Micro, Small & Medium Enterprises are the backbone of the Indian Economy contributing to more than 33% of the economy.
MSMEs are defined clearly and are businesses or startups which has a turnover of less than Rs.250 Crores.
Apart from all these, the MSMEs create 120 million+ jobs and are the primary driving force for the economy of India.
With being such a crucial part of the economy, the Ministry of Finance provides various schemes and benefits including MSME loans to businesses and startups at low-interest rates.
MSME constantly faces a credit crunch which leads to many businesses losing crucial business opportunities and growth processes.
With these MSME loans, this credit crunch can be prevented and businesses can be helped in their time of need.
In 2022, the MSMEs took a loan of 3.22 trillion rupee loan from banks which is a massive growth of 182% from the previous year.
If you own an MSME business then this article, where we will discuss MSME Loans- Check Features, Eligibility, and Interest Rates in 2023 will interest you.
Features of MSME Loans
The following are the features of MSME Loans that make them an amazing choice for many businesses-
- MSME Loan comes with flexible loan tenure for ease of repayment
- The approval of the MSME loans will take less time than other types of loans, and the loan amount will be credited faster
- There are minimal additional cost involved in the MSME loans also, processing fees is low with no hidden charges
- The MSME loans start at a minimal interest rate of 8.75% which is the lowest interest rate charged as compared to other loan types
- The collateral pledging in the case of MSME loans is not there
- You can seek a loan for the advancement of developmental technologies, infrastructural development, and the modernization of enterprises across
The following are the eligibility criteria for seeking MSME loans-
- The CIBIL credit score of the individual applying for the loan must be above 750
- The business must have a minimum income of Rs.2 lakhs per year with a total turnover being Rs.10 lakhs per year
- The financial stability of the business and the repayment history should be good
- There should not be any default payments in the past
- The minimum age of the loan seeker must be 21 years of age or at max 65 years of age
- The minimum experience in the industry matters hence at least 5 years of experience in the industry of the business helps
- The business applying for the MSME loan must have established the following type of business-
- Private limited companies
- Public limited companies
- Sole proprietorships
- Partnership firms
- Limited Liability Partnerships (LLPs)
Documents Required for applying for the MSME loans-
The following are the documents required for applying for the MSME loans-
- Duly filled application form with passport-sized photographs
- KYC documents of applicant and co-applicants that include Passport, Aadhar card, Voter’s ID card, Driving License, PAN Card, and Utility Bills (Telephone, Electricity Bills)
- Business PAN card, Business address, and vintage proofs
- Last 1 year’s ITR along with the last 6 months’ bank statement
- Business Establishment Certificate or Incorporation Letter
- Proof of belonging to SC/ST or OBC category, if applicable
- Any other document required by the bank/NBFC
MSME Loan Interest Rates 2023
The following are the loan interest rates provided by various banks-
|Bank Name||Interest rate|
|Central Bank of India||11.25% p.a. onwards|
|Indian Bank||9.75% p.a. onwards|
|Punjab and Sind Bank||9.95% p.a. onwards|
|Punjab National Bank||At the discretion of the bank|
|State Bank of India||7.65% p.a. onwards|
|UCO Bank||8.85% p.a. onwards|
|Union Bank of India||At the discretion of the bank|
|Axis Bank||14.95% – 19.20% p.a.|
|Bajaj Finserv||9.75% – 30% p.a.|
|Flexi loans||1% per month onwards|
|HDB Financial Services Ltd.||Up to 36% p.a.|
|HDFC Bank||10% – 22.50% p.a.|
|IDFC First Bank||10.50% p.a. onwards|
|Indifi||1.50% per month onwards|
|Kotak Mahindra Bank||16% – 26% p.a.|
|Lendingkart||12% – 27% p.a.|
|Mcapital||2% per month onwards|
|NeoGrowth Finance||19% – 24% p.a.|
|Tata Capital||12% p.a. onwards|
|UGRO Capital||14.90% p.a.|
How to get MSME Loans for your Business?
The following are the steps that you’ll have to follow to get MSME loans for your business-
- The very first step that you’ll have to find out the loan amount which you need and evaluate the areas where you are going to invest the loan amount
- After that, you’ll have to evaluate the MSME loan interest rate of various banks and have to shortlist a few banks
- make sure that you’ve calculated the loan amount repayment for the interest rate suggested
- After shortlisting, collect all the documents required which are mentioned above, and prepare the file
- Now, visit the shortlisted banks and fill out the application form for the MSME loan and attach the documents file prepared and submit it
- Your documents and application form, loan requirements, and business premises visit will be conducted along with other loan processes procedure
- You may even be charged the loan processing fees to do that
- After the completion of the loan processing, you will be provided with the loan offer with details like EMI tenure, amount, interest rate, etc.
- If you like the loan offer, you can accept it by providing the e-Mandate bank which will deduct the loan amount every month from the bank account
- After completing all these processes, you’ll receive the loan amount in your bank account, and is ready to use
Yes, startups are eligible for MSME Loans like Mudra Loan however, for other loan schemes, you’ll have to apply with some previous experience in the industry.
Yes, you can apply for MSME Loans despite being new to the business however, the loan scheme available for startups are limited and to receive a good loan deal, you’ll need some basic business history.
Yes, MSME loans are collateral-free loans and do not require much documentation for applying for the loan.