You probably already know that any unsecured loans offered by NBFCs to start-ups, small business owners, and women 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.