India’s Micro, Small, and Medium Enterprises (MSMEs) contribute immensely to the country’s entrepreneurship development. They contribute about 30% to India’s GDP and employ lakhs of individuals in both urban and rural areas.
As such, it wouldn’t be wrong to call the MSME sector the backbone of the Indian economy.
To support this vibrant and dynamic sector, the government has introduced several loan schemes for MSMEs. If you’re a young entrepreneur, read on to understand more about MSME loans and some useful tips to enhance your eligibility.
MSME loans are loans tailor-made for micro, small, and medium businesses. The enterprises can use the loan to kick start their startup, expand their existing business, or fulfil other business requirements.
Collateral-free and available at attractive interest rates, the loans can provide the necessary boost to MSME businesses in their early days.
Financial institutions offer MSME loans under various government schemes such as the Credit Guarantee Fund Trust for Medium and Small Enterprises (CGTMSE) or the Credit Linked Capital Subsidy schemes (CLCSS).
The schemes provide credit access to MSMEs without needing to back it with securities like land and building. However, business owners must fulfil certain criteria mentioned in the scheme to avail its benefits.
An MSME loan can set your small business on a fast growth trajectory. But before applying for a loan, here are a few things you should consider to get an instant loan online.
Before applying for an MSME loan, check their eligibility requirements and ensure you meet them.
For instance, an MSME loan for doctors from Poonawalla Fincorp requires you to have a minimum practice of at least one year.
Following these steps is essential because too many inquiries and loan applications in a short period can adversely affect your credit score and affect loan terms. In a worst-case scenario, it may even prompt the rejection of your loan application.
So do visit the lender’s website and confirm your eligibility. Look out for specific business-sector requirements, location, years of operation, income requirements, credit scores, etc. Then narrow your choices to 2 or 3 lenders based on these specifications.
Lenders will not process your loan unless you submit all the essential documents. While the requirements may differ from lender to lender, here are some common ones that you need to keep ready:
Some examples of such special licenses include:
Before you apply for a loan, you need to determine why you need the loan and where you are going to use it. Having clarity will help you select the right type of loan.
For instance, if you need a loan to meet your working capital requirements, you should ideally opt for a business line of credit.
Most lenders offer loans for a wide range of purposes. Specifying your goals helps ensure the loan goes towards meeting that objective.
All loans come at a cost, and you must repay them sometime in the future. So, instead of saddling yourself with heavy loans, make a calculated decision keeping your expenses and income in mind.
Repayment is a crucial part of your loan cycle, and you must plan for it beforehand. You must ensure you are comfortable with your monthly EMIs and that they do not become burdensome.
Any default or delays in repayment will impact your credit score and adversely affect your chances of taking a loan in the future.
Final Thoughts
MSME loans are a necessary catalyst for small entrepreneurs to fuel their business growth. However, it’s essential to identify your needs and the lender’s eligibility criteria first. It will help you find the right lender who can grant you an instant loan online without any delay.
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