The growth of India’s economy depends heavily on micro, small, and medium-sized enterprises (MSMEs). According to government statistics, there are 6.33 crore MSMEs in India, and 99.4% of them are micro- or start-up businesses. These start-ups account for 40% of all exports and 45% of our nation’s total manufacturing output.
However, the majority of these start-ups experience difficulties growing because of a lack of working capital and weak business infrastructure. With the assistance of a few commercial financial institutions, the Central Government is offering start-up enterprises simple financing through MSME loans in order to assist them in overcoming these obstacles and actively contributing to India’s economic progress.
Continue reading to learn more about MSME loans for new businesses and how they work.
What is an MSME loan?
The MSME loan program enables individuals, small- and medium-sized business owners, and start-ups to get financing for their operations. MSME loans are frequently unsecured forms of lending, making them one of the finest methods to grow your company while improving cash flow. The money can be used for a number of things, including expanding business operations, resolving cash flow issues, or investing in new manufacturing equipment.
The period of these MSME loans is normally twelve months, however, it is subject to change based on the lender’s yearly evaluation. Typically, most lenders provide MSME loans between Rs. 10 lakh and Rs. 5 crores. Your creditworthiness, financial stability, the size of your business, and your ability to repay the loan all play a role in determining the maximum loan amount you are eligible to obtain through the MSME loan.
Benefits
Easy eligibility criteria
The simple eligibility requirements for the MSME start-up loan are the first factor that makes it the best option for your company. All you need to do to be eligible for this loan is meet the lender’s minimal qualifying conditions, such as having a business established, a well-organized business plan, and an acceptable credit score.
It implies that you are eligible for an MSME loan whether your company is established or just getting off the ground. Furthermore, lenders just require a modest amount of paperwork in order to grant this loan to small business owners.
Quick disbursement
Lenders easily disburse MSME loans for new enterprises because they have simple qualifying requirements and little documentation. As a result, they guarantee that you won’t have to wait long to get operating cash when you need it. The majority of financial institutions let you apply online for an MSME loan scheme and receive a quick decision if you meet their qualifying requirements.
Additionally, you can use your smartphone to track the status of the financial disbursal and the status of your loan application.
Collateral free debt
The ability to acquire working capital for your new firm without putting up any security or collateral is another advantage of applying for an MSME loan. It implies that you do not have to put your own or your company’s assets on the line to be approved for funding.
Additionally, you can receive guarantee coverage on the loan amount that has been approved through government programs like the Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE). It implies that the government will settle your debts according to the guarantee coverage if you are ever unable to pay back your loans.
Greater flexibility
The majority of lenders provide excellent flexibility in terms of the loan amount, interest rate, and repayment period for MSME loans for new enterprises. It means that you can select suitable loan size and repayment period based on your current financial needs.
Additionally, some lenders provide flexible interest rates on MSME loans, so you are only obligated to pay interest on the amount of the loan that you really use. Even better, you can decide to foreclose on your loan without incurring any additional fees.
Conclusion
Because of its benefits, MSME loans are a great option for new business entrepreneurs like you. These loans are available to you, and you can use them to fund a variety of business needs, like building out your office space, purchasing supplies and inventory, improving your company’s infrastructure, etc.
To avoid any problems down the road, do thorough research and online comparison before selecting your lender.
