. If you are a fresh customer and want to apply for the MSME loan, you must open a new account with the Bank or the NFBC.
- Go straightaway to the MSME Loan section. Take a look at the msme loan application form and fill out all the necessary details, including your personal information, details about your income, and business.
- After filling up all the details, you must submit the documents supporting those pieces of information. The documents mainly consist of proof of business ownership, Income Tax Return documents, KYC proof, a profit and loss statement, and relevant details about your business bank account.
- Double-check if all the required information has been provided, and then apply online.
- After the submission, an application number will be provided to you by the lender. This application number is essential to make any communication with the loaner in the future.
- You will be contacted by the loan officer of the respective Bank to finalise the deal.
- Nowadays, most banks and NBFCs have gone 100 percent digital. In such a case, an in-person visit might not be necessary.
- Finally, the bank will verify all the documents and personal and business details provided by you. After your loan gets approved, it will be transferred within a few days to your account.
Documents needed for an MSME Loan
- Identity proofs like Aadhar Card, Voter ID Card, and Passport are required.
- Address proof like Telephone Bill, Electricity bill, Driving License, and Passport is needed.
- Income tax filings and vintage proofs like bank statements of profit and loss for at least three years are required as business proof.
- Incorporation letter or business establishment certificate.
- Properly fill up the application form with two passport-size photographs.
- If you belong to SC/ST or OBC category, submit adequate proof.
Conclusion
The chances of your loan application getting approved are much higher if you have a credit score above 750. Various MSME schemes initiated by the Government of India are now available to upcoming businesses. Now that you understand how to get an MSME Loan, go for the one that suits you best.