Startups are on the radar of the Indian government to offer special incentives. They constantly support the technology up-gradation, and infra development and trigger the modernization. The government has launched various programs to assist entrepreneurs, especially small businesses. Therefore, registering as a Micro, Small & Medium Enterprises (MSME) is an ideal and new approach for startups. The government wants MSMEs to reach a 50% contribution to India’s GDP by 2024. Currently, it is 29%, generating jobs for 11 crore Indians.
Startups registered under the Ministry of Micro, Small, and Medium Enterprises and looking for funding options for expanding their operations can apply for MSME loans with reputed NBFCs. Entrepreneurs can invest in machinery, and equipment, purchase raw materials or even meet their working capital requirements using the loan amount. MSME loan applications can be submitted without any collateral requirement.
General Eligibility Criteria for MSME loan is as follows:
- An individual aged 22 years at the time of application and 65 years at the loan maturity can apply for SME or MSME loan.
- An individual who has been engaged in the current business for a minimum of three years and has five years of business experience can apply for an SME or MSME loan.
- Self-employed proprietors and partnership firms serving in the manufacturing, trading, or services sector can apply for these loans.
- Business annual turnover should be Rs. 10 lakhs following a minimum of two years in profit.
One can determine MSME loan eligibility and available loan amount using the MSME loan calculator.
Benefits of MSME Registration In India
Subsidy on Patent Registration
Businesses registered under MSME laws can get a 50% subsidy on their patent registration fees. Startups can keep innovating and working on new projects using the latest technologies.
Overdraft Interest Rate Exemption
Businesses registered with the MSME ministry can benefit 1% on the Overdraft that helps small businesses during adverse market conditions.
Industrial Promotion Subsidy
Startups registered as MSMEs can get subsidies for Industrial Promotion from the Indian Government.
Protection against Delayed Payments
Delayed payments can disturb a business hugely. Businesses registered under MSME law can benefit from the law that a buyer of registered MSMEs must make the payment on the agreed date of payment, or it must be paid within 15 days from the goods or services received. If the payment gets delayed for more than 45 days, the buyer will be levied interest on the transaction amount. It can go as high as three times the rate fixed by the Reserve Bank of India.
Save on Electricity Bills
Businesses under MSME are allowed for concessions on their electric bill. These savings can be utilized to boost production. The company needs to submit an application to the department of electricity and a certificate of registration of the business.
Why opt for MSME Loans
1. Transparent procedures and Fast Loan Disbursal
MSME loan procedures are transparent, and entrepreneurs can make an informed decision to finance their business using a loan eligibility calculator and EMI calculator. A business can apply for a loan amount as high as up to 50 lakhs at affordable and competitive interest rates.
2. Flexible Loan Repayment
Entrepreneurs can have ample flexibility in regard to the repayment schedule. You can schedule the loan repayment between 12 and 60 months, as per your financial situation and receivables. Also, you can foreclose the loan without extra charges.
3. Online Loan Processing
You can apply for an MSME loan quickly following the online application procedures. Upload the required documents and get funds after successful verification. There is minimal documentation required to make the lending process effortless.
Required documents by the lenders are as follows:
- Applicant’s latest passport photograph
- Identity Proof – Applicant’s PAN card as well PAN card in the name of the business
- Business registration certificate for address proof and the applicant’s address proof (Aadhaar card, passport, etc.)
- Past six months’ income statement along with Form 16
- Income Tax or GST Returns for the previous two financial years
- Financial statements showing profits for the previous two fiscal years
- Certificate of Business Incorporation
This way, startups can get an MSME loan based on their eligibility for the desired tenure.
Additional Read: A Complete to avail a Startup Business Loan in India
In the end, youth’s interest in starting a new business will continue to grow rapidly with the support from the Government and available easy funding options, and MSME will remain an ideal and new approach for startups. Approach a reputed NBFCs MSME to avail of funds at the best interest rates and favourable terms. If your business category is under the category to avail of subsidies on interest rates, your borrowings can be more affordable.