MSME Loans

4 Simple Steps To Apply For An MSME Loan Online

Introduction

MSME loans are an excellent way for small businesses and entrepreneurs to get a loan for the things they need to stay afloat.

Getting an MSME loan online is very easy and quick. There are plenty of lending institutions that have an online application process for MSME loans. All you have to do is choose a lender & fulfil their MSME loan criteria.

Steps involved in applying for an MSME loan online

Before taking a loan, the foremost thing is to choose a lender that provides you with the best service.
With Fullerton India, getting an MSME loan online is hassle-free, at attractive interest rates ranging from 17-21% p.a with flexible repayment tenures ranging from 12-60 months, and easy to meet MSME loan criteria.

To get an MSME loan online with Fullerton India, the steps to be followed are:

  1. The first step is to log into Fullerton India’s website and fill out the application form. A representative from the company will get in touch with you as soon as possible, and they will go over all the different options for your loan.
  2. Once eligibility is determined, you must submit the documents online for verification.
  3. If you are looking for an offline approach, the lender may need to collect physical copies of your relevant documents.
  4. Once the loan provider has verified your documents and approved the loan you applied for, they will create and share the loan agreement. Once you have signed the agreement, funds are released to your account within 48 hours.

Conclusion
Taking a loan is an important decision, and it is best to be completely aware of what you are getting yourself into. Loan terms and repayment options differ so you need to be aware of the impact these factors can have on your monthly budget. Before taking a loan, it is best to understand each aspect.

Also Read: What Can an MSME/SME Loan be Used For?

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

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

Advantages of Registering your Business as an MSME

As per the Ministry of MSME report, the MSME sector contributes 45% of India’s total industrial employment, 95% of all industrial units and 50% of India’s total exports. Thus, the MSME sector is the backbone of the Indian economy.

You can get your business registered as an MSME if you fulfil the below criteria:

  1. Micro Enterprise: investment less than Rs 25 Lakhs for Manufacturing and Less than Rs 10 Lakhs for service.
  2. Small Enterprise: investment between Rs 25 Lakhs to Rs 5 Crore for Manufacturing and between Rs 10 Lakhs to Rs 2 Crore for service.
  3. Medium Enterprise: investment between Rs 5 Crore to Rs 10 crore for Manufacturing and Rs 2 Crore to Rs 5 Crore for the service sector.

Why register as MSME?

If you are wondering about the benefits of MSME registration, then here is a list:

  1. Avail collateral-free loans: The Government of India launched the Credit Guarantee Fund Scheme (CGS) for MSMEs, giving them the freedom to apply for MSME loan without pledging any collateral.
  2. Lower interest rate: Sometimes, it is hard to get a secure loan for new businesses. In such cases, an MSME loan helps you get a loan at reduced rates.
  3. Income Tax Exemption: MSME registration relieves you from undergoing audit procedures and makes your business eligible for income tax exemption.
  4. Subsidies Offered: MSME registration makes you eligible for Industrial Promotion Subsidy, 50% subsidy for patent registration, and 1% exemption on the interest rate on overdraft.

Conclusion

Apart from the points mentioned above, MSME registration also offers several other benefits. MSME registration can be done by various business entities like Proprietorships, Partnership Firm, Private Limited Company, Public Limited Company, Limited Liability Partnership, Hindu Undivided Family, Self Help Groups, Society, Co-Operative Society, Trust, and Others.

Must Read: What are the Actual Crucial Differences Between a SMB vs SME?

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 Loans – Application Process, Eligibility and Registration

Micro, Small and Medium enterprises are fundamental to the growth of India. They contribute almost 30% of India’s GDP, are responsible for 40% India’s exports and employ almost 11 crore people across the country. Recognizing the need and importance of MSME to the country, a slew of reforms and benefits have been announced by the government for MSME companies, including loans at a reduced rate.

For availing an MSME loan (https://www.fullertonindia.com/sme-msme-loan.aspx), the enterprise must be registered and hold Udyam registration or Aadhar Udhyog registration as it was known as previously. The registration can be obtained using the Aadhar of the promoter and the number is linked to other registration such as GST and Income Tax automatically.

Interest Rates and Process

Business loan interest rates for MSMEs are generally lower and provided at a much-subsidized rate in order to promote their growth and development. MSMEs can approach any financial institution in order to acquire such a loan and they may be granted the loan based on the eligibility criteria.

Documents Required

Whereas the finer details may vary, the following details are required to obtain an MSME loan:

  1. Udyam or Udhyog Aadhar Registration
  2. Balance Sheet audited by a Chartered Accountant
  3. Income Tax Return
  4. Bank Statements of the past six months
  5. Financial Institutions might require MSME to be in operation for a certain period

Apart from obtaining loans at a cheaper interest rate, MSMEs get various advantages in government tenders and other spheres of business activities as well. An MSME registration might just be the step you need to boost your business.

Must Read: Loans and Advances Comparison- Which is a Better Choice?

FAQS:

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