MSME loans are great financial support for Micro, Medium, and Small enterprises for their growth and expansion. Business owners can apply for loans to meet their financial requirements, to circulate the cash flow smoothly, to buy new machinery or raw material, paying salaries, etc.
MSME Loan – Introduction
MSME (Micro, Small and Medium enterprise) loan is offered to the business owners as financial assistance. It can be availed by individuals, SMEs, MSMEs, and start-up enterprises. It helps the owners to take their business to next level and meet the financial expense of their business without any hindrance. Different Banks offer different MSME loans interest rates. Business owners are free to compare the MSME loans interest rates of every bank and then apply.
MSME Loan – Details
| MSME loans interest rates | Varies from bank to bank and business requirements |
| Loan Types | Term Loans, Working Capital Loans, Equipment Finance, Government schemed loans i.e. Mudra Loan, PMEGP, etc.) |
| Amount | Up to Rs.1 crore. |
| Tenure for repayment | 1-5 years |
| Collateral | Not required for unsecured business loans |
| Fees | up to 4% of the total loan amount |
| Foreclosure fees | Up to 5% of the outstanding loan amount |
| Partial payment charges | Up to 4% |
| Cancellation fees | Not Fixed |
MSME Loan – Eligibility Criteria
The business owners need to fulfill the following eligibility criteria before applying for a loan:
| Age | Between 18-70 years |
| Company Types | Private/Public Limited, Sole Proprietorship, Partnership Firm, Limited Liability Partnership |
| Entities | Individuals, SMEs, MSMEs, Business owners, Women Entrepreneurs, Self-employed professional people, ST/SC/OBC category people, Traders, Artisans, Retailers, manufacturers. |
| Turnover | varies from lender to lender |
| Vintage | at least 2 years and in profit |
| History | Good repayment history, no previous defaults in any banks |
| CIBIL Score | above 750 |
- Documents should be certified with CA.
- The applicant should be an Indian Citizen.
- There should be no Criminal record of the Applicant
- Registration of the business under the MSMED Act.
- The address and identity proofs are required.
- Bank Statements are also required.
- Certificates from bodies such as GST regulatory authority, ISO certifications are also required.
Calculate MSME Loan EMI
EMI= p x r x (1 + r)n/ {(1 + r)n ‘“ 1}
Where,
P = Loan amount
r = Interest rate
n = Tenure in months
Benefits of MSME Loan
MSME loans are very beneficial for business owners. The benefits are as follows:
- MSME loans interest rates is very Low.
- Loans are Collateral free.
- Applicants need to present only a few documents.
- These are short term loans and offer flexible payment options
- The procession fees for loans are nil or very low.
- The loans are approved and disbursed very quickly.
- Loans are backed by a 100% credit guaranteed scheme.
How to Apply for MSME Loans?
If the applicant meets all the eligibility criteria, can follow the following steps to apply for the MSME Loans:
Step 1: Visit the nearest Bank where you find the appropriate MSME loans interest rates.
Step 2: Ask for the application form.
Step 3: Fill the application form properly and submit it to the bank authority.
Step4: Attach the required documents.
Collateral or Security
There is no requirement of collateral or security for MSME loans. The collateral is required only for Equipment Finance, Machinery loan, Fleet finance, letter of credit, working capital Loan, etc.
Documents required for MSME Loans
The borrower needs to show the following document to apply for MSME loans:
- Plan of the Business
- Properly filled application form
- Passport size photo
- KYC Document
- ID proof such as Passport, DL, PAN Card, Voter ID
- Residence Proof such as Passport, Lease Agreement, Trade License, Electricity or phone bill, Ration card, or Sale tax certificate.
- Age proof such as Passport, Voter ID, PAN Card.
- Income Proof
- Rent Agreement, Sales Deed, MoA, AoA.
- License, Certificates, and registration.
- Last 1-year bank account statement
- Registration proof of business
- PAN card of Proprietor (xeroz)
- Partnership Deed
- Copy of company PAN Card
- P&L and balance sheet of last 2 years
- Sale Tax document
- Municipal Tax Documents
MSME Loan Scheme under Government of India
The Government has launched several MSME loan schemes concerning the development of MSM enterprises. Some of them are as follows:
1. MUDRA Loan Scheme
This is the very first MSME Loan scheme introduced by the Government of India in order to provide financial assistance to small business owners. Mudra Loan scheme is categorized into 3 Parts:
- Shishu Loan- Where a loan of rupees 50000 is provided to a start-up enterprise.
- Kishore Loan- Where loans of up to rupees 5 lakhs can be provided to enterprises that are running for a while.
- Tarun Loan- Where loans are provided for well-established companies looking for expansion. The loan amount is 10 lakh rupees.
2. Prime Minister Employment Generation Programme (PMEGP)
This MSME Loan scheme is introduced by the government of India for the sectors which cost a maximum of 10 lacs for the service sector and Max. 25 lacks for manufacturing. The amount of credit provided for the general category is 90 percent of the project cost and for special categories and minorities, it is 95 percent.
3. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT SME)
This MSME loan scheme is introduced by the Government for Micro and Small business. A loan of up to 100 lakhs rupees is offered for the MSE on the payment of a guarantee fee by the bank. This loan is collateral-free.
There are several additional MSME loan schemes also available like Micro & Small Enterprises Cluster Development (MSE-CDP), Marketing Assistance Scheme, Domestic Market Promotion (DMP), etc.
Bank Schemes on MSME Loan
Business owners are also eligible for MSME loan apply through banks. There are several banks coming forward with the MSME loan schemes.
MSME loans Schemes from Different Banks
Below are the main schemes from different banks on MSME Loans:
| Banks | Lendingkart Finance- 2021 | SBI Mudra Loan | HDFC Bank SME Loan-2021 | ICICI Bank MSME loans- 2021 | Bajaj Finserv- MSME Loans-2021 |
| Interest Rate | 17% + | 9.75%+ | 15%+ | 16%+ | 19%+ |
| Loan Amount | Rs.50,000 – 1 crore | Up to 20 crore | Up to Rs.75 lacs | up to 2 crore | Up to 3% of the loan amount |
| Processing Fees | Up to 2% of Loan Amount | Up to 2% of Loan Amount | up to 2.50% of the loan amount (Min. Rs.2359 & Max. Rs.88500) | NA | Up to 20 lacs |
| Repayment Tenure | Up to 36 months (3 years) | up to 120 months | Up to 48 months | NA | Up to 48 months |
| Sanctioning time | Max. working 3 days | NA | NA | NA | 24 hours |
| Collateral required | NR | NA | NR | NR | NR |
| Pre-pay charges | Nil | NA | Nil | NA | NA |
Frequently Asked Questions
Q1. What is the maximum loan amount can a person get under MSME?
Ans. A person can get up to 1 crore loan amount.
Q2. What is the turnover limit for MSME loans?
Ans. The turnover limit required varies from bank to bank.
Q3. What is the full form of MSME loan?
Ans. MSME Full form is Micro, Small, and Medium enterprises loans.
Q4. MSME provide a loan for machinery also?
Ans. Yes, you can get a loan to buy machinery under the MSME loans.
Q5. What are the registration fees for MSME?
Ans. It is Free of cost. There are no registration fees required.
