MSME Loans provided by the government aim to boost small and medium enterprise businesses. The provided funds can be used for business expansion, establishment, or meeting expenses with proper documentation and action plan. When financial institutions check an applicant’s application, they check for details such as project viability. Apart from this, these MSME loans are collateral-free loans, which encourages more MSMEs to take advantage of these loans.
Types of MSME Loans
Before deciding to take an MSME loan one must consider the various types of MSME loans offered by the government. All important types are mentioned below.
The Khadi & Village Industries Commission
The Khadi & Village Industries Commission offers loans for the prime minister’s employment generation programme. The loan is given to groups with 15-35% of the project cost covered. The remaining amount is disbursed at periodic intervals.
Fund of Funds Equity Infusion
This one is offered to support MSMEs when they’re in their growth stage. In these funds, an equity intervention helps provide cash to underprivileged MSMEs with growth potential.
The Pradhan Mantri Mudra Yojana
This scheme offers loans up to Rs 10 lakhs to quasi and semi or small enterprises. In this scheme, borrowers can approach commercial banks, NBFCs, etc to apply for online loans. Also, these loans are awarded based on Shishu, Kishore and Tarun.
The Credit Linked Capital Subsidy Scheme
This scheme allows MSMEs to utilise modern technology. Apart from the basic requirements, the scheme offers a 15% subsidy for further expenditures up to Rs 1 crore to use the latest technology in business practices.
SIDBI Make in India Loan for Enterprises
This loan scheme was introduced to help MSMEs promote the Indian government’s “Make in India” initiative They do this by helping eligible businesses in meeting their debt-equity ratio by providing soft loans. The main goal is to finance smaller businesses whose payback period is about 10 years.
The Credit Guarantee Trust Fund for Micro and Small Enterprises
This was introduced to provide financial assistance to small and medium-sized businesses without any collateral. Rural financial institutions offer funding options for entrepreneurs, with guarantee levels varying based on the business type. Retail ventures may receive up to 50% guarantees, while micro-enterprises could see guarantees exceeding 85%. If the borrower defaults, a mechanism is in place to cover as much as 75% of the outstanding debt.
Documents Required for MSME Loans
To apply for a MSME business loan one needs to provide various documents which confirm one’s identity and residence. Apart from this, the lender wants to confirm that you’re old enough to take these loans.
- Identity Proof: Driving license, passport, PAN card, etc.
- Age Proof: Passport, voter’s ID and PAN card
- Residence Proof: Passport, leasing agreement, trade license, telephone and power bills, ration card, and sales tax certificate.
How to Apply for MSME Loans?
MSME loans are offered by the government to small and medium enterprises. One can apply by visiting the government’s portal.
Fill Application Form
The process to apply for MSME loans starts with filling out the application form. This requires one to enter their phone number, and date of birth as mentioned on their PAN card. After this one successfully completes the first stage of application.
Fill Business Information
This requires one to provide information about their business and other statistics such as income and turnover. In addition to this, one needs to enter annual income for the bank to assess your eligibility.
Check Offers
After filling out all the information, one needs to check the maximum amount one can borrow from the finance service provider. This also helps to check one’s monthly EMI, including interest rates and other minor information that needs your attention.
Complete the Loan
Lastly, one needs to complete the loan process by selecting a financial provider’s offerings or packages. This helps determine the repayment period.
Acknowledgement and Verification
After approval from your lender, review your application. Check the loan amount, payment term and information with the financing partner. After this, you can expect the disbursal of amount to your account within a few working days after receiving an online confirmation of your application’s approval.
Conclusion
MSME loans are provided by the government to small and medium enterprises. They offer these funds for expansion and meeting business expenses. Apart from that, these loans are collateral-free, encouraging more MSMEs to take loans from them. The process to apply for these loans starts with filling application form, filling in business information, checking offers and completing the loan.
Also, these loans can be easily availed from lenders such as Tata Capital who offer these loans at competitive interest rates and flexible loan terms. Remember, it is important to apply for an MSME loan only after thorough research. This will help you get a loan on favourable terms.
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