Procedure to Apply MSME Loan

Here are the three easy steps to get an MSME/SME loan

• Application:

Applicants who wish to secure a MSME loan can fill in an online application form giving details about their fund requirements

• Documents:

The next step is to upload relevant documents like bank statements, PAN Card copy, Aadhaar Card copy, Business Registration Certificate, GST Filing, Drug License, Trade License, TIN, and VAT Registration.

• Sanction:

Applicants can expect a MSME loan application approval the moment all their documents and other submissions are verified.

Why should Enterprises go for MSME loan?

Do you know that the MSME sector is one of the largest sources of industrial output and employment in India? Around 40% of the total country’s exports and 45% of the total industrial production comes from this section. Therefore, the MSME sector has always showcased a high demand for business finance.

Inability to secure finance at the right time is one of the biggest issues faced by various small and medium scale enterprises in the country. However, (NBFC<) non-banking financial companies are a promising alternative for the manufacturers who wish to secure business finance immediately. The online submissions for MSME loan process have made very easy and short.

They can utilize these funds wisely in the following activities:

• Plant and Machinery

Manufacturers can utilize their business loan funds to purchase new machinery or upgrade the existing ones. This will have a direct impact on their profit ratios and growth chart.

• Procurement of Raw Material

If an enterprise is confident of its plant and machinery, and installed technology, the best way to utilize MSME loan funds is the procurement of raw material. The high-quality raw material will ensure equal grade final products and ultimately high profits.

• Working Capital Management

WCM is a business strategy formulated to ensure that the company grows by utilizing its assets and liabilities in the best possible manner. Manufacturers can effectively utilise their loan funds to expand their business operations without exhausting their existing capital funds. This can be a fruitful option for the manufacturers who have the latest manufacturing equipment and aim to vertically or horizontally expand their operations.

• Marketing

Manufacturers can also use MSME loan funds to market their products and services on a larger-scale. This will open many new growth avenues for their enterprises.

• Manpower

MSMEs can utilize the loan amount to hire new employees and train the existing workforce. Training the employees regarding the latest industrial advancement can prove to be fruitful in gaining a competitive edge in the industry.

Do’s and Don’ts while Applying for Online MSME loan

Here are some simple tips that will increase the chances of securing an MSME/SME loan for the applicant, by reducing the risk of rejection.

Do’s

• The applicant must cross-check all the compulsory documents required for this process

• Applicants should check their credit score as some digital lenders consider it at the time of sanctioning the MSME loan amount.

• Calculating the actual MSME loan requirements in advance will be a wise move for the applicants.

• Applicants should also have a viable business plan for the right allocation of loan funds.

Don’ts

• Applicants should be aware of the fraudulent lenders available online. They charge an upfront fee for approving the MSME loan online. However, any reputed digital lending platform will never ask for an upfront fee, instead, it will charge a minimal percentage after loan disbursal.

• Applying for MSME loan online from multiple lenders can harm an applicant’s credit score.

• Applicants must ensure that all their pending debts are cleared before applying for MSME loan.

Many small business enterprises face issues due to low access to funds that hampers the growth of their business. Udyami Helpline is a leading digital lending platform which connects with Indian’s top Banks & Institutions for MSME loan to the manufacturers sans any collateral and at the most affordable interest rates. They offers loan with flexible repayment schedules and without any hidden charges. All this makes the repayment process quite convenient for the applicants.

Who is eligible to apply for an MSME loan?

MSME Loan are prone to financial risks, so only those who meet the eligibility criteria can get them. However, in most cases, small and medium-sized business owners can get their loan applications approved easily.

In general, businesses from both the manufacturing and service sectors are eligible to apply for MSME loan. But, the limitations are different. For instance, micro, small, and medium-sized businesses belonging to the manufacturing industry can get up to Rs. 25 Lakhs, Rs. 5 Crore, and Rs. 10 crore, respectively.

Similarly, the micro, small, and medium-sized businesses belonging to the service sector are eligible to get up to Rs. 10 Lakhs, Rs. 2 Crores, and Rs. 5 Crores, respectively.

How to calculate MSME loan EMI?

If you are a small business owner who wants to borrow money for funding your start-up or organization, learning to estimate the EMI you will pay every month can be beneficial for you. You have several ways to calculate MSME loan EMIs. The most common formula used is:

E = P * r * (1+r) n / (1 + r) n-1

Here, ‘E’ is the EMI amount you must pay every month, ‘P’ is the principal amount of the loan, ‘r’ is the interest rate, and ‘n’ is the repayment tenure.

How to use an MSME loan calculator?

Most online business loan emi calculator calculates MSME loan EMIs by using the standard formula. So, to use any standard online business loan calculator, you will need to provide the following values: the principal amount, the interest rate, and the tenure.

Suppose you have borrowed Rs. 1 Lakh at an interest rate of 3% per annum, with a repayment time of three years. You can calculate the EMI amount you must pay each month using an online business loan calculator, You can also check the total amount you will be paying.

Also, the online loan calculators can show you the total amount you will be paying to the lender.

Why use an MSME loan calculator?

Besides helping you estimate the monthly EMI amount, most online business loan calculators come with many other benefits.

• • You do not need to calculate the EMI amount manually

Most people these days refrain from using pen and paper for calculations. If you are one of those people, online business loan calculators can save your time as you do not have to calculate the EMIs by yourself. Also, you can get the advantages of fast and accurate calculations.

• • Visually Appealing

Most online business loan emi calculators are visually appealing as they consist of different charts and diagrams, such as pie charts, bar graphs, etc.

• • Helpful for Financial Planning

One of the reasons why people use an online business loan emi calculator is that it helps them make tough financial decisions involving large sums of money.

These are just a few advantages of using an online business loan calculator to estimate the amount of money you will be paying every month as EMI for repaying your business loan.

There are many ways to calculate MSME loan EMIs. So, whenever you borrow money for funding your small business or start-up organization, do not forget to estimate the EMI you will be paying every month. It will help you make better financial decisions. You can do it easily using online business loan calculator.

MSME Loan Frequently Asked Questions

• What is the difference between SME and MSME Loan?

Both terms are the same. SME stands for small and medium enterprises. Whereas, MSME stands for micro, small and medium enterprises

• Which documents are required to get an MSME loan?

Documents like Bank Statements for the last 6 months, PAN Card copy, Aadhaar Card copy, Business Registration Certificate, GST Filing, Drug License, Trade License, TIN, and VAT Registration are required for this purpose.

• What is the maximum term limit for MSME loan?

The maximum term limit for the MSME loan is 36 months.

• How should the loan funds be optimally utilized?

An enterprise can divide the funds wisely in raw material procurement, working capital optimisation, and inventory management.

• What is the interest rate for a MSME loan?

The interest rate starts from Rs. 50 per day or 1.5% per month, evaluated on a reducing balance.

• What is the processing fee for MSME loan?

One time processing fee for a business loan is around 2% of the sanctioned loan amount.

• What determines my sanctioned loan amount?

Your credit rating, business profits, and revenues will determine your final loan amount.