Banks usually address THIS loan as SME loan which at times, may involve some collateral. There are a number of factors which decide the approval of your MSME loan like return on investment, profitability, capacity to repay loan and contribution of the promoters.
To apply for an SME Loan you must fulfill these requirements –
The entity must also deal in manufacturing or service-based sector excluding retail traders, educational/training institutes and agriculture.
Before initiating the loan process the applicant must present complete documents along with the application. At times, there are few other documents required according to the type of business registration.
There are a number of loans introduced in India in the past few years to provide credit to small businesses. The Small Industries Development Bank of India (SIDBI) offer long-term loans to the MSME’s without the need of going to any bank.
Here are some of the popular Government Schemes which provide business loans to MSME in India.
This scheme is launched jointly by India SME Technology Services Ltd and World Bank aiming to execute energy efficiency across India, finance purchase of plant/machineries and meet the costs of capital expenditure.
This scheme aims to provide credit support to the MSME sector of India. The lending institutions include public, private and even foreign banks. Some of the regional rural banks also provide this facility.
The loan will begin when you make payment for the guarantee fee and will continue upon the agreed tenure.
In case working capital facilities are provided to the applicant, the period will be of 5 years or as specified by the guarantee trust.
This scheme is launched by the Prime Minister to automate the entire process of loan approval and provide easy access to the MSME sector. The applicant gets an in-principle approval in less than 60 minutes and the amount gets credit to the bank account within 8 working days.
For this, the Government of India has launched a new portal to speed up the process of MSME loan in 59 minutes.
This scheme provides loans to banks or Micro Finance Institutions (MFI’s) for lending money to units with requirement of up to Rs. 10 Lakh. The loan can be availed as per these three categories.
The primary targets of this scheme are women, backward classes, tribals or Dalits who fail to get an excess to credit facilities provided by the government.
This scheme provides MSME loans to new businesses and also existing enterprises, who wish to grow their business, upgrade technology or undertake any new project.
The application process of availing a loan might differ with different banks or schemes. To get a MSME Loan -
The Reserve Bank of India has announced to restructure existing loans to MSME sector which are in default but standard on 1st January 2019.
This has to be implemented by March 2020 with 5% provision of the total outstanding loan. In addition, money set aside for potential losses have to be made for such applicants.