There has been a remarkable rise in Micro, Small and Medium Enterprises (MSMEs) since the government introduced MSME Act 2006. However, it is challenging for new MSMEs to get the required funding during their initial phase.
According to experts, most new businesses in India shut down within one year of their launch. Hence, the government has proactively launched various schemes and programmes to provide MSME Business Loans to eligible applicants as an initiative to fast-track their growth. Let’s discuss how to apply for MSME Business Loans in India and all the related information.
Eligibility Criteria for MSME Business Loans
The eligibility criteria for securing MSME Business Loans vary based on the chosen government scheme. However, the general eligibility criteria applicable to these types of loans include:
- The minimum age for an applicant to get an MSME Business Loan under any scheme is 22 years, and the maximum must not exceed 65 years.
- The applicant must be a citizen of India.
- The applicant must submit a complete business plan.
- The new MSME must be formed as a company, sole proprietorship, partnership firm, or Limited Liability Partnership (LLP).
- The applicant must have a reasonable credit score.
How to apply for MSME Business Loans
The application process for different new MSME Business Loans varies from scheme to scheme. However, the general application process steps to be followed include:
- Visit the suitable MSME Business Loan scheme’s website or the fintech service provider’s website that offers these types of loans for news.
- Click the ‘Apply Loan’ button on the website’s home page.
- Complete the mandatory fields by furnishing the details like owner details, amount of loan needed, annual turnover or gross sales, bank account details, business experience, etc. Also, send the documents required for a Business Loan when prompted.
- After submitting all the necessary details, the loan application will be processed at the lender’s end in terms of document verification and loan eligibility.
- Once the MSME Business Loan application is approved, the fintech institution will authorise and disburse the approved loan amount directly to the applicant’s bank account within the mentioned business working days.
Documents required for Business Loans under MSME schemes
- KYC documents like Aadhar card, passport, Driver licence, Voter ID card, PAN card & utility bills.
- Self-drafted business plan report.
- Recent 12 months’ bank transaction statements and the last year’s ITR.
- Business registration certificates and documents.
- Business address proof.
- Any other document requested by the financial institution
Advantages of MSME Business Loans
Here are the reasons why you should consider MSME Business Loans for funding your startup.
- Financial institutions understand your emergency funding needs and work to ensure fast and hassle-free processing. They also try to approve and disburse the loan amount of less than ₹50 Lakh within a few working days.
- Top MSME Business Loan providers like Poonawalla Fincorp provide the option of applying online to reduce travel efforts and the hassle. You can log into the website of your preferred loan provider, enter vital details, upload the documents required for a Business Loan and get the required loan amount based on your need and eligibility.
- You will get flexible repayment tenure as per your current loan repayment capacity, which can be from 12 months to 5 years and opt for foreclosure at no additional cost.
- New MSMEs can secure MSME Business Loans at competitive interest rates ranging from 15-28%. The interest payable is calculated on numerous parameters like income, loan amount, location, tenure, etc.
- You can utilise an MSME Business Loan eligibility calculator to assess your eligibility & also check documents required for a Business Loan, etc. This will help you understand the necessary steps to be taken to get loan approval successfully.
- There is a plethora of Business Loan offerings by both the Government of India, and the private financial sector to support MSMEs by injecting the necessary funds to sustain growth. These loans are sanctioned and disbursed by the government through leading private and fintech institutions with promptness and without much hassle.
MSME Business Loans are essential for most new and small businesses as they invariably do lack funding or the means to generate sizable formal credit. MSME business owners can use the information above and approach a suitable financial institution to avail a quick MSME Business Loan.