How To Get Loan For MSME
Nevertheless, the SME and MSME loan process is the same thing.
Such loans for MSME are offered to businesses under these three categories - micro, small, and medium. According to the government of India and the Reserve Bank of India (RBI), such loans are for the support of business enterprises in terms of finance, infrastructure, and other areas.
Usually, start-up owners and small business owners go for an MSME business loan. The duration of MSME loans may vary from lender to lender, but mostly it is offered on a short-term basis. An important point to note is that MSME loans are unsecured. Some minimum eligibility requirements must be satisfied to secure such loans.
Let us go into detail to understand the MSME eligibility criteria for loans, MSME loan application online procedure, required documents, and collateral-free loans. This will get you the answer to ‘how to get a business loan.’
Who Is Eligible For an MSME Loan?
To apply for business loan, MSMEs must fulfil certain eligibility criteria. A specific lender sets this to provide loan approval. These requirements are not universal and may vary from one bank to another.
However, listed below are the general MSME Loan eligibility criteria that must be met:
Procedure to Apply for an MSME Loan:
Go to the website of your loan provider and log into it.
Now, fill in the application form by entering the details required accurately.
Then a designated representative of the loan provider will establish contact with you. There will be discussions of the various permutations and combinations about your loan to find the best fit for you.
After determining the eligibility, you will have to submit documents for verification by the loan provider. It may be possible to scan the documents and submit them online. Otherwise, you can physically submit the relevant documents to the loan provider.
After verifying the documents, the loan provider will create the loan agreement and share it with you. Once you sign the agreement, the funds are disbursed to the applicant's account within a few hours.
Documents Required for an MSME Loan:
Bank and Income statements
Proof of address of the business
PAN card
Income tax returns of the company of the previous years (the number of previous years will be determined by the loan provider)
Audited financial statements of the company ((the number of previous years will be determined by the loan provider)
Lease agreement
Trade license
Bank statement of last 12 months
Business registration proof
Municipal tax document
Sales tax documents
Partnership deed copy
P&L and balance sheet copy of previous years (the number of previous years will be determined by the loan provider)
Collateral Free Loans for MSMEs:
A collateral-free loan is provided to the borrower without any guarantee. Simply speaking, this means that a business can borrow money from a lender at a specific rate of interest even if it has nothing to invest or pledge.
Collateral free business loans for MSMEs help set up the business. Such loans can also be helpful in business expansion for such enterprises.
Due to various reasons, MSMEs in India suffer from a lack of access to sufficient and timely credit. To solve this problem, the Government of India came up with schemes for Collateral free loans for MSMEs.
The most popular schemes from the Indian government that offer collateral-free loans are the MUDRA (Micro Unit Development and Refinance Agency) scheme and the CGTMSE (Credit Guarantee Funds Trust for Micro and Small Enterprises) scheme.
Conclusion:
MSMEs are the heart of the economy of India. They contribute about one-fourth to the service sector of India. As such, loans for MSME are crucial not only for such enterprises but for the entire Indian economy. We hope that this guide will help such enterprises apply for a business loan.
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