Business loans offered to Micro, small and medium enterprises are known as MSME Loan. The loan is specially designed to help MSMEs achieve growth and generate revenue. The Government understands the importance of MSMEs in the country and has extended several initiatives for them. Lenders across the country have loan products designed to meet the specific needs of MSMEs and they are offered at low interest and flexible repayment terms.
The loan is offered for the development of business and additional activities like the purchase of raw material, machinery and to meet the working capital needs. The rate of interest will vary across different lenders and the loan is offered to businesses across all industries.
Before you apply for the loan, you need to be aware of whether your business falls into an MSME or not. An MSME is classified into manufacturing and service enterprise and the same is further defined according to the investment and turnover.
As per the new definition, micro-units are those companies that have investments up to Rs. 1 crore and a turnover below Rs. 5 crores. Further, small units are those enterprises with an investment up to Rs. 10 crores and turnover below Rs. 50 crores. Lastly, medium enterprises are those with an investment of up to Rs. 50 crores and turnover below Rs. 250 crores.
MSME loan eligibility:
To be eligible for an MSME loan, you need to fulfil the below-mentioned criteria.
- The applicant must be above the age of 25 years.
- The business should be in the manufacturing or service sector.
- Your investment in the manufacturing sector must not exceed Rs. 10 crore and in the service sector must not exceed Rs. 5 crore.
- Your business should be operational for more than six months and should not fall in the blacklisted categories.
- The business should be profitable.
Different lenders may have additional criteria for MSME loan eligibility and you need to be aware of the same. You can make an online comparison and then proceed with your application. Some lenders have a turnover requirement while many have profit criteria.
Documents required for the loan:
If you fulfill the eligibility criteria, you can proceed with the application and submit the documents as required. You will need to provide:
- Proof of identity,
- Proof of address,
- Business registration documents,
- Partnership agreements,
- Memorandum of Association,
- Income statement and balance sheet,
- Copies of ITR for the last two years,
- Bank statements, and,
- Projected income statement and balance sheet.
An MSME loan can serve various purposes and take the business to its potential. As a business owner, if you want to expand the business and are looking at the best ways to fund the expansion, you can apply for a loan today. It has a low and competitive interest rate with flexible repayment tenure. The loan is designed to help meet your goals without worrying about the funds.
MSME loans are available for women at special rates and can help grow women-owned businesses. Since the loan is specially designed for small and medium enterprises, it is the best choice for small business owners and will help escalate the business.