The A to Z of Getting an MSME Loan in India

MSME loans are the capital support provided by Government schemes, banks, and financial institutions. You can avail of the fund to set up a new business or expand the existing entity.

The current Government initiatives and economic situations are apt to begin your entrepreneurial journey.

Some Quick Facts

  • Finance Minister Nirmala Sitharaman announced during her budget 2021, “We are determined to take necessary steps to support the MSME sector. We have allocated INR 15,700 crore fund support for the sector in this budget. It is double than the previous year.”(Business Standard)
  • According to the Udyam Registration Portal, there was more than 6.3 crore registered MSME units operational in India as of 26th November 2021 (MSME Ministry)
  • The MSME sector will play a crucial role in National Manufacturing Policy Goals. NMP is intended to make manufacturing contribute to 25 percent of the GDP of India.

Excited to be part of this promising sector and wondering how to apply and avail of an MSME loan in India? This comprehensive guide will provide all the relevant information you need to get an MSME business loan quickly.

Purposes of An MSME Loan

  • To inject fresh capital to manage cash flow problems.
  • Payments to vendors, operational expenses, overdue, etc
  • Premises extension, branch expansion, increasing headcounts, and purchasing machinery & equipment.
  • Technological up-gradation with AI, VR, and IoT-enabled systems.
  • ‘Great Resignations’ are happening across sectors. It affects operation and management. MSME sector requires capital to manage their labor shortage and high attrition during & Post Covid Era.
  • MSME comprises Micro, Small, Village, and Medium enterprises. The business was affected during the lockdown. To get back to the pre-covid situation, they need MSME loans.

How Can MSME Loans Help?

  • Government schemes provide MSME loans on easy terms with attractive interest rates. You can avail and fund your business.
  • You can get faster capital support for managing day-to-day business requirements. These loans are easier to get than other traditional financial products.
  • You can pursue and achieve your passion without worrying about financial roadblocks. With crores of units across India, it creates crores of jobs.
  • It develops an entrepreneurial spirit at the micro-level, and the macro-level boosts economic growth.

What Are Some MSME Loan Schemes Available in India?

  • MSME Loan Schemes From The Government Of India

The government has launched several loan schemes to support the MSME sector at different touchpoints in their business cycle.

Here is the list of prominent ongoing schemes in 2022

  • Pradhan Mantri Mudra Yojana (PMMY)
  • Prime Minister’s Employment Generation Programme (PMEGP)
  • Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE)
  • Credit Linked Capital Subsidy Scheme (CLCSS)
  • Equity Infusion for MSMEs through Fund of Funds
  • Credit Guarantee Scheme for Subordinate Debt (CGSSD)
  • SIDBI Make in India Loan For Enterprises (SMILE)
  • MSME Business Loans for Startups in 59 Minutes
  • MSME Loan Schemes by Banks and NBFCs

Almost all leading banks and NBFCs offer MSME loans to fulfill your business needs. You can compare loan details of different lenders online and apply with the best lender to get the desired loan amount. This category of loans is available for small business owners, startups, and women entrepreneurs.

  • MSME Loans for Women

Ministry of MSME provides lucrative offers and discounts on interest rates for women entrepreneurs. They launched Udyam Sakhi in 2018 to develop an ecosystem where women can participate actively in the MSME sector dominated by men. Udyam Sakhi has helped more than eighty lakhs women across India with MSME loans to build their own identity. 

  • Government-backed MSME Loan Schemes for Women 

  • Trade-Related Entrepreneurship Assistance and Development (TREAD)
  • Mahila Coir Yojana

*Women get extra concessions and benefits in almost all the Government-sponsored MSME loan schemes. These two are dedicated to women only. 

  • MSME Loan Schemes for Women from Banks and NBFCs

Several banks and NBFCs offer attractive business loans to encourage maximum women to participate in the business ecosystem. The interest rates, loan amount, and terms & conditions vary from lender to lender.

Some of the prominent ongoing MSME schemes for Women

  • Punjab National Bank: Mahila Samridhi Yojana, Mahila Udyam Nidhi Scheme, Mahila Sashaktikaran Abhiyan etc
  • Canara Bank: Synd Mahila Shakti
  • State Bank of India: Stree Shakti Package
  • Bank of Baroda: Shakti Scheme
  • Bhartiya Mahila Bank: Annapurna and Shringaar

Eligibility for MSME Loan Application

  • You must be more than 22 years of age and less than 65 years of age for most of these schemes and apply with lenders.
  • Good Credit score and consistent financial history
  • Minimum business turnover should be INR 12 lakhs. It could vary from lender to lender.
  • Eligible entities for MSME loans are self-employed professionals, sole proprietorship firms, LLPs, Partnership firms, Public & Pvt. Limited Companies, SMEs, MSMEs, women entrepreneurs, business owners from SC/ST/OBC categories

Documents for MSME Loan Application

  • A duly filled MSME loan application with passport size photographs
  • KYC documents include Passport, Aadhaar Card, PAN Card, etc., of principal applicant and co-applicants (if any)
  • Income and Address Proof with previous six months’ account statement
  • SC/ST/OBC certificate (if applicable)
  • Business Incorporation Letter
  • Your lender can ask for additional documents for further verification

Steps to Apply for an MSME Loan in India

As we have explained, you have multiple options for getting MSME business loans. You can compare Government-backed schemes and loans from Banks or FIs. Next, assess your eligibility and prepare documents. Once you go through all the processes, you can start the loan application procedure.

Step 1

Visit your loan provider’s website and fill out the application form correctly. You will require to submit details such as loan amount, business/employment status, turnover/salary, current city, business experience, security type, etc. Mention your active phone number and email id. You will get all the communication on registered contact details.

Step 2

Click on the box for terms & conditions and move to the next step.

Step 3

On the next page, enter your business name, category, profit, existing EMIs, PAN details, etc.

Step 4

Lender/s verify documents. They can also visit the business premises and your residence.

Step 5

Once verified, the lender will notify you on the registered mobile number and email id. The loan disbursal varies from lender to lender. It could take a few hours to a couple of days.

Concluding Remarks

Assess your business requirements and apply for a suitable amount for your MSME business. You must consider EMIs, repayment tenure, total loan amount, and interest before applying for a business loan to avoid financial burden during loan repayment tenure.

 

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