According to recent reports, Micro, Small and Medium Enterprises or MSMEs contribute nearly 28.77% to the Indian GDP. This sector has progressed rapidly and comprises almost 45% of total industrial inputs and 40% of total exports.
From poultry farms to leather factories, these enterprises are creating employment opportunities for the country’s youth. The sector’s contribution towards the Indian economy has been further leveraged with the introduction of the MSMED Act of 2006.
Nonetheless, to meet up with production and other operational needs, these firms require substantial financial backup. This is where an MSME loan comes into action as the advance helps ease up funding concerns.
This short-term credit form offers considerable funds against minimum eligibility and documentation requirements. Hence, new and existing entrepreneurs planning to avail of an MSME loan need to understand its variables to make an informed decision.
What is MSME loan?
An MSME loan is financial aid extended to small business owners that can help them meet various funding requirements like that of working capital, operational needs, etc.
The segregation of the type of enterprise based on annual turnover set by the government is given as follows –
- Micro-enterprises – An industry with an outlay of Rs.1 crore and revenue of Rs.5 crore belong to this category.
- Small enterprises – Companies with an investment of less than Rs.10 crore and income of less than Rs.50 crore are considered small enterprises.
- Medium enterprises – Under this category, businesses with an outlay of Rs.50 crore or more and a yield of Rs.250 crore are included.
Entrepreneurs qualifying under the above-mentioned MSME categories can make an online application in a few clicks.
What are the steps to follow for an MSME loan application?
- Evaluate the business requirements
Potential borrowers must evaluate how much working capital does their business need before proceeding with the application. One needs to determine the loan variant – whether a top-up loan or working capital loan fits the financial requirements. This would help streamline the entire borrowing process. Moreover, the applicant will be equipped with a structured plan on the expenses and make repayments with ease.
- Compare different lenders
The next step to avail an MSME loan is comparing various financial institutions. This would help in finding substantial funds and better facilities. Since there are multiple competitors in the market, thorough research on the interest rates and EMI is imperative.
One can check NBFCs like Bajaj Finserv, offering an affordable business loan to borrowers against minimum eligibility.
The financial institution also extends pre-approved offers that help to streamline the entire application process. Such offers are available on financial products like business loans, personal loans, etc. Check your pre-approved offer by submitting your name and contact details.
- Make an online application
As digitisation has influenced how lending institutions operate today, individuals can now make online credit applications without hassle. This facility has streamlined the cumbersome process of visiting lenders and waiting in queues for documentation.
Potential borrowers need to fill the online form with personal and professional details. They are also required to select a repayment tenor based on which their EMIs will be calculated.
- Submit required documents
For a successful application, applicants have to submit scanned copies of documents with the lender. In this regard, keeping the documents needed for a business loan handy would be convenient. Typically, one has to submit KYC papers, address proof, business proof, bank statements, etc., for verification.
- Verification and disbursal
If the submitted documents are satisfactory, lenders issue a loan sanction letter with detailed information on the borrowing. On acceptance of the same, the loan amount is disbursed to the borrower’s account.
Following these steps, an aspiring business owner can make an application for an MSME loan without hassle. Funds sanctioned on approval would support requisite business goals like expansion or big-scale investments. Hence, an MSME loan is a convenient liquidity source for entrepreneurs aspiring to expand their business. Are you looking for dubai vat registration then read more how to apply for VAT registration in UAE.