What is an MSME business loan and who is eligible for it?

CreditEnable_MSME business loan

To learn about what an MSME business loan is, we first need to understand what an MSME is.

What does MSME mean?

MSME, short for Micro, Small and Medium Enterprise, are governed by the Micro, Small and Medium Enterprises Development (MSMED) Act of 2006 introduced by the Government of India (GoI). An MSME is any business involved in the production, processing and preservation of commodities and goods. They are categorised according to their investment value and annual turnover. Matters pertaining to MSMEs in India, including their financial, infrastructural, and skills advancement, fall under the purview of the Ministry of Micro, Small and Medium Enterprises, GoI.

There are 63 million MSMEs operational in India right now, with only 3,000,822 registered on the Udyam portal.

Register my MSME on the Udyam portal.

The GoI revised the categorisation of MSMEs in 2020, making the definition of “MSME” uniform across the Manufacturing and Service sectors. According to the new categorisation:

  1. Micro enterprises: Invested no more than Rs. 1 Crore in plant and machinery, and its annual turnover does not exceed Rs. 5 Crore.  
  2. Small enterprise: Invested no more than Rs. 10 Crore in plant and machinery and has a maximum annual turnover of Rs. 50 Crore.
  3. Medium enterprise: Invested no more than Rs. 50 Crore in plant and machinery and has an annual turn limit of Rs. 250 Crore.

What is an MSME Loan?

A loan procured by an MSME from a formal lender to expand their business, purchase raw material, invest in assets, cover working capital requirements, etc. is known as an MSME loan. Often MSME and SME (Small and Medium Enterprise) loans are combined by lenders. Every lender who offers MSME/SME loans will curate their loan terms within the stipulated guidelines set by the RBI. The loan terms lenders offer a business depend on the business’s financial health and its financial history.

Note: If your MSME business comes under the retail trade, training or educational institution, agricultural, or self-help group categorization, you are not eligible for an MSME loan.

CreditEnable partners with 25+ lenders in India to help SMEs access business loans easily and quickly. According to the 2020 updated definition of a Small and Medium Enterprises in India, your business falls under the SME category if your business turnover is no more than Rs. 50 Crore and Rs. 250 Crore respectively.

Do the government offer MSMEs any business financing support?

The Ministry of Micro, Small and Medium Enterprises offers MSMEs a variety of schemes ranging from loans and tech upgrades to skill development. The credit schemes the government offers are:

  1. Prime Minister’s Employment Generation Programme (PMEGP)
  2. Micro Unit Development and Refinance Agency (MUDRA Loan)

See the full list of all MSME schemes offered by the Ministry of MSME.

Why should I apply for an SME loan with CreditEnable?

CreditEnable is a credit and technology company that is making it easier for SMEs to navigate the loan underwriting process. We partner with over 25 leading lenders in India and have 100+ SME loan products on our technology platform. Our process is 100% digital and free to use for SMEs.

Depending on your business needs, you can get an unsecured business loan, secured business loan, loan against property, business machinery loan, working capital loan, overdraft facility, and commercial credit card through CreditEnable.

Find out what type of small business loan is right for your needs.

We help you get business loans in 3 simple steps.

  1. Register on our platform.
  2. Tell us about your business and its financial needs to help us assess your eligibility.
  3. Share the business documents required to get you the loan.

Based on the information you share with us we check your eligibility to get an SME loan with one of our lender partners. If you meet the following requirements, we match you with a lender partner who should approve your request for an SME loan within days! 

  1. Your business vintage is 2 years or more.
  2. Your Experian credit score is 750 and above.
  3. And your business is in good financial standing.

We’ve helped our SME customers get unsecured business loans in 2-3 days and secured business loans in 7 days! We can help you too.

Apply for an SME business loan with CreditEnable today!