How to Apply for an MSME Loan and Get Approved

John A3 weeks ago

0 10 5 minutes read

Historically, MSME have faced constraints in obtaining adequate financing due to stringent collateral requirements, complex loan application procedures, and limited access to formal credit. However, with the introduction of government lending initiatives and the rise of digital lending platforms, this has changed in recent years. Micro, small, and medium enterprises can now easily access MSME loans to sufficiently fulfil various business requirements like starting or expanding their businesses, procuring machinery and equipment, and meeting working capital requirements. Businesses seeking to foster growth and innovation can apply for MSME loans online to secure quick funding. This article outlines how to apply for an MSME loan online and how to boost your chances of getting approved.

5 Step Guide On How To Apply For An MSME Loan And Get Approved

MSME loans offer flexible loan amounts to help micro, small, and medium enterprises meet various business requirements at competitive interest rates. While applying for an MSME loan is relatively simple, you can implement the following strategies to boost your chances of getting approved.

Here’s an easy step-by-step guide on things you should do before applying for an MSME loan:

Understand your business requirements

Financial requirements of MSMEs vary as much as the diversity within the sector. That’s why it is essential to consider your precise business requirements before you apply for an MSME loan. Assess your business needs, including the purpose for the loan, the amount required, and your repayment capacity. For instance, if you plan on using the funds to purchase machinery or equipment, determining the cost of the machinery will help you identify the correct loan amount. Once you ascertain these nitty-gritties, the MSME loan process will get simplified.

Choose a conducive scheme

In India, MSME loans are available from a variety of sources, including government schemes, banks, and NBFCs. The Indian government has launched several finance initiatives to ensure easy financing access for MSMEs. MSME loans are available through schemes like Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE), Pradhan Mantri Mudra Yojana, PSB Loans in 59 minutes, and others. MSMEs can apply for funding under these schemes on the Udyami Mitra portal or visit a bank branch/NBFC offering the scheme. Additionally, various banks and NBFCs also offer MSME loan products that are tailored to meet the unique requirements of small and medium businesses.

Opt for the right lender

The next step in the MSME loan application process is to pick the right lender. Research banks, NBFCs, and online lending portals that offer MSME loans. Remember to compare MSME loan interest rates, tenures, and other terms before selecting the lender.

Check eligibility criteria

When selecting a suitable lender for your MSME loan, you also need to peruse through the eligibility criteria of the lender. Different lenders have different eligibility criteria for MSME loans. Similarly, eligibility parameters also vary among the various government-backed MSME loan schemes. For instance, Mudra loans are offered to non-farm MSMEs like manufacturing and trading, while loans through the Stand-Up India initiative are available to only female MSME entrepreneurs. Therefore, it is essential to review these eligibility parameters before you apply for an MSME loan.

Keep the required documents ready

The right documentation is essential to boost your chances of getting the MSME loan approved. Typically, the list of required documents include the MSME’s Udyam registration, financial statements, and ITR for the last 2-3 years, as well as the applicant’s PAN Card and Aadhaar Card. Create a list of documents required prior to the MSME loan application process to avoid delays and ensure hassle-free approvals.

How To Apply For An MSME Loan Online?

In a drive to make pocket-friendly credit easily accessible to MSMEs, most lenders offer such loans online. In other words, you can apply for an MSME loan online through the comfort of your home instead of stepping out into the lender’s office.

The next section covers the step-by-step guide on how to apply for an MSME loan online through a bank or NBFC:

● Step 1: Visit the lender’s website

Once you have selected a suitable lender, visit the lender’s official website to apply for the MSME loan.

● Step 2: Log in/set up your account

If you are an existing customer, log into your account using your credential. If you are a new customer, create and set-up your account.

● Step 3: Fill-up the online application form

Head to the MSME business loan page and click on the digital application form option. Fill-in all the mandatory details in your MSME application form including personal details, income details, and MSME loan requirements.

● Step 4: Upload the necessary documents

Upload the necessary documents required by the lender to verify your application. You will find the document list available on most lender portals. Review this list prior to applying for the MSME loan to keep the required documents handy.

● Step 5: Await sanction and disbursement

Once you have submitted all the required documents, the lender will verify the same. Upon successful verification, the loan will be sanctioned and the amount will be disbursed.

How To Apply For An MSME Loan Through The Udyami Mitra Portal

The Udyami Mitra portal is a digital offering under SIDBI (Small Industries Development Bank of India). The portal is designed to meet financial and non-financial needs of MSMEs. You can apply for various MSME loans like Mudra loans, Stand-Up India Schemes, and other SME loans on the Udyami Mitra platform. Here’s a step-by-step guide on how to apply for an MSME loan on the Udyami Mitra portal

Step 1: Visit the Udyami Mitra website at https://udyamimitra.in/

Step 2: Under the ‘Programs’ option on the top right corner, click on the ‘MSME Loans’ option

Step 3: Scroll down to find the link to register yourself as an MSME.

Step 4: Fill in the necessary information about your business to register.

Step 5: Once registration is complete, you can review the MSME loan options available and apply for a suitable one.

The benefit of applying through the Udyami Mitra portal is that your application will be viewed by many banks, NBFCs, and fintechs to ensure optimised credit support. Additionally, the Udyami Mitra portal also offers services to connect MSME entrepreneurs to the right agency for loan support in case you find it difficult to file the MSME loan application.

Conclusion

In summation, applying for an MSME loan is easy once you know the steps involved. If you have an MSME registration, you can directly apply through the Udaymi Mitra portal. Alternatively, you can also apply via bank, NBFC, and fintech websites. Analysing your loan requirement, scheme suitability, lender preference, eligibility requirements, and the documents required can help streamline the application process, ensuring quick access to credit and easy approvals.

Frequently asked questions

Can I avail of a collateral-free MSME loan?

Yes. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) offers collateral-free MSME loans of up to Rs. 10 Lakhs.

What is the interest rate on an MSME loan?

MSME interest rates are typically low to ensure easy access to low-cost credit for small and medium enterprises. While MSME interest rates vary depending on the lender and loan amount in question, most generally start from around 8.50%.