MSME Loan: MSME stands for Micro, Small and Medium Enterprise. Any Individual who wants to start new business or expand existing business can take a Startup Business Loan under MSME Loan scheme. Sometimes, it is also known as SME loan.
Earlier the criteria used to classify MSME was on the basis of Investment in Plant and Machinery which now got amended in the crisis of COVID- 19. “Atmanirbhar Bharat Abhiyan” or Self-reliant India Scheme 2020 by Government of India revised the Investment and Turnover for MSME sector-.
Old Criteria – Investment
Old criteria of classification of MSME Enterprises is based on investment in plant and machinery or equipment-
| Particulars | Manufacturer Sector | Service Sector |
| Micro Enterprise | Up to Rs. 25 Lakhs | Up to Rs. 10 Lakhs |
| Small Enterprise | More than Rs. 25 Lakh up to Rs. 5 Crore | More than Rs. 10 Lakh up to Rs. 2 Crore |
| Medium Enterprise | More than Rs. 5 Crore up to Rs. 10 Crore | More than Rs. 2 Crore up to Rs. 5 Crore |
New Criteria – Investment and Turnover
New Criteria is same for both Manufacturing or Service Sector –
| Criteria | Investment | Turnover |
| Micro Enterprise | Less than Rs. 1 Crore | Less than Rs. 5 Crore |
| Small Enterprise | Less than Rs. 10 Crore | Less than Rs. 50 Crore |
| Medium Enterprise | Less than Rs. 50 Crore | Less than Rs. 250 Crore |
It has also been decided that the turnover with respect to exports will not be counted in thelimits of turnover for any category of MSME units whether micro, small or medium.
What is the Purpose of MSME Loan scheme?
- Invest in your firm’s infrastructure,
- Meet working capital requirements,
- Install new plant and machinery,
- Pay for several overheads, etc.
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What are the Features and Benefits of MSME Business Loan?
There are some General Benefits that will be given to the loan subscribers-
- No collateral or security needed.
- Easy and Flexible repayment schedule.
- Minimum documentation.
- Swift disbursement to Bank Account.
However, New MSME Benefits introduced in “Atmanirbhar Bharat Abhiyan” or Self-reliant India Scheme 2020 by Government of India which are-
- It will be an automatic loan
- Moratorium period offered is 12 months, that means no repayment of principal for 12 months.
- Manufacturers, Traders and Service Providers can take MSME Loan.
- Repayment Tenure is 48 months. The Loan has to be repaid within maximum 4 years.
- No Guarantee fee
- No fresh Collateral required from MSMEs
- Loan Amount will be 20% of outstanding credit till 29 February 2020.
- Last Date of Loan Application under MSME Loan Scheme for availing the additional benefits is 31st October 2020.
The loan will be given to those who already have taken loan before COVID-19. As it will be automatic loan. If you have taken loan from any bank previously, you will automatically became eligible to take fresh new loan. For 12 months, you will not require to repay the principal amount. However, interest will be charged.
Interest Rate on MSME Loan
Interest rates under MSME Loan scheme for-
- Banks or financial institutions can charge maximum 9.25% rate of interest.
- NBFCs can charge maximum 14 % rate of interest.
However, some banks may charge different interest rate.
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Udyog Aadhaar
For taking MSME Loan , a person require to take MSME Registration. Udyog Aadhar is a government registration provided with certificate and a unique number in order to certify micro, small and medium enterprises. Under this, you can self-certify your entity’s existence, bank details, promoter/owner’s Aadhaar details and other details are required. There is no fee applicable for filing the Udyog Aadhaar Memorandum.
Documents Required for Udyog Aadhaar
Following is the list of documents required for Udyog Aadhaar registration–
- Two passport size photograph
- Proof of Identity (PAN card, Aadhaar card, Driving License, etc.)
- Address Proof (Passport, Aadhaar card, Driving License, etc.)
- Age Proof (Passport, PAN card, etc.)
- Bank Statements ( Last 6 months)
- Proof of Income (Income tax returns, Salary slips)
- Signature proof (Bank verified signature, PAN card, Passport)
- IFSC Code Proof
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MSME loan Govt. schemes
Some popular MSME loan schemes provided by Indian Government are-
Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)
Under this scheme for MSME, Ministry and the Small Industries Development Bank of India (SIDBI) established a trust named the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Scheme.
MUDRA Loans
The most widely-known government loan scheme for small businesses is MUDRA (Micro-Units Development and Refinance Agency Ltd.). It aims to develop and refinance the MSME sector by supporting the financial institutions lending to micro and small business entities engaged in manufacturing, trading and service activities. MUDRA provides MSME Loans in two forms:
1. Micro Credit Scheme (MCS)
Refinance Scheme by Commercial Banks, Regional Rural Banks (RRBs), Small Finance Banks and Non-Banking Financial Institutions (NBFCs).
2. Stand-Up India
The Scheme offers a composite loan (inclusive of term loans and working capital) for up to 75% of the cost of setting up the business. The Stand-Up India loan may be secured by the issuing bank by security or guarantee under the Credit Guarantee Fund Scheme for Stand-Up India Loans (CGFSIL). The loan is repayable in seven years, with a maximum moratorium period of 18 months.
For any questions, you may reach us at Discussion Forum
The author of the above article is CA Rahul Gaur.
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