Author: Ashish James

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Udyam Registration in India

Udyam Registration in India

A micro, small and medium enterprise (MSME) will now be identified as Udyam as per the notification issued by the Ministry of MSME on 26 June 2020. The ministry has also come up with specific guidelines for the classification of MSMEs. Also procedure for registration and the arrangements made by the ministry for facilitation in this process. The notification clarified that exports of goods or services or both shall be excluded while calculating the turnover of any enterprise whether micro, small or medium. It further stated that the registration process will be known as Udyam Registration.

 The MSME Ministry notified that Udyam Registration can be filed online based on self-declaration with no requirement to upload documents, papers, certificates, or proof. One can register an enterprise just based on the Aadhaar number. The company will make the new online registration available from 1 July 2020.

Criteria for MSME Registration

The MSME classification is based on the criteria of investment in plant and machinery and turnover. Under Aatmanirbhar Bharat Abhiyan, the government revised the MSME classification by investment and annual turnover.

The distinction between the manufacturing and the services sectors under the MSME has been removed. The following is the revised MSME classification to be considered for deciding an MSME.

Criteria Micro Small Medium
Turnover does not exceed Rs. 5 crore  Rs. 15 crore  Rs. 250 crore
Investment in P&L does not exceed  Rs. 1 crore  Rs. 10 crore  Rs. 50 crore
Key Takeaways:
  • Register only on a Government portal.
  • The portal name is Udyam Registration and the URL is http://udyamregistration.gov.in
  • Whoever intentionally misrepresents, shall be liable to such penalty.
  • No enterprise shall file more than one Udyam Registration:
  • In the end, the Registration certificate will be generated & sent to you or print yourself from the portal
Documents required for Udyam Registration 
  • Aadhar NumberPAN Card
  • Copy of industrial license
  • Bills and receipts on purchase of machinery
  • Bank account details
  • Business address proof
  • Copies of sale and purchase bills
  • Partnership Agreement
  • Memorandum of Associations
  • Articles of Associations
  • Certificate of Incorporation
  • Copy of Resolution passed in general meeting
  • Copy of Board Resolution 

Udyam Registration Process 

  • The form for registration shall be as provided in the Udyam Registration portal.
  • There will be no fee for filing Udyam Registration.
  • Udyam Registration requires an Aadhaar number.
  • The Aadhaar number shall be of the proprietor in the case of a proprietorship firm and of the managing partner in the case of a partnership firm.
  • In the case of a Company or a Limited Liability Partnership or Cooperative Society or a Society or Trust, the organization or its authorized signatory shall provide its GSTIN and PAN along with its Aadhaar number.
  • In case an enterprise is duly registered as a Udyam with PAN, any deficiency of information for previous years when it did not have PAN shall be filled up on a self-declaration basis.
  • No enterprise may file more than one Udyam Registration. However, any number of activities, including manufacturing, service, or both, may be specified or added to a single Udyam Registration.
  • Whoever intentionally misrepresents facts and figures in the Udyam Registration shall be liable to such penalty as specified under section 27 of the Act.
Udyam Registration of existing enterprises 
  • All existing enterprises registered under EM–Part-II or UAM shall register again on the Udyam Registration portal on or after the 1 st day of July 2020.
  • All enterprises registered till 30th June 2020, shall be re-classified under this notification.
  • The existing enterprises registered before 30th June 2020, shall continue to be valid only for a period up to the 31stday of March 2021
  • An enterprise registered with any other organization under the Ministry of Micro, Small and Medium Enterprises must register itself under Udyam Registration.
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Also, all public and private sector banks working in India accept our report. Click to create your report.

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Peer-to-Peer (P2P) Lending

Peer-to-peer lending also referred to as P2P lending, is a form of direct lending of money to individuals or businesses. It works without an official financial institution participating as an intermediary in the deal. P2P lending is generally done through online platforms. 

P2P lending offers both secured and unsecured loans. However P2P lending websites connect borrowers directly to investors. The site sets the rates and terms and enables the transactions.P2P lenders are individual investors who want to get a better return on their cash savings than a bank savings account or CD offers. Secured loans are rare for the industry and are usually backed by luxury goods. 

It is also known as crowdfunding or social lending, P2P lending is gradually gaining popularity among borrowers and investors in India. P2P borrowers seek an alternative to traditional banks or a better rate than banks offer.

Features of Peer-to-Peer Lending
  • The P2P lending system raises loans for individuals who don’t have access to traditional banking systems from persons who want to invest their money.
  • It extends credit to individuals who can’t avail it through financial organizations.
  • The system offers benefits to the borrowers as well as the investors. 
  • It facilitates people to borrow funds at low interest rates, it also enables savers to earn good interest on their saved amount.
  • Online platforms facilitate the entire process, with both parties registering themselves and connecting directly.
  • Only after proper assessment, the members can participate in the transactions.
  • Reserve Bank of India regulates all peer-to-peer lending platforms 
Benefits of P2P Lending
  • P2P borrowers can enjoy lucrative cost advantages compared to the rates offered by a bank or other financial organizations.
  • The process of getting a loan from P2P lenders is very fast and hassle-free. 
  • These sites render services in a very short period with minimal documentation. 
  • Since they have an essence of community service, it is easy to exchange information and most of the users are very happy with the way these sites work.
  • The peer-to-peer lending system is more focused and convenient when compared to the loan application formalities mandated by the banks and other formal lending organizations.
How does peer-to-peer lending work?

All the transactions are carried out through an online platform. The steps below describe the P2P lending process:

  • An interested applicant can complete an online application on the peer-to-peer lending platform.
  • The platform assesses the application and determines the risk and credit rating of the applicant. Then, the applicant is assigned the appropriate interest rate.
  • When the application is approved, the applicant receives the available options from the investors based on his credit rating and assigned interest rates.
  • The applicant can evaluate the suggested options and choose one of them.
  • The applicant is responsible for paying periodic (usually monthly) interest payments and repaying the principal amount at maturity.
What are the Advantages of P2P Lending?
  • It is entirely up to the lender to whom he wants to give a loan and whom not.
  • The peer-to-peer lending system doesn’t follow traditional financial institutions and banks.
  • The poor CIBIL score and low monthly income will not be a factor.
  • Through this platform, people with a very poor CIBIL score and low income can get personal loans from multiple lenders at low interest rates and flexible terms. 
  • Since the borrowers can directly negotiate with the lenders, sometimes they get loans at a lesser rate than the banks.
  • With minimal documents, the borrower can avail loans from the lenders available on the website.
  • The lending and borrowing process is based on the mutual understanding between the borrowers and the lenders.
  • The processing time is fast, and the borrowers needn’t wait for a long time for the loan to get approved and disbursed like the traditional banks.
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you must have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. All public and private sector banks working in India accept our project report. Click to create your report.

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10 Financial Ratios for Business

The financial statement used for obtaining swift integration of an entity’s performance in key areas is known as ratio analysis. The ratio analysis aims to compare relationships between financial statement accounts that enable managers or investors to determine the health of the business. It provides us with crucial financial information and points out the areas that require investigation. Ratio analysis is a technique that involves the regrouping of data by the application of arithmetical relationships; its interpretation is a complex matter. Ratio analysis requires a good understanding of the techniques and ways used for making financial statements. Once it is done effectively, it provides a lot of financial information that helps the analyst. The following are the 10 Important financial ratios for a business:

Financial Ratios for Business
Quick Ratio

A quick ratio shows that a firm can meet its financial obligations and pay off its liabilities even in the case of an unanticipated situation. This ratio indicates the extent to which a company has quick assets to pay off its current liabilities. The higher the ratio, the Higher the solvency level of the company and the less the risk of being bankrupt.

Quick Ratio = (Current Assets, Loans & Advances – Current Inventory- Prepaid Expenses) / Current Liabilities & Provisions – Bank Overdrafts

Current ratio

The current ratio shows a company’s present financial strength. It is similar to the Quick Ratio, and this is also used to determine the short-term solvency of a company. A good current ratio indicates a strong short-term solvency position of the company. Sometimes, people also refer to this as the working capital ratio.

Current Ratio = (Total Current Assets, Loans & Advances) / Total Current Liabilities & Liabilities

Inventory turnover ratio

The inventory turnover ratio shows how frequently a company converts inventory into sales. Also, this ratio reveals the inventory holding period. The shorter the holding period, the Faster the conversion of inventory into sales indicating better efficiency.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventories

ROI (Return on Investment)

ROI basically compares the amount you invest in your business to how much money you make from that investment. This ratio measures the profitability of your business. The higher the ROI Ratio, the higher the profit your business will make. Investors also check this ratio as a primary indicator before investing money in any business.

ROI = (Earnings – Initial Cost of Investment) / Initial Cost of Investment

Return on Capital Employed (ROCE)

This ratio indicates the return by the company on its total investment. It is the ultimate measure of the company’s overall performance and productivity of capital employed, this ratio when compared with the industry average gives an indication of the financial performance of the company. ROCE is a very useful ratio in analysing capital-intensive companies in telecom/oil and gas / heavy industries etc.

ROCE = Profit before interest and taxes / Total Capital employed

Return on Equity (ROE)

This ratio indicates the income earned by equity shareholders. A high ratio means a high dividend, better prospects and a high valuation in the capital market.

Equity shareholder Funds = Equity Share Capital + Reserves and Surplus +/- Deferred Tax Assets or Liabilities

ROE = (Profit after tax- Preference dividend / Total capital employed) * 100

Earnings per Share (EPS)

EPS is one of the important financial ratios for a business. This ratio shows the earnings made on each share of a company. It is one of the important measures of profitability for analysts or investors. This ratio is the main consideration for the valuation of companies in case of mergers, etc. A higher ratio shows that the company is in a positive light. A higher ratio indicates higher returns.

Earnings per share (EPS) measures the net income earned on each share of a company’s stock.

EPS = Profit after tax- Preference dividend / Number of equity shares

Debt-Equity Ratio (DER)

This ratio indicates whether the company is relying on its own funds or borrowed funds. The debt-equity ratio shows a firm’s total long-term debt as a percentage of its owner’s total equity.

 Higher the debt, more fixed liabilities by way of interest and more financial risk for the company. This ratio also indicates whether the company has an optimal capital structure to improve the returns available to equity shareholders.

Debt-equity ratio = Long-term debt / Equity

Debtor Turnover Ratio

The efficiency with which debtors are converted into cash is shown by this ratio. The higher the ratio, the greater the speed with which debtors are converted into cash. One can also express this ratio in terms of the number of days.

Debtor Turnover Ratio = Net Sales/Average Debtors

Cash ratio

The working capital ratio considers only cash and cash equivalents when calculating this ratio. Cash equivalent refers to the total value of cash in hand that includes items that are similar to cash or investments that mature within 90 days. Treasury bills, Treasury notes, and Commercial paper are some examples of cash equivalents. The following is the formula to find the cash ratio:

Cash ratio = Cash and cash equivalents/Current liabilities

About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Also, our reports are accepted by all public and private sector banks working in India. Click to create your report.

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Loan Against Stock & Inventory

Loan against Stock & Inventory

Inventory in any business is an asset. The accounting term “inventory” refers to goods or products available for sale and raw materials.  It may also be referred to as all goods, items, products, produce, stock, and materials kept by business owners to make a profit by selling them.

What is Inventory Financing?

The inventory takes time to convert back to cash, and hence it locks a large part of working capital in the form of stocks. A loan against unsold stocks and inventory helps a dealer to maintain big stocks at the same time it maintains the required liquidity in the working capital. 

The approval of your loan against inventory in India relies heavily on the quality of inventory handling for a realistic appraisal of your needs. Management of inventory is the primary factor that influences a lender to fulfil the credit needs of the borrower.

The bank values the inventory and grants a loan based on the value of the business inventory. The percentage set and the interest rate offered shall vary from bank to bank and depend on the volume of inventory. Generally, inventory here serves as a type of collateral for the loan, helps a dealer to expand his business, and purchases inventory from retailers, traders, manufacturers, or distributors making it a secured business loan.

Features of Inventory Financing
  • You can avail an asset-backed loan by submitting inventory as collateral
  • The loan amount depends on the percentage of the value of inventory set by the lender
  • The owner shall not sell the products immediately; it is a loan against them.
  • A type of Revolving Line of Credit and Secured Business Loan requires inventory as collateral.
  • Percentage and Interest Rate offered shall vary from lender to lender
  • Turn-around time for stock or inventory conversion into cash is flexible
  • Helps in cash flow enhancement and improved liquidity by keeping stock assets intact
  • The percentage range for loan amount against inventory is generally between 50%-90% of its value
  • The life of the inventory is linked with the type of short-term credit and repayment of the loan.
  • Preferred by smaller privately-owned businesses, SMEs, retailers, and wholesalers
What are the benefits of a Loan against Stock and inventory?
  • Locked up funds in inventory unlock by Inventory Finance.
  • Helps you to buy and accumulate Inventory at a low cost and maintain liquidity.
  • Easy EMI repayment.
  • Quick days processing.
  • Up- to 90% Funding on the value of inventory.
What are the eligibility criteria for Loans against Stock and inventory?
  • The borrower must be at least 18 years of age 
  • The applicant should be an Indian citizen
  • Minimum Turnover 30 Lakhs per annum
  • Business must be operating at the same place for the last 1 year
  • CIBIL score must be above 750.
  • The applicant must not have any credit default history with any bank/NBFC’ s.
What are the documents required for the Loan against Stock and inventory?
  • Firstly, Applicant’s KYC Documents – PAN Card, Passport, Aadhaar card, Voter’s ID card, Electricity Bill, Water bill, Driving License
  • Business Address Proof – Ownership agreement or Rent agreement of business premises, GST Registration, Business License.
  • 12-month Bank Statement.
  • 2 years ITRs with Balance Sheet and P&L.
  • GST returns for 1 year (If available).
  • Cancelled Cheque.
  • Copy of inventory invoices.
  • Collateral documents.
  • Stock valuation report
  • Collateral Documents
Types of Inventory Financing
  • Inventory Loan: It is simply a loan based on the value of the business inventory, wherein the loan amount can be availed and used at once from the lender
  • Inventory Line of Credit: It is a credit limit sanctioned by the lender in which the borrower can withdraw cash, as many times depending upon the requirement but not beyond the total sanctioned limit. However, only the availed amount from the total sanctioned limit shall incur the interest rate.
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Also, our reports are accepted by all public and private sector banks working in India. Click to create your report.

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Merchant Cash Advance

As the name implies, a Merchant Cash Advance is an upfront cash advance that is received by a merchant in case he or she has temporary business credit needs and does not qualify for a bank loan. Many times, merchants of small and medium businesses experience a short-term cash crunch. Hence, to reduce liquidity crunch in the business, merchants opt for Merchant Cash Advance in India, popularly known as MCA or Point of Sale (POS) Loans.

Under this scheme, the business owner is eligible for a lump sum cash advance that he or she can repay with a portion of the daily debit or credit card transactions received by the concerned business.

Once the financial lender and the business owner reach an agreement under this scheme regarding the advance amount, term of the advance, holdback, and payback amount, they transfer the advance cash amount to the merchant’s account. The business owner must pay back the entire advance by remitting a predetermined percentage of the future card receipts, known as holdback, every day. Since the lender possesses the merchant’s account details, it does not require additional collateral, unlike other small business loans.

Features & Benefits of Merchant Cash Advance (MCA)
  • The repayment plan is decided based on daily collection at the Point of Sale (POS) machine in the shop. The fixed percentage of the daily collection is transferred to the lender account automatically. Such a percentage denotes a ‘Holdback Percentage’.
  • Even if loan repayment gets faster, the merchant does not get the advantage of the interest cost
  • Both the merchant and lender prefer this method because it aligns the repayment with the credit at the Point of Sale (POS) machine.
  • For the merchant, it gives flexible payment linked to the sales. For the lender, it is transparency linked to the POS machine’s bank account
  • As per the agreement between the merchant and lender, the automated and hassle-free repayment transfers the amount equivalent to the holdback percentage to the lender’s account.
  • Availing the Merchant Cash Advance does not require collateral. Since the lender can easily create the charge on the POS machine’s bank credits, there is no additional requirement for security or collateral
  • Since the MCA amount disburses very quickly, the system credits the loan amount to the merchant’s bank account almost immediately.
  • The application process to avail of Merchant Cash Advance is extremely simple and quick. Hence, you don’t have to prepare a bunch of documents and visit the bank multiple times to avail the funds.
What are the Eligibility Criteria for Merchant Cash Advance (MCA)?
  • The Applicant must have a good CIBIL/credit score
  • Should be into a stable business.
  • The lender decides a fixed percentage of annual turnover, as an eligible loan amount.
  • Merchant must have POS machine in shop or store
  • Lenders may ask for POS banks’ statements to ascertain eligibility.
What are the Documents Required to Avail Merchant Cash Advance?
  • Applicant’s KYC Documents – PAN Card, Passport, Aadhaar card, Voter’s ID card, Electricity Bill, Water bill, Driving License
  • Business Address Proof – Ownership agreement or Rent agreement of business premises, GST Registration, Business License
  • Turnover Proof – GST return of last 1 year Bank statement of the current account & POS machine’s account (last 1 year)
  • Additional Requirement – Details of existing loans and repayment status
  • Business Financial Document – Balance sheet, P&L Account, Income Tax Returns of last 2 years
How to Apply for Merchant Cash Advance Online?

Apply for a Merchant Cash Advance loan by below-mentioned steps:

  1. Visit the website to check the business loan options offered by financial institutions.
  2. Pick the deal and fill in the basic details like your name, mobile number, residence, loan amount, email address, annual turnover & profit, etc.
  3. After submitting the details, a customer care professional will contact you to verify the submitted details and to proceed with the discussion on the chosen loan deal.
  4. The bank will send your business loan application for further verification, and a representative from the bank will then contact you to proceed with the loan formalities.
  5. Once the bank approves your loan application, they will disburse the sanctioned loan amount to your specified bank account within the designated working days.
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Also, all public and private sector banks working in India accept our project report. Click to create your report.

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Machinery or Equipment Loan

Although many SME loans on the market can be used for various purposes, a specific loan can be advantageous if you are sure about the purpose of taking the loan. For example, one type of loan that can be used to buy machinery is a machinery loan.

What is a machinery loan?

A machinery loan is a type of commercial loan used to acquire new machinery or equipment for a business. Modern business equipment and cutting-edge tools are excellent ways to grow your company, but securing the right financing occasionally takes time and effort. A machinery loan removes barriers to achieving business success and simplifies equipment financing. As output rises due to higher productivity, sales and revenue also rise.

Numerous lenders offer machinery/equipment loans at alluring interest rates following the applicant’s business profile, profitability, and need. In addition, businesses that obtain loans for machinery to buy machinery can benefit from tax advantages, as per the rules laid out in India.

In this situation, as long as the loan is fully repaid, the lender will retain ownership of the machinery you buy with the loan money. For the loan, no additional collateral is needed.

Features of machinery equipment loan

The borrower must be fully aware of the equipment needed for their company and the lender who can offer them the best terms. We’ve listed a few crucial things to remember when applying for an equipment loan.

  • Amount of loan – it varies depending on the lender. When determining the loan amount, the lenders consider the equipment’s cost and the borrower’s credit history. Generally, one can receive up to 75% of the cost of purchasing used equipment and up to 90% of the cost of purchasing new equipment. There are offers ranging up to Rs. 25 crores.
  • Security/collateral – The purchased equipment has been hypothecated to the lender, so no additional security is needed. However, the lender might require more collateral for larger loans.
  • Eligibility – Miners, contractors, partnership firms, corporations, trusts, and societies are all eligible. More than three years of business continuity should be provided by the.
  • Repayment – Typical repayment terms range from three to seven years, with a six-month moratorium.
  • Interest Rate – The current interest rates for this loan range from 15% to 20%.
Types of machinery equipment loan 
  • Construction Equipment
  • Medical equipment
  • Printing equipment
  • Plastic and packaging equipment
  • Manufacturing equipment
  • Aviation industry equipment
Benefits 
  • Timely production: Because you now have the required tools and machinery, you can be sure that your products will be produced quickly and promptly.
  • Better productivity: Since the turnaround time for producing products will be shortened, your company’s productivity will rise. Compared to before, you can now accept larger orders and complete deliveries more quickly.
  • Higher calibre: The quality of the products produced improves and becomes more sophisticated with access to better equipment. Quality is an enticing factor for newer, larger orders and greater brand loyalty.
  • Reduced defects: You can anticipate fewer defective pieces as product quality improves, lowering your losses.
  • Low repair costs: Because the machinery will be brand new or in good condition, you won’t have to worry about the cost of repairs or the downtime of the machines. The loss that results from idle time is also unthinkable.
Tax on the loan

Many business loans are eligible for tax benefits from the Indian government, particularly for small businesses. One such loan with tax advantages is a loan for machinery. In other words, you can deduct the interest you pay on the machinery loan from your taxes. However, the principal portion of the loan is exempt from this rule. In any case, a decrease in your overall taxable income for the fiscal year will decrease the actual tax owed.

How does an equipment loan work?

Banks and equipment financing companies typically offer equipment loans. One can use them to pay for new or used versions of the necessary machinery and equipment. There is no need for additional security or collateral because the purchased equipment serves as collateral. Therefore, spreading out the cost of equipment over several months or years is beneficial.

The borrower may borrow up to 95% of the cost of the equipment. Typically, the repayment period lasts up to 60 months. Additionally, compared to other loans, the processing time is short, and it requires little documentation.

What is a Machinery/Equipment Loan?

A machinery/equipment loan is a type of business loan taken to finance the purchase of new machinery or equipment for a business. It helps business processes and scales up production. Increased productivity will lead to higher output and, in turn, higher sales and revenue

Also Read: Business Loan Eligibility
What are the Documents required for a Machinery/Equipment loan?

The following documents will be needed to submit when applying for a machinery/equipment loan, they are as follows:

  • KYC documents 
  • Passport size photographs 
  • Identity proofs like PAN, Aadhar, passport, and driving license.
  • Address proof like utility bills, Aadhar, passport, and driving license.
  • Income proof, like the latest ITR Files 
  • Company account statement for the last 12 months 
  • Facility sanction letter
  • Quotation of machinery to be purchased
  • Business plan/ Project report

In the above list, a Business plan also known as a project report is a crucial document when applying for a bank loan. The bank uses this document to analyze the overall feasibility, risks, financial viability, and potential of a project. A well-crafted and convincing project report increases the chances of loan approval. With Finline you can craft a compelling project report in less than 10 minutes. That too in your language. All public and private sector banks working in India accept our reports.

Click to create your project report.

Also Read: Documents Required for Business Loan
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CGTMSE Loans

Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) launched in 2000 is a trust established by the Government of India, under the Ministry of Micro, Small and Medium Enterprises (MSME) and Small Industries Development Bank of India (SIDBI). 

The availability of bank credit without the hassles of collaterals / third party guarantees would be a major source of support to first-generation entrepreneurs to realize their dream of setting up a unit of their own Micro and Small Enterprise (MSE). The government of India launched the Credit Guarantee Scheme (CGS) to strengthen the credit delivery system and facilitate the flow of credit to the MSE sector.

The main objective is that the lender should give importance to project viability and obtain both term loans and working capital facilities from a single agency.

What is a Credit Guarantee under CGTMSE?

Credit Guarantee Fund Scheme for Micro and Small Enterprises was started to promote the SME and MSME sectors in India. Both new and existing micro and small enterprises including service enterprises are eligible for a collateral-free loan with a maximum credit cap of Rs. 2 crores. 

The interest rate depends upon the applicant’s profile, business requirements, and project cost and is comparatively low, as compared to other direct loan schemes. It offers a maximum credit guarantee coverage of up to 75% of the total project cost.

Features of the Credit Guarantee Scheme:

The stand-out features of the CGTMSE scheme are:

  • Guaranteed repayment of 75% or 85% in some cases for the defaulted principal loan amount up to Rs.50 lakh.
  • The maximum guarantee is 50% for a loan amount greater than Rs.50 lakh but under Rs.1 crore.
  • Provides for 85% repayment for loans up to Rs.5 lakhs to micro-enterprises.
  • If a woman promotes the MSME or if the unit is located in the Northeast Region (NER), the guarantee amount for repayment is 80% of the loan amount.
  • The repayment procedure covers the entire loan amount inclusive of the interest component for 3 months.
  • Rs.1 crore as support to the lender if the business failure is beyond the control of the management.
What are the Eligibility for the CGTMSE Scheme?

Let us look at the eligibility criteria for the CGTMSE loan scheme for credit providers and credit borrowers.

Eligible entities
  • Sole Proprietorship Firms, Partnership Firms, Private Limited Companies, Public Limited Companies 
Lending Borrowers
  • All Existing and New Small and Medium Enterprises (SMEs)
Lending Institutions
  • Scheduled Commercial Banks (SCBs)
  • Regional Rural Banks (RRBs)
  • Small Finance Banks (SFBs)
  • Non-banking Financial Companies (NBFCs)
  • Small Industrial Development Bank of India (SIDBI)
  • National Small Industries Corporation (NSIC)
  • North Eastern Development Finance Corporation Ltd. (NEDFi)

Women-operated small and micro-enterprises qualify for an 80% guarantee cover, while all credit/loans in the North East Region (NER) for credit facilities qualify for Rs. 50 lakh guarantee. Educational institutions, agriculture, training institutions, and Self-Help Groups (SHGs) are not eligible for guaranteed coverage under CGTMSEs.

What are the Documents required for a Loan under the CGTMSE Scheme?

Documents required for a Loan under the CGTMSE scheme and its coverage:

  • CGTMSE loan application form with Passport-sized photographs
  • Business Plan
  • Company registration certificate / Business incorporation letter
  • Business Project Report
  • CGTMSE Loan Coverage Letter
  • Copy of loan approval from the bank
  • Any other document required by the bank

In the above list, a Business plan also known as a project report is a crucial document when applying for a bank loan. The bank uses this document to analyze the overall feasibility, risks, financial viability, and potential of a project. A well-crafted and convincing project report increases the chances of loan approval. With Finline you can craft a compelling project report in less than 10 minutes. That too in your language. Our reports are accepted by all public and private sector banks working in India. Click to create your project report.

CGTMSE also provides recovery support to the business units. The scheme covers the loan for rehabilitation within the credit cap of Rs. 1 Crore if a business unit is beyond the control of the management.

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Loan Syndication Services for Business Loans

Loan Syndication Services generally involves two or more banks, which work collectively to provide credit to a large borrower. Loan syndication happens when a single borrower demands a large loan ($1 million or more) that a single lender may be incapable to provide. 

When the loan is outside the range of the lender’s risk exposure. Lenders then form a syndicate that allows them to spread the risk and share in the financial opportunity. Be it a working capital loan, term loan, loan against property, or bank guarantee. The banks function as a syndicate and use common debt documents to provide loans to businesses. 

The liability of each lender is restricted to their share of the total loan, and they all share in the lending risk. The agreement for all members of the syndicate is included in one loan agreement. One of the lenders acts as the manager (arranging bank), which administers the loan on behalf of the other lenders in the syndicate. The syndicate may be a combination of various types of loans, each with different repayment terms that are agreed upon during negotiations between the lenders and the borrower.

Features of Loan Syndication Services
  • Large Amount.
  • No separate agreement between an individual bank and the borrower.
  • No ambiguity
  • The Length of the agreement is generally between 3 to 15 years.
  • Low risk
  • Each bank is not necessarily to contribute an equal amount
Participants in a Syndicated Loan

Those who participate in loan syndication may vary from one deal to another, below are the typical participants include the following:

1. Lead Bank or Arranging Bank

The lead bank acts as a manager and is responsible for a borrower organising funding based on the decision by the parties of the loan. The bank must procure other lending parties who are willing to participate in the lending syndicate and share the lending risks involved. The arranging bank and the borrower negotiate the financial terms outlined in the term sheet.

2. UnderWriting Bank

The lead bank may underwrite the unsubscribed portions of the required loan or a different bank may also underwrite the loan. Underwriting banks will take the risk that will likely occur.

3. Participating Bank

All banks that participate in loan syndication are known as participating banks. Participating banks will charge fees for their participation.

4. Agent Bank

The work of the agent bank is to guarantee that loan syndication is operating effectively. The agent bank acts as a mediator between the borrower and lender and also has a contractual obligation for both parties. However, the agent lacks a fiduciary duty and does not need to advise the borrower or the lenders. The agent’s duty is mainly administrative.

5. Trustee

The trustee is responsible for retaining the security of the assets of the borrower on behalf of the lenders. Syndicated loan structures avoid granting the security to the individual lenders separately since the practice would be costly to the syndicate. In the event of default, the trustee is responsible for enforcing the security under instructions by the lenders. Therefore, the trustee only has a fiduciary duty to the lenders in the syndicate.

Advantages of a Syndicated Loan

1. Financing takes less time and effort.

2. The administration of the loan is Extremely Efficient.

3. It is beneficial for borrowers to establish a good market image.

4. Borrowers have flexibility in structure and pricing.

5. Allows borrowers to borrow large amounts to finance

6. The borrower need not go to each bank and also need not apply separate applications to all of the banks.

7. The purpose and period of the loan are fixed.

8. The system is simple.

Process of Loan Syndication Services

Here is the process of loan syndication.

1. Initial discussions with promoters should be there.

2. Then, Project Assessment needs to be done.

3. Availability of alternatives for Sources of funds needs to be done.

4. Then, a Preliminary discussion with lenders should be done.

5. Then there is a requirement to prepare of loan application and follow up on it.

6. Assisting in Project Appraisal by doing financial analysis.

7. Lastly, the Letter of Credit should be obtained from a lending institution

About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline will help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. All public and private sector banks working in India accept our project report. Click to create your report.

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What is a Microloan?

Microloans are short-term, lower-dollar-amount loans. It is available to self-employed people, new businesses, microenterprises, small firms, and private individuals with little or no capital. A sort of tiny loan known as a microloan is given to microbusiness owners or low-income households who have little to no access to banks or other lending organisations.

Through collaborations with private limited enterprises and microfinance organisations, RBI has begun to engage with the unbanked and underbanked population in order to provide them with funds with the support of the Government of India (MFIs). After MFIs and private limited businesses, NGOs are regarded as the most prevalent microlenders. In this article, Finline will give you a brief on the benefits, purpose and related topics of Microloans.

The benefits of microloans

Microloans can be utilised for a variety of business-related purposes, including debt reduction, starting a new business, managing daily expenditures, paying staff wages, fulfilling working capital needs, and preserving cash flow. People who have problems getting business loans frequently think about microloans or microfinance.

The purpose of microfinance
  • encourage the socio-economic growth of families with limited or no banking services
  • strengthen the Self-Help Groups (SHGs) and utilise them for the nation’s economic growth
  • promote and encourage women’s businesses and startups nationwide

Initiated and supported by the Indian government, the National Bank for Agricultural and Rural Development (NABARD) also provides microloans or microfinance.

What drawbacks are there to microloans?

There are some drawbacks to microcredit, such as excessive debt levels, a high likelihood of borrower suicide, and excessive pressure to repay loans. Also, the excessive interest rates on certain microcredit loans, which may be as high as 30%, are one of the drawbacks.

How can you get eligible for a microloan?
  • Small businesses that are for-profit are eligible for SBA microloans.
  • If your small business is for profit, you should be eligible for an SBA Microloan.
  • Most microlenders don’t demand exceptionally good credit.
  • Capacity to repay the loan, as well as a private guarantee and collateral.
How to apply?

Since the interest rates given by banks and NBFCs are often lower than those offered by MFIs, those in need of funds must first request business loans from private and public financial institutions or NBFCs. The applicant may, however, choose MFIs if they have already tried using them. Individuals with extremely low credit ratings or no financial background typically make applications for microloans.

You now have the funds you need to expand. What’s next? How you use it may significantly impact your future success. Employment, inventories, machinery, furniture, decorations, and technology are all items that may be financed with a microloan, just as you can with any other kind of company loan.

During lean times, one can pay bills and provide extra aid when it’s needed. They may make it possible for you to seize a lucrative marketing opportunity or a supplier’s generous discount on merchandise you want to resale. 

Using a microloan to clear private debt or make personal purchases is prohibited. It’s crucial to distinguish between company and personal spending. Furthermore, one cannot purchase actual money with it.

Without question, microloans are accelerating the growth of numerous enterprises both domestically and internationally. Yes, they are not only for the impoverished rural craftsman. They are genuinely intended for every company owner who is aware that, when utilised wisely, a modest sum of money may have a significant impact.

About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Also, all public and private sector banks working in India accept our reports. Click to create your report.

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Stand-Up India scheme 

Stand-Up India scheme focuses on empowering the minorities, such as scheduled castes, scheduled tribes, and women. The scheme was introduced by the Department of Financial Services (DFS), Ministry of Finance, Government of India.

 The scheme is to facilitate bank loans between Rs.10 lakh and Rs. 1 Crore. They aim to help at least one Scheduled Caste or Scheduled Tribe borrower and at least one woman borrower per bank branch. The scheme shall be operated by all branches of India’s scheduled commercial banks. The main focus of this scheme is to provide funding to enterprises serving the services, manufacturing, and trading sectors. 

  Stand-Up India Scheme Details               
Interest Rate Bank’s MCLR + 3% + tenor premium
Loan amount

Working Capital Limit

 Between Rs. 10 lakh and Rs. 1 crore

Up to Rs. 10 lakh in form of Cash Credit limit
Repayment tenure Max. 7 years with a moratorium period of up to 18 months
Loans offered for Only Green Field Projects
Features of the Stand-up India Scheme
  • Loans are only offered for Green Field Projects which means manufacturing or trading sectors for the first time
  • The nature of the Stand-Up India scheme is a composite loan that is inclusive of a term loan and working capital loan of Rs. 10 lakh and up to Rs. 1 crore
  • Collateral security or a guarantee from the Credit Guarantee Fund Scheme may secure the scheme.
  • SC/ST and women entrepreneurs can use it.
  • The repayment period is a maximum of up to 7 years with a maximum moratorium period of up to 18 months
  • The Stand-up India Scheme does not offer any subsidy.
  • This scheme will cover up to 75% of the project cost.
  • Assures the lowest applicable interest rate of the bank for base rate * MCLR + 3% + tenor premium
  • A loan amount of up to Rs.10 lakh, the sum will be sanctioned by way of overdraft. Sanction the amount above Rs. 10 lakh in the form of the cash credit limit.
What are the Eligibility criteria for the Stand-up India Scheme?
  • Only SC/ST individuals and women entrepreneurs are eligible.
  • Age minimum 18 years.
  • Only green field projects can apply for the loan scheme.
  • Applicant should not have loan defaulted before to any bank or NBFC
  • Non-individuals, such as existing firms and businesses, can also apply for the scheme.
  • 51% of the shareholding and controlling stakes of the firm must be held by either SC/ST and/or women entrepreneurs.
How to apply for the Stand-up India Scheme?
1) Visit the Stand-Up India portal 

2) Click on the ‘Register’ button to fill up the details

3) Enter the business location that includes the business address, state, district, village, town, city, and pin code.

4) Based on your response, you will be categorized and hold a 51% stake or higher, and the same applies to the SC/ST category.

5) Next select the nature of the business, and desired loan amount, and select the drop-down of first-time entrepreneurs.

6) The final step of registration is regarding the applicant’s personal information.

8) By clicking on register applicant, the application for the Stand-up India scheme is submitted.

The respective financial institution and its officials will contact you for further formalities.

What are the documents required for the Stand-up India Scheme?
  • Duly filled application form 
  • Passport-sized photographs
  • Identity Proof: Passport, driving license, voter’s ID card, PAN card, etc.
  • Residence Proof: Voter’s ID card, passport, latest electricity and telephone bills, property tax receipt, etc.
  • Business address proof
  • Partnership deed of the partners
  • Copies of lease deeds or Rent agreement
  • The last 3 years balance sheets of the association
  • Assets and liabilities statement of the promoters and guarantors
  • Any other document required by the bank
About Finline!

Finline is an online platform for creating financial reports for getting bank loans and investments. It’s like ‘Canva’ but for financials. If you are an entrepreneur looking for a bank loan, you need to have a well-crafted project report. We, at Finline help you with that. Our team will help you create a powerful business plan in ten minutes. That too in your language. Our reports are accepted by all public and private sector banks working in India. Click to create your report.