The government of India offers financial assistance to the MSMEs (Ministry of Micro, Small and Medium Enterprises) to promote their development, improve sales and their business in the market. To achieve this objective, several private banks also advance collateral free loans with less paperwork and quick processing time. There are a number of conditions which determine the approval of MSME loans such as return on investment, profitability, capacity to repay loan and contribution of the promoters.
Types of MSME Loans
There are several types of loans introduced in India to provide credit to MSMEs. SIDBI (Small Industries Development Bank of India) provides long term loans to the MSMEs without the need of going to any bank. Here are some popular government schemes which offer business loans to MSMEs.
- 4E (End to End Energy Efficiency): This scheme has been introduced jointly by India SME (Small and Medium Enterprises )Technology Services Limited and World Bank with an objective to execute energy efficiency across India, finance purchase of plant/machineries and to meet the costs of capital expenditure.
- Credit Guarantee Scheme: This scheme offers credit support to the MSME sector of India. The lending institution includes public, private and foreign banks. Some of the RRBs (Regional Rural Banks) also offer this facility.
- Business Loans In 59 Minutes: The scheme has been launched by the PM of India to automate the entire process of loan approval and provide easy access to the MSME sector. The loan gets an en-principle approval in less than 60 minutes and the amount gets credited to the bank account within 8 working days.
- Pradhan Mantri Mudra Yojana (PMMY): This scheme offers loans to banks or microfinance institutions (MFIS) for lending money to units with requirements of up to rupees 10 lakhs.
- Make In India Soft Loan Fund (SMILE): The scheme provides MSME loans to new businesses and also existing enterprises which aspire to grow their business, upgrade technology or undertake any new project.
How to apply for MSME loans ?
One has to be an Indian resident between 25 to 66 years. One also has to be in the business for a minimum 3 years. Minimum turnover of the business has to be 25 lakhs. Credit evaluation process has to be fulfilled. Business registration as sole proprietorship, partnership firms, private limited company should be done. The MSME entity must deal in manufacturing or service-based sectors excluding retail traders, educational/training institutes and agriculture.
Which are the documents required for MSME loans?
The loan application form has to be submitted with certain documents. Such as, ID proof, business address proof, KYC details, quotation or the machinery to be purchased, audited financials of the business entity including balance sheet, profit and loss statement, tax audits and returns, current year performance and projected turnover, latest bank statements.
Considering the various schemes launched and new initiatives taken by the government of India, to promote and develop MSMEs, the scenario looks to be very promising in the days to come.