MSME Loan 

MSME loans are credit facilities made available to MSMEs, startups,  individuals, business owners, entrepreneurs, self-employed professionals, and other business entities for business expansion and day-to-day operations. Banks/NBFCs offer maximum loan amounts of up to Rs. 2 crores (collateral-free loans) with payback terms of up to five years, which may be extended as needed. MSME loan interest rates will differ from lender to lender and will be determined by the applicant's profile and business needs.

What is MSME Loan?

The Government of India had changed the definition of MSME and announced it on May 13, 2020. The revised MSME Loan Details are as follows:

  • The MSME classification criteria have been altered from investment to investment and annual turnover.
  • The Government of India recently enhanced the investment ceiling for MSME unit classification. This means that more businesses and firms can now take advantage of MSME programs.

Characteristics of MSME loan

  • Interest rate: Determined by the applicant's profile and business needs.
  • Loan Amount: There is no minimum amount and a maximum loan sum of up to Rs. 2 crores, which can be increased based on business needs.
  • Processing fee: 0% to 4% of the loan amount sanctioned.
  • Foreclosure penalties range from 0% to 5% of the outstanding principal amount.
  • Part-payment penalties range from 0% to 4% of the unpaid principal amount.
  • Tenure of repayment: 12 months to 5 years, subject to company circumstances.
  • Unsecured business loans do not demand collateral or security.
  • Working Capital Loan, Overdraft, Term Loan, Cash Credit, Letter of Credit, Bill of Purchase, Merchant Cash Advance, Government Loans, etc.

Objectives of MSME Business Loan

Financial institutions' MSME Loans can be used for the following business purposes:

  • To establish a new business/company or to grow an existing one.
  • Launch of a new product line or payment to suppliers via Bill Discounting.
  • Paying workers, purchasing commodities and raw materials, stockpiling inventories, marketing, and promotional reasons, and so on all require operating cash.
  • Plant and machinery purchases, such as testing or lab equipment/machines, electrical appliances, furnishings, replacement parts, and so on.
  • Building spaces are being constructed, or land/factory or commercial properties are being purchased.
  • Purchasing new or used machinery/equipment, as well as a fleet of cars.
  • Any additional monetary help for commercial reasons.

MSME Loan Eligibility

  • Minimum age of 21 at the time of loan application and maximum age of 65 at the time of loan maturity.
  • Annual Gross Revenue: The lender's definition will differ from bank to bank.
  • Excellent repayment history and financial stability.
  • There has been no past loan default with any financial institution.
  • A one-year business vintage is required.
  • Lenders will assess the applicant's credit score and creditworthiness.
  • Individuals, Startups, MSMEs, women entrepreneurs, self-employed professionals, business owners, and people from the SC/ST/OBC categories, as well as a variety of other business organizations.
  • Private or public limited companies, partnership firms, sole proprietorships and limited liability partnerships (LLPs) that only conduct business in the commerce, service, and manufacturing sectors.

How to Apply for MSME Loan?

There are two methods for submitting an application for an MSME loan. If the lender provides an online application, you can fill out the form with the necessary information and submit it through the website.

Alternatively, you can go to your nearest bank and ask for an application form. You can contact me beforehand and inquire about the documentation needed.

How to Register with MSME?

The steps for registering for MSME as a new user are outlined here.

  • Go to https://udyamregistration.gov.in/Government-India/Ministry-MSME-registration.htm.
  • If you have not already registered, select 'New Entrepreneurs who are not yet Registered as MSME or those with EM-II.'
  • You must provide your name and Aadhaar data before clicking 'Validate and Generate OTP.' Your cell number will receive a One-Time Password (OTP). To authenticate, enter the OTP. You will then be required to submit your PAN and organization details and authenticate them.
  • In the following step, enter your personal information as well as information about the industry or factory in which you work.
  • After entering all of your information, click 'Submit and Get Final OTP.' Your cellphone number will receive an OTP. After entering the OTP, you will receive a message confirming the successful registration of the MSME.

MSME Loan Interest Rate

Bank Name

Interest rate

Oriental Bank of Commerce

10.70% p.a. onwards

Punjab and Sind Bank

9.95% p.a. onwards

Central Bank of India

11.25% p.a. onwards

Indian Bank

9.75% p.a. onwards

United Bank of India

10.25% - 16.25% p.a.

UCO Bank

8.85% p.a. onwards

State Bank of India

7.65% p.a. onwards

 

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