In the post-covid era, there has been a boom in small businesses. Do you think that anybody can have huge capital to start a new business, however small it may be? The answer is No. You have to take a loan to kick-start your journey.
The Government of India launched the MSME loan for the start of a business, expansion of the business or meet other expenditures related to business. The MSME sector is considered to be the backbone of the nation.
What is an MSME loan?
MSME or Micro, Small, and Medium Enterprises loans are collateral-free loans. They have a low rate of interest and a repayment period is desirable. You can also avail of top-up.
For applying for MSME loans, you have to register in the Government’s Udyam Registration Portal. No registration fee is required. Once the process is done, you will be assigned an “Udyam Registration Number”. You will receive an e-certificate at the end of your registration.
For Government approved loans, log into the Jan Samarth portal. There are different types of schemes under Business Activity Loans. There is also a scheme for Livelihood loans. You can easily start a new business or expand your extending business.
There are two types of schemes which work best for a small business owner. MUDRA and CGTMSE.
If your requirement is below Rs 10 lakhs, MUDRA (Micro Units Development and Refinance Agency) loan can be obtained. The main aim of the MUDRA loan is to support the MSME. The MUDRA loans can be obtained from Small Finance Bank, Commercial Bank, RRBs (Regional Rural Banks), NBFCs (Non-Banking Financial Companies) and MFIs (Microfinance Institutions). It is also known as PMMY (Pradhan Mantri MUDRA Yojana).
MUDRA loans are further classified into 3 types:
- Shishu – Loan amount up to Rs 50,00.
- Kishore – Loan amount above Rs 50,000 and up to Rs 5 lakhs
- Tarun – Loan amount is above Rs 5 lakhs but below Rs 10 lakhs.
If you want a loan of an even bigger amount, up to Rs 2 Crore, opt for CGTMSE (Credit Guarantee Trust Fund for Micro and Small Enterprises). This government-funded scheme was launched under the Ministry of MSME and SIDBI (Small Industries Development Bank of India).
There are also Mahila Udyami Scheme and Credit Link Capital Subsidy Scheme (CLCSS).
Classification of MSME
Size of Enterprise Investment Annual Turnover
|Less than Rs 1 crore
|Less than Rs 5 crore
|Less than Rs 10 crore
|Less than Rs 50 crore
|Less than Rs 20 crore
|Less than Rs 100 crore
Benefits of MSME loan
- Collateral free loan
The main aim of the Indian Government is to uplift the economic development of the nation. The scheme of MSME loans has motivated small business owners to start new businesses or help the existing ones in times of cash crunch. The fact that the MSME loan doesn’t need a security deposit, asset and guarantor appeals to all.
Getting funds for your business using an MSME loan is very easy. On submitting the minimal documents, loans will get quickly disbursed to you without any hassle. You can focus entirely on your business.
You can also apply online for MSME loans
- Reduced interest rates
The interest rate on MSME loans is considerably low. They also can be reduced further depending on where you have initiated the loan from. There are various risk gradations which let you negotiate accordingly. The payment of interest is also tax deductible.
Usually, Small business owners take a loan for a short duration of time. Since the commitment is not long-term, it enables the handling of cash and allocation of resources better.
Other advantages of MSME registration include:
- Subsidy on Patent
In case your business has a unique product, you can easily apply for a patent. A subsidy of 50% can be availed if your business is MSME registered. You need to apply to the respective ministry.
- Protection against Delayed Payments
There is a separate portal called MSME SAMADHAAN, related to the delayed payment. If the buyer is not able to pay the supplier within 45 days, the supplier can complain.
If you are running a business for 4 years, you can check out the webpage of Piramal Finance (https://www.piramalfinance.com/business-loan) for your business loans.
Piramal Finance offers you a non-collateral loan commencing from 3 lakhs to 10 lakhs. You can pay for the loan at an interest rate starting from 17% per annum and repay it in 36 months. You are entitled to a hassle-free loan by applying for it online. The expert team of Piramal Finance will be arriving at your doorstep. You can avail of maximum benefits as the eligibility for the loan is very simple. However, it is better if you have a property registered in your name.
You have to submit the necessary documents like PAN Card, Proof of Identity and Proof of Residence (Aadhar, Driving License, Passport, Voter ID card or Utility Bills like monthly electricity and telephone bills). For the proof of income, 6 months bank statement of your primary account and the latest ITR (Income Tax Return) are essential. Your recent passport-size photo should accompany your application form. You can be the sole owner of your business. In case you have partners or shareholders, you can file under the co-applicant scheme. Your spouse or adult first-blood relatives can be co-applicants too. The business loan fee and other charges are minimal. The rate of interest is different for different customers depending on the risk gradation. Repayment of the loan can be done in the form of a Post Dated Cheque, Electronic Clearing Service or Direct Debt Methods.