MSME loan

Factors to Consider Before Applying For an MSME Business Loan

The MSME sector is an indispensable contributor to the Indian economy. More than 6.3 crore MSMEs in the country produce approximately 8000 products and contribute about 45% to the total employment in the country. However, MSMEs have been facing serious financial issues after the Coronavirus pandemic. 

Business loans for MSMEs help these small businesses to cope with financial challenges. To ensure that your MSME loan application does not get rejected, you need to be aware of certain factors that affect your business loan application.

Factors to Consider Before Applying For an MSME Business Loan

  1. The credit score of a business is a vital determinant of its loan application approval. It also decides the interest rates and the terms of repayment of the loan. A good credit score leads to a better interest rate and customer-friendly loan terms for the business. 
  2. An MSME loan means a loan to meet business expenses. Before applying for a business loan, you should analyze your business expenses and determine the amount of loan you need. It will help you apply for the correct loan amount and save from default on your loan EMIs.
  3. Have an accurate record of the business’s financial standing. Ensure that the credit report, GST report, and financial statements of the business are accurate before applying for a loan. It will prevent delays and rejection of your loan application. 
  4. A business that has positive cash flows and has shown a profit in the last few years is more likely to get a business loan.

Apply for a business loan with a trusted lender to increase your chances of getting a transparent and fair loan offer.

Also Read: Know How To Get MSME Loan For your New Businesses?

Importance of Credit Scores for MSME

If one owns a small business like MSME, one always thinks about how to fund it in order to expand it. It is important to understand how business funding works, credit scores are calculated, etc. just like how credit scores are important for individuals to secure loans, for MSME loan eligibility too, credit scores are significant. 

Once an MSME applies for a loan online, the credit score is usually the first thing that is checked by any creditor. Credit reports are indicators allowing a financial institution to assess the MSME’s ability to repay any debt on time.

Factors Influencing an MSME’s Credit Score

  • The length of time the MSME has been in business.
  • Credit lines for MSMEs applied for in the last 9 months These are known as credit inquiries.
  • The number of new business credit lines opened in the last six months, as well as the number of business credit lines used in the last six months. Such lines include credit cards, invoice accounts, loans, and leases.
  • There have been any tax liens or collection amounts in the last 7 years.
  • Payment history shows how often payments are made on time.

Must Read: Top 5 Challenges Faced by MSME/SME Financing in India

What MSMEs can do for Loan Eligibility?

Take out a Short-Term Business Loan and Make On-time Payments

Taking out a short-term MSME loan online andrepaying it on time demonstrates to the credit bureau that you can responsibly manage credit. Furthermore, this can assist you in improving a poor credit score and your MSME loan eligibility. However, before implementing this tip, ensure that all previous loans have been paid off.

How To Apply For An MSME Loan & Get Approved?

Introduction

Micro, Small, and Medium Enterprises (MSMEs) are considered the backbone of the Indian economy. They contribute around 30% of the country’s GDP. Further, they also have employed about 117 million people in the last few years.

However, with a decrease in funding, it has become increasingly difficult for these businesses to scale up or expand. Starting a business is often easier said than done. It is not uncommon to stumble through the financing process, and that is where an MSME loan can make all the difference. 

How to Apply for MSME loans?

MSME loans are loans availed by companies registered under the MSME scheme to expand their businesses.

The question that many companies often ask is How to apply for MSME loans?

To apply for an MSME loan, they have to fulfill the requirements of the lender.

The MSME loan eligibility criteria with Fullerton India are:

  • Private companies engaged in the trading, manufacturing, or services sector, sole proprietors can apply for an MSME loan. 
  • Individuals who want to apply for an MSME loan must be at least 22 years of age when applying and no older than 65 years at the time of maturity.
  • The applicant should have 5 years of experience in the industry, and 3 years of experience with the particular business.
  • To qualify to apply, the business should generate a turnover of at least Rs. 10 lakhs a year and must be profitable for the past 2 years.
  • Registering an MSME in the Udyan portal and providing a certificate is a prerequisite for applying for a loan.

Individuals are also advised to make sure to check the documentation requirement of the lender.

Conclusion 

Accurately assessing your needs and finding the right provider is crucial to your company’s financial success in the long run.

With Fullerton India, getting an MSME loan is seamless; get a loan with flexible repayment tenures at attractive interest rates and easy to meet MSME loan eligibility criteria.

Must Read: 5 Noteworthy Advantages & Features of Taking an MSME Loan

Uses of MSME Loans for Small and Medium Enterprises

The small and medium enterprise loans provide business owners with a single line of credit for facilitating the financial requirements of the SMEs. The MSME loan process is approved after evaluation of the nature of the business, market conditions, and cash flow statements. The SMEs and other entities defined under the MSMED Act, 2006 are eligible to avail of such loans. Below listed are how business owners can utilise SME loans. 

  • Stock Management

The MSME loan amount is utilised to facilitate the operations and manage the supply chain system. By availing of an inventory loan, SMEs can refill stock levels, purchase a sample and ensure proper availability of funds during seasonal dips. MSME loans in India are widely used for meeting shortages in inventory requirements. 

  • Managing Working Capital Requirements 

Working capital refers to the finances used to carry out day to day activities of an enterprise. It is an indication of the enterprise’s liquidity position. An SME loan can be utilised for carrying out recurring activities for small and medium firms without being dependent on suppliers and buyers. 

  • Investment in Fixed Assets 

Investment in property, plant and equipment results in a significant outflow of finances for small business owners. To facilitate the purchase of such plants and machinery, SME loans can be availed.

SME loans are commonly available for short term requirements of enterprises in India. It is an efficient way with quick processing time and the requirement of minimal documentation. For availing of such loans at attractive interest rates and flexible repayment tenures, research online for the best loan provider.

Additional Read: Where Can I Use My MSME/SME Loan Money?

MSME Loan – How Business Owners Apply for it?

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The Indian government offers many benefits for MSME firms. Among these is the MSME loan. MSME stands for Micro, Small, and Medium Enterprises. If you are an MSME Business owner, you should know the criteria for apply MSME loan online. 

What is an MSME loan?

An MSME loan is designed for entrepreneurs to start their business and for existing business owners to expand the business. MSME loans are easy to avail of and are a hassle-free way to cover all types of business expenses. 

Type of MSME loan

MSME loans are unsecured, given by many financial institutions to help small and medium business owners to meet their business expenses. Generally, the interest rate for MSME loans is 8.3 %, and it has a low ‘processing fee’. You can apply for a maximum of INR 500 crores under this loan category. 

The repayment tenure for such loans can be up to 15 years. MSME loans can be taken without any mortgage or collateral. 

How to apply for an MSME loan?

Being a business owner, you should know how to apply for an MSME loan. Many financial institutions have started providing MSME loans as per the RBI guidelines, and loan approval has become easy for business owners.

Here are some useful steps a small or medium business owner should follow-

  • Business requirement assessment

Before applying for the loan, assess your business needs and select the loan amount based on them. 

  • Loan Type

The loan amount should not exceed your requirement. There are some types of loans available like top-up, machinery, and distinct loan. Select the one according to your needs.

  • Select the right lender

When it comes to MSME loans, there are many lenders available; select the lender according to the EMI, amount, rate of interest, and other facilities. Check the MSME loan criteria before you select the lender.

Additional Read: Top 5 Challenges of MSME Loans That You Should Know

MSMEs – All You Need To Know

MSME stands for Micro, Small, and Medium Enterprises, and they are the backbone of India’s economy. Contributing nearly 8 percent of the total GDP of the nation, these enterprises account for up to 40 percent of the Indian exports. Therefore, the Government of India introduced the MSMED Act of 2006 to help develop them further and contribute to their welfare. 

MSMEs mostly engage in the production and manufacture of products and goods. Applicants can apply for MSME loans to help their business grow. Many NBFCs offer exclusive interest rates and help people grow their businesses. 

What are the General Advantages of MSMEs?

  • They provide for employment and the growth of artisans and workers.
  • MSMEs help by promoting entrepreneurship abilities.
  • They support the advancement of technology.
  • They help provide solid support to the export markets.

With minimum documentation required and a low MSME loan interest rate, you can apply for an MSME loan in a hassle-free manner. 

How do MSMEs aid the economy?

  • MSMEs manufacture goods that are required for the domestic and international markets.
  • MSMEs have helped promote the development and growth of several small-scale industries, including khadi and coir.
  • They have helped increase the socio-economic development of the rural areas.
  • They help workers get acquainted with the latest technologies, thus increasing their area of interest and upgrading their skillset.

Fullerton India provides loans to both small and medium-sized enterprises. You can easily apply for the MSME loan services in India at Fullerton, and avail of the loan at a low MSME loan interest rate. However, you must be aware of the eligibility criteria before applying for the loan at Fullerton India.

Must Read: Top 5 Challenges of MSME Loans That You Should Know

What is an MSME Loan, and What Can it be Used For?

MSME stands for Micro, Small, and Medium Enterprises, and MSME loans can be said to be the form of loans that allows individuals, MSMEs and startups to get a loan for their financial needs. Most businesses avail these loans to meet their working capital needs, boost their cash flow, or even expand. Therefore, several institutions have provisions for MSME loans.

While most institutions require collateral for the business to be approved, some lenders provide MSME loans without collateral. Since most customers avail of loans to facilitate their businesses and boost their capital, the MSME loans without collateral are preferred because they provide affordable interest rates that make the payment cycle easier. Furthermore, these loans are usually short term loans that have to be repaid within 12 months. However, depending on the business needs, the loan repayment tenure can extend up to five years. The MSME loan procedure is relatively simple, and the eligibility depends on the applicant’s profile, repayment ability, financial stability and creditworthiness. 

The MSME sector is crucial to the country’s economy and employs a significant portion of the population. Therefore, it is essential to provide all necessary support to advance these businesses and provide assistance whenever required. The MSME loan procedures are in place to allow these businesses to flourish and grow without much hindrance. In a broader sense, these loans allow the companies to operate without the fear of bankruptcy. These loans can be used to consolidate debts, make business expansions, invest in new markets, and manage stocks.

Must Read: When Should We Take SMEs/MSMEs loan- [September 2021]

Challenges of Availing an MSME Loan

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The MSME (Micro, Small and Medium Enterprises) industry makes for a huge part of our nation’s economy, and it is of great significance to ensure these businesses receive proper help. While there are specific business loans in place for the same, there are still a lot of challenges in availing them.

These include: 

List out Challenges of Availing an MSME Loan

  • Trust Deficit  

Lenders have a lack of trust when it comes to MSME loans. This is because they think these businesses have a low repayment capacity. Resultantly, the rules and regulations for getting this loan are much more stringent than others, which is an obstacle in the way of MSME’s.

  • Lengthy Process 

As mentioned above, the rules for SME loans are stricter. This manifests itself into the documentation process and makes it tedious for business owners. Naturally, they hesitate to think of an SME loan as an option as most business owners require funding in emergencies. 

  • Costs and Collateral
    A lot of lenders make SME loans secured, meaning, they require pledging of a collateral. This is not possible for a business that is just starting out and has limited assets. While there are some lenders that offer unsecured loans, the MSME loan interest rate automatically goes higher due to the lack of collateral. This again, is not viable for many businesses.  

To steer clear of these challenges and get a business loan at competitive interest rates and flexible repayment periods, turn to Fullerton India to not sacrifice the growth of your business due to a lack of funding.

Additional Read: Top Reasons Why MSME Loan is The Perfect Options for Small Business Owners

What is an MSME loan- & Eligibility Criteria for Applying ?

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MSME Loans are loans for small and medium enterprises, registered with the MSME Ministry of the Govt of India. MSMEs often face the problem of a lack of funds to expand their business. MSME loans help them in expanding and becoming self-sustainable. Certain lenders, offers MSME loans up to Rs 50 lakhs, based on the eligibility.

To understand who qualifies as an MSME, the table below will offer you comprehensive information:

Classification Micro Small Medium
Manufacturing Enterprises and Enterprises rendering Services Investment in Plant and Machinery or Equipment:
Not more than Rs.1 crore and Annual Turnover ; not more than Rs. 5 crore		 Investment in Plant and Machinery or Equipment:
Not more than Rs.10 crore and Annual Turnover ; not more than Rs. 50 crore		 Investment in Plant and Machinery or Equipment:
Not more than Rs.50 crore and Annual Turnover ; not more than Rs. 250 crore

What is the eligibility of an MSME Loan?

Here are the common criteria for an MSME loan:

  • Age Criteria: Minimum 22 – 65 years 
  • In case of Individuals: Individuals who have been engaged in the current business for at least three years with a total of five years of business experience.
  • Company Type: Self-employed individuals, proprietors, private limited companies, and partnership firms working in manufacturing, trading, or services.
  • Business Turnover: At least Rs. 10 lakhs per year
  • Business Vintage: Minimum 2 years in profit
  • Business with a Minimal Annual Income (ITR) of Rs. 2 lakhs per year

Additional Read: Top Reasons Why MSME Loan is The Perfect Options for Small Business Owners

How To Get A Quick MSME Loan?

Micro, small, and medium-sized enterprises play a significant role in our economy. They have shown resilience in the face of constant economic downturns. So if you have an excellent business idea, you must go ahead with it.

But how will you manage the funds? Well, you can invest in your business from your savings. However, that might not always be possible. In that case, you can apply for an MSME loan. With the growing number of NBFCs, it has become easier to get one.

Steps To Apply For MSME Loans

  1. Find Out The Purpose Of Your Loan

You might require a business loan for several purposes. Buying machinery and equipment is one of the main reasons. You have to explain the purpose to your lender.

  1. Do Your Research About The Financial Institution

Several; lenders offer MSME loans in the market. However, you have to verify their credentials before applying. Also, check the interest rates and the repayment options.

  1. Keep All Your Documents In Place

Keep a PDF version of all the necessary documents. You will have to upload them while submitting the application form. Keeping them ready will help you get faster approval, saving your precious time.

There you go. Now, you can complete your online application process. Do not forget to check the business loan requirements before you apply.

Final Word

Fullerton India makes it easier to start your dream business. You can get a loan of up to Rs 50 lakhs for your small and medium enterprise. Moreover, you do not require any collateral. Hurry and grab the opportunity to start your dream business.

Must Read: What is the Difference Between a Business Loan and an MSME Loan?

Take MSME Loans To Finance Your Small Business

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Small and medium sized firms contribute almost 38 percent of our GDP. Do you realise their huge potential?  So if you are planning to start a small business, do not get discouraged.

But you need to have your finances in place. How will you fund your business? Taking an msme loan can be a good idea.

Benefits Of Taking MSME Loan

  • Low interest rates

Micro, small, and medium enterprises registered with the government of India can apply for MSME loans. You will have to pay a significantly low interest compared to other loans. You can use the money saved on some other fruitful investment.

  • Income Tax Benefits

An  MSME loan will reduce the taxable income of your company. Hence, you can save a lot on your tax payments. Isn’t that great?

  • Full Control Of The Business

When you approach an investor, they will ask for a share in your business. However, taking an MSME loan will give you full control of your business. It is crucial as an entrepreneur to take your business decisions independently. MSME loans will guarantee that.

  • Different Options To Choose From

You can get different types of MSME loans in the market. You can opt for one depending on your needs and risk taking capacity. Loans are available to start a business, expand it, or to buy equipment.

Fullerton India offers MSME loan for new business. Your application will get approved within a couple of days. Moreover, you will get super low interest rates.

So, why are you waiting? Visit the Fullerton India website now and start planning to boost your new business.

Must Read: Here’s How to get MSME business loan approval in 59 minutes?

Why are businesses choosing MSME loans, Know the Reason!

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You probably already know that any unsecured loans offered by NBFCs to start-ups, small business owners, and woman entrepreneurs are called MSME loans. Here, the term MSME stands for the micro, small, and medium enterprise.

The MSME loan duration ranges from institution to institution. The loan interest rate depends on the profile, business experience, and the loan amount of the borrower. It is classified under an SME, whether you own a general store, saloon, bakery, clothing store, or a stationery shop.

Often, when heading along the growth curve, company owners face intermittent financial pressures. Borrowing a loan from MSME helps to reduce the possible deficit, brace the enterprise for success, and produce strong sales.

MSME is big in India

If you don’t know already, in India, the main job providers are Micro, Small, and Medium Enterprises. Interestingly, 69 percent of the country’s overall employment is contributed by the MSME sector. MSME also holds a share of approximately 45 percent of the country’s manufacturing sector and 40 percent of our overall exports.

Consequently, since the contribution is large, the growth of MSMEs will contribute to the growth of the Indian economy. However, in order to expand, MSMEs need funds & investments, much like any other company in the industry.

The Government of India, banks, and other financial institutions, such as non-banking finance companies (NBFCs), have launched numerous schemes providing business loans to MSMEs in India in order to attract MSMEs. It is not so easy, however, to opt for an MSME loan, MSME needs to pass a range of financial litmus tests to receive an unsecured business loan or a working capital loan from a bank or NBFC.

However, the eligibility requirements for applying for an MSME loan are smaller than those needed for any lender to apply for a regular business loan.

Advantages

For a standard business loan, only certain businesses that are deemed risk-free and sustainable are granted preference. This is why MSME loans are deemed best for a small business owner because, along with many additional advantages, they have few qualifying requirements to follow.

  • Minimal conditions of qualifications to apply for the loan 
  • Benefits on a certain amount of taxation 
  • There are eligible government-based MSME loans 
  • Provides all sorts of businesses with fair opportunities 
  • Provides capital development assets 
  • For some kind of company need, funds from MSME loans may be used.

What would you need to apply for MSME loans? 

You will need the following in order to be eligible for MSME loans.

  • Business plan: The most important thing that you need to apply for any MSME loan is to have a proper business plan.
  • Company registration: In any case, business registration is a must to apply for any form of government scheme or any other business credit, whether it is a start-up or a small business that is there for some amount of year.
  • Profit and loss statement: If the company is still present, the company’s P&L statement may be asked to demonstrate how your company was already performing before receiving funds.
  • ITR filed last year with your company: ITR records show your taxes and lenders search it to see whether or not you paid all your taxes?
  • A good history of credit: this shows the past of all the past loans. So, you can apply for this loan comfortably if you have a good repayment background.
  • Certificate from all approved bodies: The GST and other company registers provide the company with a compliance check. Lenders are comfortable allocating a business loan to an organization that is registered with the appropriate entities.

You can opt for Fullerton India for a lower business loan interest rate and additional flexibility in terms of repayment.

One of the many steps taken by the Government of India to facilitate the ease of doing business in the country is government loans for small businesses. In 2018, India was ranked 77th in ease-to-do business in the World Bank Matrix. It’s your time to ride the growth.

Must Read: How to get a MSME Loan in 5 Easy Steps

MSME Loan: An Ideal Choice for Small Business Owners

So many new businesses are coming up each day, and with that is arising the need for capital to fund these businesses. While looking for an investor is not a choice for small business owners MSME loan is the best option. Let us see why. 

MSME loan features:

To encourage MSMEs, the government of India, in collaborations with other financial institutions have started different schemes offering business loans to MSMEs in India. Let us see the features of MSME loan:’

1.      The MSME loan has minimal eligibility criteria to qualify for the loan.

2.      The MSME loan also helps small businesses save on certain taxes. 

3.      As the loan is driven by the government of India, equal opportunity is provided to each business. Startup business loans for women are also provided under it. 

4.      The MSME loan helps in providing funds to small businesses for capital growth. 

No matter what your business is, the funds from MSME loans can be used for any kind of business requirement.

Qualifying criteria for MSME loan:

To qualify for the MSME loan, the requirements areas follows:

∙        A proper Business plan

∙        A registered business

∙        Profit and loss statement

∙        Last year’s ITR filed for your business

∙        A good credit history

∙        Certificate from all the authorized bodies

∙        Your permanent address proofs

∙        Sign of co-borrower (if any

∙        Collateral documents (if required)

∙        Bank Statement

∙        Business should have a realistic projection.

∙        The business should have an end-use of funds.

The government has released various schemes like Stand-up India, Pradhan Mantri Mudra Yojana (PMMY), MSME Business Loans for Start-up’s In 59 Minutes and many more that offer MSME loan to businesses. Based on your requirement you can make the best of these schemes to fund your own business.

Must Read: Follow these Easy Steps to Get A MSME Loan