With the MSME segment evolving rapidly, the government is also taking various financial measures to support them and help them grow. MSMEs had to rely only on banks previously, but now there are more options open with the different digital lenders and other Non-Banking Financial Institutions (NBFCs) in the market. Compared to traditional bank loans, sanctioning an MSME loan from NBFCs is relatively hassle-free and quick. How to Get an MSME loan in 5 Easy Steps
This article will explain how you can avail an MSME loan in five easy steps.
How to get an MSME loan?
With a fiercely competitive market, the entire approval process for MSME loans can vary based on the lender. However, these are some of the typical steps involved in MSME loan application and processing:
1. Know your Requirements: First, it is essential to know why you need the loan and your business requirements. It will also help you ascertain the type of loan that you require and the amount necessary for your business growth. Apart from this, list down your present debts and responsibilities, which will help you determine your loan repayment capacity and the EMI amount to pay off the MSME loan.
With most of the leading NBFCs, you can get an MSME loan up to Rs 50 lakhs without collateral. However, the final amount will depend on your income, business type, and credit score.
2. Check the Eligibility: The second important step is to know the MSME loan eligibility criteria. Different lenders have different eligibility criteria, but here are a few standard guidelines:
3. Age: For the MSME loan, the applicant’s minimum age should be 22 years at the time of application and a maximum of 65 years at the time of maturity.
● For Individuals: Individual applicants should have been in the current business for at least three years, along with a total of five years of business experience.
● Company Type: The loan is available for self-employed individuals, partnership firms working in manufacturing, trading, or services, proprietors, and private limited companies.
● Business Turnover: At least Rs 10 lakhs per year
● Business Vintage: Minimum two years with profit margins
● Business with a minimal annual income (ITR) of Rs 2 lakhs per year
If you and your business follow the above criteria, then you will be eligible for the loan.
3. Keep your documents ready: To prove the above eligibility, one must submit the necessary documents. It is vital to have all the documents handy and submit them as and when required. Some of the documents required for an MSME loan are:
● A photograph, not older than six months
● Proof of Identity – PAN card for the business and applicant
● Valid address proof of the businesses well as the applicant
● Bank and income statements for the last six months along with Form 16
● Income tax or GST Returns for the last two years with an audited income summary
● Financial statements with a declaration of cash profits for the last two years along with annual turnover demonstrating the positive trend in the current financial year
● Proof of business existence (like Certificate of Incorporation, etc.)
4. Understand all the details: Now that you have all the documents handy, know about the loan details from the lender, such as the loan amount you are eligible for, MSME loan interest rate, the loan tenure, etc. It will help you in calculating the EMI that you have to pay to the lender. Only if you can afford the EMI, then opt for the loan. The MSME loan interest rate can be anywhere between 17% to 21% based on various parameters such as the nature of the business, industry type, several years in existence, financials, etc.
5. Apply for the loan online: If you meet all the above parameters, it is time to apply for the loan. Visit the lender’s website or app and fill in all the details and upload relevant documents to apply for the MSME loan with just a click.
With these simple five steps, you will be able to avail of an MSME loan from any leading NBFC in India. However, choose your lender wisely to get the lowest MSME loan interest rate on favorable terms & conditions.
