How You Can Get a Loan to Fund Your MSME

There is no doubt regarding the importance of the MSME sector to the Indian economy. However, despite being such critical contributors to economic development, MSMEs often suffer incredible difficulties in managing their working capital and finances.

As part of the relief measures for MSMEs, the government revised the MSME definition. Earlier there was a low threshold in MSME definition which left out a lot of businesses, which has now been addressed in the new one.

Existing MSME Classification

Criteria: Investment in Plant & Machinery or Equipment

Classification	Micro	Small	Medium
Mfg. Enterprises	Investment<Rs.25 lac	Investment<Rs.5 cr.	Investment<Rs.10 cr
Service Enterprise	Investment<Rs.10 lac	Investment< Rs.2 cr.	Investment<Rs.5 cr.

Revised MSME Classification Composite Criteria : Investment And Annual Turnover

Classification	Micro	Small	Medium
Manufacturing & Services	Investment< Rs.1 cr. & Turnover< Rs.5cr	Investment< Rs.10 cr. & Turnover< Rs.50 cr.	Investment< Rs.20 cr. & Turnover< Rs.100 cr.

Government Schemes for MSMEs 

Pradhan Mantri MUDRA Yojana (PMMY)

• Credit Amount: This scheme provides online business loans of up to INR 10 lakh.
• Who Can Apply: Non-corporate, non-farm small or micro-enterprises.

The PMMY loan can be availed through commercial banks, regional rural banks, small finance banks, cooperative banks, mutual fund institutions and NBFCs. MUDRA has created lending products including Shishu, Kishore and Tarun, to signify the stages of the business’ development respectively and funds it may require.

• Shishu covers loans up to INR 50,000.
• Kishore covers loans above INR 50,000, up to INR 5 lakh.
• Tarun covers loans above INR 5 lakh, up to INR 10 lakh. 

Credit Guarantee Fund Scheme for Micro and Small Enterprises

• Credit Amount: This scheme provides fund- and non-fund-based (letters of credit and bank guarantees) credit facilities of up to INR 200 lakh per eligible borrower.
• Who Can Apply: New and existing micro and small enterprises engaged in manufacturing or service activity excluding educational institutions, agriculture, self-help groups and training institutions.

These loans are given by scheduled commercial banks (public sector banks, private sector banks and foreign banks) and select regional rural ranks which have been classified under the “sustainable, viable” category by the National Bank for Agriculture and Rural Development (NABARD). The guarantee cover under the scheme is the maximum of 85% of the sanctioned loan amount.

National Small Industries Corporation Subsidy

• Credit Amount: The NSIC scheme facilitates MSMEs in accessing credit support of up to INR 5 lakh
• Who Can Apply: All medium and small enterprises (MSEs) with a Udyog Aadhaar Memorandum (UAM) are eligible to apply under the Single Point Registration Scheme offered by the NSIC.

These loans can be availed by various nationalized and private sector banks. You can download the application form from the banks and submit the business loan documents online. MSMEs who have already commenced their commercial production but not completed one year of business are issued a certificate with a monetary limit of INR 5 lakh, which shall be valid for one year.

Credit Linked Capital Subsidy Scheme

• Credit Amount: This Scheme, under the aegis of the MSME Ministry, aims to facilitate technology up-gradation in MSMEs by providing an upfront capital subsidy of 15% (on institutional finance of up to Rs. 1 crore availed by them) for induction of well-established and improved technology in 51 specified and approved sub-sectors/products. Any business with a valid UAM is eligible to apply for this loan for up to Rs. 15 lakh given at the prime lending rate of the lending institution.
• Who Can Apply: MSMEs with a valid UAM number are eligible.

The CLCSS is being implemented by 12 nodal banks or agencies, including the government’s SIDBI and NABARD. All the nodal banks or agencies would consider proposals only for credit approved by their respective branches. The scheme helps in the technological upgrade of MSEs’ plant and machinery with or without expansion and also for new MSEs that have set up their facilities with appropriate eligible and proven technology duly approved under the scheme’s guidelines.

SIDBI Make In India Soft Loan Fund For Micro, Small and Medium Enterprises (SMILE)

• Credit Amount: The minimum loan size availed is INR 25 lakh.
• Who Can Apply: MSMEs with a valid UAM number can avail of the scheme.

SIDBI is a development financial institution backed by the Indian government, grants this loan. SIDBI provides a soft loan like quasi-equity and a term loan on relatively flexible terms to MSMEs for the establishment of a new unit or growth of existing companies. The focus is on identifying 25 sectors under the government’s flagship programme Make in India. Deserving proposals from any other industry can also be assisted on merits. Loans extended under the scheme cannot be used for the repayment of earlier loans. You can use the Finserv MARKETS app to apply for business loans in quick and easy steps.