Several financial institutions offer unsecured loans in order to meet different business expenses, and these are known as MSME loans. MSME (Micro, Small, and Medium Enterprises) is an acronym used to determine the size of a business.
These loans are in support of infrastructure, finance, and other areas as well.
Documents For MSME Loan
While searching how to apply for MSME loan online, it may be important to note that a number of documents are necessary to establish identity. The general documents for such loans include:
- Address Proof- This can be in the form of electricity bill, trade license, lease agreement, ration card, and others
- ID Proof- documents such as Aadhar Card, PAN card, Voter’s ID, Passport, and Driving License can be considered here
- Proof of Business- Memorandum and articles of association, Registration Certificate, and other proofs
- Financial Documents- Items here include audited P&L statements and Balance Sheets, Bank Statements for the last 6 months, projected Turnover, and ITR for the last two years
Here is how the above documents differ as per the type of business:
- Partnership Firms- For them, it is necessary to get partnership deeds and registration certificates
- Companies- Documents necessary here are Memorandum of Association, articles of association, and certificate of incorporation
- Private Ltd- Articles and memorandum of association, along with Registration Certificates are necessary here
- Sole Proprietorships- Self-employed professionals will need to give documents such as ITR or Registration Certificates and other business identity proofs. Proof of business is adequate for self-employed non-professionals like traders and retailers.
MSME’s have contributed to India’s manufacturing prowess to a great degree. However, this contribution needs a lot of funds throughout the year, which is why receiving the right type of manufacturing business funding is important. MSME loans from reputed agencies enable companies to get funds that can help them meet initial operational costs, get new equipment, and make initial setups.
Application for MSME Loan
To apply for this loan, a user needs to visit the website of a reputed financial institution and simply fill-up the application form given there. Separate options may be available on financial websites for new and existing customers. MSME loans are also dependent on the amounts they are being availed for, with minor differences in the processes.
Common Eligibility Criteria
There is not a very long list of eligibility criteria for digital lenders in today’s times. Businesses are eligible for these loans if:
- Their manufacturing plants have been in operation for a period of at least 2 years
- They have filed GST returns in India for a minimum period of 12 months
- They have submitted IT Returns for the previous 2 years
Credit scores are not the only deciding factor here, unlike individual loans. Other business parameters are considered as other criteria, apart from the scores.
Excellent for New Entrepreneurs
The criteria for receiving MSME loans have been relaxed over the years in India, which has helped a large number of businesses to grow. It has also given impetus to a large number of new entrepreneurs, helping them set up shows and grow in the country. Available capital can be a major challenge for any new entrepreneur, but these loans have shown the way forward by instilling confidence amongst businessmen.
After any major economic slowdown such as the one due to the COVID-19 pandemic, it is important to get a country’s economy back to normalcy. Technology has made a number of options available for entrepreneurs, who have many opportunities to consider now. The availability of financing options is what is really necessary to restore growth in the economy.
Advantages of MSME Loans
1. Flexible Tenure for Easy Repayment
The convenience of repayment is very important for a loan to be beneficial to a customer. As the repayment tenure is a relaxed one, borrowers can easily manage debt without defaulting on the same. It certainly helps various businesses plan their finances in advance.
2. Favorable Rate of Interest
The rate of Interest helps determine the monthly payment and overall cost of a loan. A lower rate always helps get an affordable EMI, which is immensely beneficial for small entrepreneurs.
3. Meets Major Expenditures
High-value MSME loans which do not require securities are greatly helpful for business expansions. This enables the businesses to handle all kinds of expenses, including major ones.
4. Quick Approval
Timing is very important for a business, and the quick approval process of this loan is helpful for the business’s establishment
Regulated by Economic Conditions
MSME loans are financial securities which can be regulated as per current economic conditions. The same has happened in India as well, with a difference in lending appetite being observed across banks. Of course, overall growth will always be bolstered by these loans, and these are simply based on the current world situation.