How to apply for MSME Loan?[Detailed process]

How to apply for MSME loan is discussed in detail in this article. MSME stands for ‘Micro, medium and small enterprises. If you are a business owner and fall under the MSME threshold, then you can apply for an MSME loan. MSME loans are given to units in the manufacturing and service industry space. They help businesses and entrepreneurs scale their MSME business and grow it. These loans are intended to help small and medium businesses with credit, and facilitate promotion of the nation’s economy.

To become eligible for an MSME loan, a business needs to fulfil certain criteria. You can apply for the loan either online or offline. In this article, we will dive deep into the requirements and the procedure required to apply for an MSME loan.

More about MSME loans

MSME loans are issued by banks as well as NBFCs. These are unsecured loans, i.e., one does not need to secure their property, or any other form of collateral, to apply for the loan. In short, MSME loans are loans given to business enterprises that need financial assistance, working capital, machinery, infrastructure, etc.

The repayment tenure on an MSME loan varies from institution to institution. Based on the profile of the applicant and the business history, interest rates are assigned by banks and financial institutions.

MSME Classification

Applying for the MSME loan

As a registered MSME business owner, you can apply for the MSME loan, either through a physical location or online. When you apply through a physical location, you have access to only one lender and may need to wait for days in the long queue to sanction the loan. This is generally an inconvenience. Now with technology developing and everything available online, the best method would be to apply for a loan online.

When applying online, you will have multiple options of lenders that you can choose from. Once you choose a lender and apply for the loan, the banks, NBFCs, SFB’s, and other fintech companies can look at your application, and the one nearest you will approach you. You are free to apply online 24/7 whenever you need.

Registering yourself as an MSME Business and avail the loan

Firstly, if you are not registered as an MSME business, then you need to register it as per the guidelines of the Indian government. For this, you need to go to the udyogaadhaar.gov.in website. This is the portal for the registration of MSME businesses.

Here, please fill in the requested information such as your Aadhar number, the name of the entrepreneur, the address, etc. Once the details are filled in, you will be asked to verify an OTP. Once verified, you will be asked to fill in the rest of the information. Once the form is complete and you click submit, you will get a registration number. That’s it, your business is registered under MSME and you are eligible to receive the loan.

In order to apply for the loan you can visit, https://site.udyamimitra.in/.

The 5 step guide for the application of the MSME loan

1. Know the business requirements - Before going forward with an MSME loan, you should know the exact business requirements you have. This will help you to have clear planning and estimates.
2. Choose the right lender - It is important that you always do apt research before choosing the lender for the MSME loan. Different lenders will have varied policies and interest rates and you need to be selective.
3. Apply online - In today’s world, everything is digital, and using the internet is far more easy and convenient for applying for an MSME loan. You can save a lot of time and travel by applying online.
4. Keep ready the required documents - You will need certain documents ready for applying. Make sure you have all the necessary documents with you prior to the application. This will help you.
5. Approval and disbursement - Once the institution verifies and approves the loan, the amount will be deposited in your bank account and you can use it for the desired purpose.

How to apply for MSME loan online?

1. Visit the official and live website of the bank of your interest.
2. If you are already a customer of the bank, you need to log in and if you don’t have an account, you need to sign up by filling in the details.
3. Search for the MSME loan application section.
4. Fill in all the details asked in the form. This includes your personal information, business details, income details, and MSME loan requirements. Follow the step-by-step procedure displayed on the screen.
5. Now the loan application form.
6. Upload all the asked documents and photographs in the place asked including business, personal, photographs, etc.
7. After submitting the documents, the respective loan executive of the bank will get in touch with you.
8. Your documents and application form will be checked and verified by the bank.
9. The bank will approve the loan and the amount will be deposited in your business bank account as per the mentioned day.

Documents Mandatory for an MSME loan

• Fully filled application form
• ID Proof: Driving license, passport, Aadhar card, Voters ID.
• Residence proof: Lease agreement, passport, electricity, and telephone bills, trade license, ration cards, sales tax certificate.
• Age proof: Voter’s identity card, passport, photo PAN card.

Required Financial documents

• Business registration proof
• Last 12 month’s bank statement
• Entrepreneurs PAN card copy
• PAN card copy of the company
• Partnership deed copy
• Last 2 years profit and loss and balance sheet copy
• Municipal tax document
• Sales tax documents

Some of the famous banks that offer MSME loans

1. State Bank of India
2. Allahabad Bank
3. ICICI Bank
4. HDFC Bank
5. Central Bank of India
6. Oriental Bank of Commerce
7. Indian Bank
8. Bajaj Finserv
9. Union Bank of India

Conclusion

This article has covered how to apply for MSME loan. MSME loans are beneficial to business owners and can help you to scale your business. Before availing of the loan, it is important to research the lenders and their policies to avoid any misunderstandings. Also online is the most efficient and easy medium to apply for the MSME loan.

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FAQs

Q. Can I avail myself of the MSME loan, without registering the business as an MSME?

Ans. No, It is mandatory to register the business as MSME to avail of the MSME loan. The registration process is easy and you can do it online. All you need to do is to go to the website mentioned in the article and follow the instructions.

Q. My annual turnover is above Rs 250 Crores. Can I apply for the MSME loan?

Ans. Unfortunately no, Only businesses that have an annual turnover of up to Rs 250 Crore and not more than Rs 50 Crore investment in Equipment or Plant & Machinery are eligible to apply for the MSME loan, under the rules of the Indian government.

Q. Can I apply for the MSME loan online?

Ans. Yes, you can apply for the loan online. Also, it is convenient to apply online as you will have more possibilities. All you need to do is to go to the website mentioned in the article and apply there.

Q. I am a trading company. Can I apply for the MSME loan?

Ans. No, MSME loans can be applied by only manufacturing and service companies and not by trading. If you have two or more businesses and one is a manufacturing or service company, then you can apply for a loan for that business.

Q. I have a partnership business. Can I get the MSME loan?

Ans. Sure, there are no restrictions to getting the MSME loan for any number of the partner businesses. The only criteria are that it should be an MSME and the turnover and the investment should be as per the requirements.