With around 75 million MSMEs contributing to 45% of India’s manufacturing output and one-third of the GDP, it is evident that the Micro, Small and Medium Enterprise sector is a key contributor to the nation’s economy.
Besides considering their importance, it is imperative to note that these enterprises require substantial financing for diversified business requirements. For this purpose, several financial institutions and the Government of India extend the MSME loan scheme, which acts as a suitable financial solution for all these needs.
Small business owners looking forward to this credit facility must know the various aspects of an MSME business loan to gain maximum benefits.
Things to know about business loans for MSME
- Eligibility criteria
Small business owners fulfilling the following eligibility criteria can easily avail of this credit facility:
- Should be a resident citizen of India
- The age of the individual must be between 24 to 70 years (the age at loan maturity should be 70 years)
- Should have a running business for a minimum period of three years
- Documents necessary for a business loan for MSMEs
Given below are the documents required for an MSME loan:
- Proof of address – Rent agreement, passport, electricity bill can be submitted as an address proof
- KYC documents – PAN card, voter ID card, driving license, Aadhaar card, or any other KYC document approved by the government
- Proof of business ownership – The business registration documents
- Financial documents – A copy of GST returns, profit and loss statement, bank account statements, and income tax returns
- Steps to apply for a business loan
Listed below are the steps which an individual must follow in order to apply for a business loan for MSME:
Step 1: Fill up the online application form for the business loan
Step 2: Wait for the representative of the financial institution to reach out
Step 3: Submit all the necessary documents
Once the submitted documents are verified, the loan gets disbursed into the borrower’s account directly within 24 hours.
- Some features of a business loan
Illustrated below are the top features of a business loan:
- High loan limit
These loans offer a high loan limit for financing all business requirements of a firm.
- Rapid processing
An MSME loan scheme provides collateral-free funds through a simple application procedure and approval within 24 hours.
- Minimum documentation
Acquiring a business loan is pretty easy as only a few documents are required to be submitted by potential borrowers to the representative of the financial institution.
- Flexible loan tenor
This efficient financing solution for MSMEs comes with flexible tenors to fit into a borrowers’ budget.
- Online management of funds
Borrowers can manage their loan account and funds online.
Why should MSMEs opt for a business loan?
An MSME loan scheme can prove to be helpful for the following purposes:
- Paying for several overheads
- Installing new machinery and plant
- Meeting working capital requirements
- Investing in the infrastructure of the firm
Benefits of business loans
Following are some of the benefits of business loans:
- Low interest rates
The competitive interest rates of business loans enable business owners to spend a minimum amount for repaying the loan. Thereby, they can focus more on other business requirements.
- Short term financial commitment
Small businesses mainly use these loans for short-term financial requirements. This provides flexibility to borrowers and enables them to allocate available resources and manage the cash flow efficiently.
- No collateral required
Collateral is not required for availing of a small business loan. It may not be possible for small businesses to pledge their resources in return for cash; hence these loans act as an ideal funding source as and when required.
Potential borrowers opting for an MSME loan scheme must pay off the same timely. This will not only allow them to boost their credit scores but also open doors to several lucrative offers.
For instance, leading financial institutions like Bajaj Finserv provide pre-approved offers, which help in simplifying and accelerating the lending process. These offers are provided on various financial products like personal loans, business loans and more. Individuals can check their pre-approved offer by providing a few details, such as their name and contact number.
Potential applicants must keep in mind all the above aspects of an MSME loan scheme to gain maximum benefits of MSME loans.