Entrepreneurs and owners of businesses can apply for MSME Loans, commonly referred to as Micro, Small, and Medium Enterprise Loans. This sort of loan gives you access to operating capital that you may use for a range of things, such as purchasing expensive equipment, paying your workers’ wages, growing your firm, or buying new goods. In India, several lenders offer MSME loans to their clients. However, banks charge different rates of interest.

On May 13, 2020, the Indian government revised the concept of an MSME and made the changing public. The following is the revised description of an MSME:

  • Investment-only requirements have replaced the investment plus yearly turnover criteria for MSME categorization.
  • The Indian government also raised the investment cap for MSME unit categorization. It implies that more companies and enterprises can now benefit from MSME programs.
MSME Loan Classification 

Micro, Small, and Medium Enterprises can apply for MSME loans to expand their existing enterprises or start new ones. Interest rates for MSME loans start at 7.65% annually. Loans are available from as low as Rs. 50,000 to many crores. Depending on the approved loan amount, the loan payback duration may last up to fifteen years.

MSMEs (Micro, Small & Medium Enterprises) are classified in two ways:

  • Manufacturing Enterprises are involved in the manufacture or production of goods if the industry plans on extending plant and machinery in the process of value addition to the final product.
  • Service Enterprises interested in providing or rendering service
MSME registration steps

The procedures for signing up as a new user for MSME are listed below:

  • Navigate to the Ministry-MSME-registration page at https://udyamregistration.gov.in/Government-India.
  • Choose “New Businesses who have not yet been Accredited as MSME or those who hold EM-II” if you’ve never registered.
  • Before selecting “Validate and Generate OTP,” you must first provide your name and Aadhaar information. A One-Time Password will be sent to your cellphone number (OTP). Enter the OTP to authenticate. After that, you must establish it by providing your PAN and organization information.
  • Provide your contact information and details about the business or facility where you serve in the next step.
MSME Classification 
Investment in Plant & Machinery or Equipment Annual Turnover
Micro Not more than Rs. 1 Crore Not more than Rs. 5 Crore
Small Not more than Rs. 10 Crore Not more than Rs. 50 Crore
Medium Not more than Rs. 50 Crore Not more than Rs. 250 Crore
What are the Eligibility Criteria for MSME Loan?
  • The age limit should be a minimum of 18 years to a maximum of 65 years
  • Individuals, SMEs, MSMEs, business owners, women entrepreneurs, self-employed professionals, people falling under SC/ST/OBC category, Private or Public Limited, Sole Proprietorship, Partnership Firm, Limited Liability Partnership engaged only in trading services, and manufacturing sectors are the eligible category under this scheme.
  • Business Turnover: Min. Rs. 10 lakh for existing enterprises
  • Good repayment history.
  • CIBIL score above 700
What are the Documents Required for an MSME Business Loan Application?
  • Self-drafted Business Plan/Project Report
  • Duly filled Application form.
  •  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)
  • Last 12 months’ bank statement
  • Copy of Business Incorporation of Company Establishment
  • Any other document required by the lender
MSME Loans under Government Schemes – 2021

Popular MSME schemes launched under the Ministry of MSME offered by banks or NBFCs are mentioned below :

  • CGTMSE: Credit Guarantee Fund Trust for Micro and Small Enterprises
  • CLCSS: Credit Linked Capital Subsidy Scheme
  • Credit Guarantee Scheme
  • MUDRA Yojana under PMMY
  • National Small Industries Corporation (NSIC) Subsidy
  • PMEGP: The Prime Minister Employment Generation Programme
  • PMRY: Prime Minister’s Rojgar Yojana
  • PSB Loans in 59 minutes
  • Standup India
  • Startup India
Purpose of MSME Loans
  • Answer working capital requirements
  • For new business development
  • Maintain business cash flow
  • Introduce new equipment or machinery
  • Purchase of raw materials, vehicles, tools, etc
  • Stock up inventory
  • Pay off rent, and salaries, hire staff, train staff, etc.
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. Also, all public and private sector banks working in India accept our project report. Click to create your report.