MSME refers to micro, small, and medium enterprises. The business needs capital for various purposes such as start-up, business expansion, purchase of new equipment, inventory, operational expenses, and others. An MSME Business Loan from a reliable lender is the best way to bear all these expenses and do your business with a healthy cash flow.
In recent years, we have seen several crucial steps by the Government of India towards strengthening the MSME sector in India. The Government is providing collateral-free loans, subsidies, benefits for start-ups, women entrepreneurs through various schemes.
Facts about MSME in India 2021
As per the MSME Ministry of India, there are more than 6.3 crores active MSME as of 16th May 2021. According to the Udyam Registration Portal, five states comprising 60 percent of all MSME are Maharashtra, Tamil Nadu, Bihar, Uttar Pradesh, and Madhya Pradesh.
In July 2021, the Government extended the MSME definition and included retail and wholesale within its scope. In a significant boost for the sector in terms of capital support, the Government has sanctioned a 10,000 crore fund for Guarantee Emergency Credit Line for eligible MSME loan borrowers.
MSME sector of India employs around 11.09 crore people, out of which 3.35 crore employees are registered on Udyam Registration Portal as of 30th June 2021.
The purpose of all this information is to establish the importance of MSME for the economy and Government support for providing MSME Business Loans on convenient terms through Banks, Loan Distributors, and NBFCs.
Now, let us discuss the best ways to avail of an MSME Business Loan in the next section.
Best Ways to Get Business Loan
When it is about the best way to get a business loan, nothing can beat the Government of India. The schemes are centrally planned, sanctioned, and supervised. If you want to start or expand the business, Government schemes are your best way out. Banks, NBFCs, and Loan Distributors are lenders for these business loans authenticated by the RBI.
Government Schemes for MSME business Loans-2021
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
- Credit Linked Capital Subsidy Scheme (CLCSS)
- MUDRA Yojana under PMMY
- The Prime Minister Employment Generation Programme (PMEGP)
- Stand-up India
- Start-up India
- Credit Guarantee Fund Trust for Micro and Small Enterprises
MSME Business owners can get a loan up to a crore under CGTMSE without collateral. Government functions as a guarantor. A business needs to demonstrate business and technical experience to fulfill the criteria for the MSME loan.
Banks charge an interest rate in the range of 11 to 16 percent. The loan is apt for working capital infusion, starting a new venture with the Government assurance.
- Credit Linked Capital Subsidy Scheme
CLCSS is an initiative to boost MSME business in rural and semi-urban India. The primary objective of the scheme is to provide financial support for technological up-gradation and modernise the entire business process.
The Small-Scale Industries under the scheme are Khadi Udyog, Tiny units, Village units, and Coir Industrial Units.
Businesses can avail of up to 15 percent subsidy with maximum capital support of up to one crore per unit.
- Prime Minister Mudra Yojana
Another reliable business loan scheme to create an ecosystem favourable for MSME businesses, PMYY provides loans in three categories.
- Shishu: Provides MSME Business loans up to 50,000 INR
- Kishore: Covers loan amount requirement more between 50,000 to 5 lakhs INR
- Tarun: MSME owners can get a business loan between 5 lakhs and ten lakhs INR
Contact your lender, check your eligibility, and apply for the suitable category.
- Prime Minister Employment Generation Programme
PMEGP is a combination of two schemes: Prime Minister’s Rojgar Yojana and Rural Employment Generation Programme. PMEGP aims to cover unemployed youths and traditional artisans by providing a line of credit. The Government provides financial support up to 5 lakhs for the service sector and ten lakhs for manufacturing MSME business.
Applicants must be above 18 years of age and have cleared standard VIII at least.
- Start-up and Stand-up India
Start-up India supports new, innovative businesses. The Government provides seed funds through different schemes for the budding MSME owners.
Stand up India is primarily focused on providing financial support to SC/ST and Women. SIDBI is the authoritative body for stand-up schemes and grants loans of 10 lakhs to 1 crore.
Government revises terms, eligibility, maximum fund allocation, etc., from time to time. So stay updated about news related to these schemes.
Apart from reliable and trustworthy Government Schemes, you can also try banks, NBFCs, Loan Distributors directly for MSME loans. These institutions also announce several lucrative offers to provide loans on easy terms.
Things to Consider for Availing MSME Business Loans
- An excellent, innovative, practical, and value-driven business idea. You need to present the concept before lenders to get the line of credit.
- Transparent financial transactions and timely payment of previous loans and debts
- Correct and verified business and personal documents.
- Future plans about the business such as equipment purchase, expansion, new branches, and projected growth trajectory.
- Sufficient credit score and no defaults.
Contact your lender for requirements and eligibility criteria. Prepare an impressive presentation and get your ideas, wings to fly.
MSME sector is experiencing loan disbursal of 9.5 trillion INR in FY 2021, a 40 percent increase from FY2020. The sector’s contribution to GDP has grown exponentially. All of these indicate the effectiveness of Government schemes in boosting the MSME ecosystem in India.
Bring your ideas and get a financial cushion through these best ways of MSME Business Loan hassle-free and collateral-free.