Business Loan

MSME Loan Application Guide To Avoid Any Delay


MSME business loans are applied every day on a large scale, ranging from microbusinesses to huge companies. While applying for these loans is on the rise, there are government schemes that try to finance these businesses, especially small and micro businesses. Likewise, the MSME loan scheme is a government initiative that helps fund small and microbusiness units and help them grow. 

Well, today’s article is about this. In today’s article, you will learn about MSME business loans, their benefits, the process to fill out the application, and the way to prevent any type of delay. 

What is an MSME business loan?

An MSME business loan is a government initiative to financially assist small and microbusinesses. It is a scheme that allows entrepreneurs to expand their businesses by providing them with an MSME business loan at subsidised interest rates. The borrowers are given a specific period within which they have to repay the loan. This can be in the form of monthly, quarterly, half-yearly, or annual instalments. 

An MSME business loan is an unsecured loan. It means that you don’t have to pledge your collateral or deposit any security funds. Even if you don’t have an asset to pledge, you can apply for an MSME business loan without a second thought. 

For the financial year 2022, the Government of India has sanctioned Rs. 37.29 trillion to the MSME business loan schemeThis will help to fund several small and microbusiness units. Typically, banks provide high loan amounts, easy benchmark requirements, and a hassle-free application process. However, it has been seen that these businesses face serious issues, such as delayed payments, that promote the bottleneck effect. 

Here, you will learn how to resolve payment delays related to an MSME business loan.

Why Should You Apply for an MSME Business Loan? 

An MSME business loan provides these advantages, which make it better than its counterparts:

  • Long repayment tenure: The tenure of repayment of an MSME business loan is high. In most cases, the repayment period can go up to 15 years, which is a reasonable amount of time for you to repay the loan. However, the repayment tenure can be subjective, depending on the bank or lender.  
  • Low rate of interest: The rate of interest charged on an MSME business loan is quite low. Banks often charge you a low interest rate to ensure that the maximum amount of your money goes to financing your business. The minimum amount should be used to repay the bill.  The MSME loan interest rate ranges from 8% per annum to 21% per annum. Depending on your credentials and those of the lender, the interest rate will be calculated. If you have a decent credit score and a record of repaying debt on time, you are highly likely to settle for a low-interest rate.  
  • No need for collateral: You don’t have to pledge your assets, deposit a security fee, or show any property as collateral. MSME business loans are unsecured, which means that banks are not going to ask you for anything to keep as a guarantee of the loan.  
  • High flexibility: The flexibility of an MSME business loan is quite highYou have the option to choose between three options while applying for the MSME business loan. These include:
    1. Short-term option
    2. Medium-term option
    3. Long term-option

In addition to the above points, some banks also give you the “Flexi” option. If you choose that, you only have to pay interest on the amount you use and not on the principal amount of the loan. 

How to Tackle Payment Delays in an MSME Business Loan

Here is what you need to do to tackle this issue:

  • Reach out to the MSME delayed portal:The Government of India has a portal called the MSME Delayed Portal. It helps small and micro enterprises with delayed payment issues. On October 30, 2017, the portal went live. You can directly contact the MSME delayed portal by logging in to your account and stating the details of your concern. 
  • Using the TReDs portal:You can also approach an online portal created by the Reserve Bank of India, known as TReDs. It was created in 2014. The TReDS (Trade Receivables Discounting System) platform is a mechanism that can help you recover some amount of your sales bill. 

As of now, there are no other legal options that you can use to prevent delays in getting your MSME business loan. However, you can file your concern and wait for the response until the issue is sorted out. The government is trying to make this process faster and more transparent, and progress has been made. 

Wrapping It Up

Delaying payments to MSMEs is a potential disadvantage of the MSME business loan scheme. Some of the main reasons for it could be catering to a large number of businesses or the lack of government provisions. However, the government has intervened in this matter and is constantly finding solutions to overcome it. 

If you are eager to read more on topics like personal loans, MSME business loan, different investment schemes, smart financing options, etc., you can visit Piramal Finance. They have several engaging blogs on related topics, which you will find useful.