How do I apply for an MSME loan?

CreditEnable_MSME Loan

Applying for an MSME loan may seem like an intimidating job but don’t worry! You’ve come to the right place to understand the process better and make the act of applying easier.

Before you apply for an MSME loan, you first need to understand if your business falls under the “MSME” classification, then decide why you need the MSME loan, who you should get the loan from, and what documents you’ll need to apply. Let’s get started!

How do I know if my business is an MSME?

MSME is short for Micro, Small and Medium Enterprises. All matters about MSMEs are governed by the 2006 Micro, Small and Medium Enterprises Development (MSMED) Act and are the responsibility of the Ministry of Micro, Small and Medium Enterprises. 

MSMEs are involved in the production, processing and preservation of commodities and goods. The classification of whether your business is a micro, small and medium-sized business depends on your investment value and annual turnover.

According to the categorization of MSMEs updated by the government in 2020: 

  • A micro enterprise is one where you have invested no more than Rs. 1 Crore in plant and machinery, and your annual turnover does not exceed Rs. 5 Crore.  
  • A small enterprise is one where you’ve invested no more than Rs. 10 Crore in plant and machinery, and your business has a maximum annual turnover of Rs. 50 Crore.
  • And a medium enterprise is one where you have invested no more than Rs. 50 Crore in plant and machinery and your businesses’ maximum annual turnover is Rs. 250 Crore.

If you’re a micro enterprise, there are also some credit support schemes the government offers that you can avail of. Learn more about them here.

Learn more about MSME loans here. 

What can I use an MSME loan for?

An MSME loan (or SME loan) is a versatile umbrella classification that lenders use to categorize any loan they offer MSMEs in India. In general, MSME loans can be used for several things, including meeting your daily working capital requirements, investing in new machinery or property, refinancing your existing debt, etc.

Within MSME loans, there are different types of small business loans you can apply for that will help you achieve your desired goals in a streamlined manner.

The different types of MSME loans lenders offer are:

  1. Unsecured Business Loan
  2. Secured Business Loans
  3. Working Capital Loans
  4. Business Machinery Loans
  5. Loan Against Property
  6. Overdraft Facilities
  7. Commercial Credit Cards

The key to applying for the correct MSME loan is to know:

  • Why do you need the loan?
  • What do you plan to use the loan for?
  • What collateral do you have to offer the lender?

Once you’ve answered these questions, you can move on to the next step – identifying the right lender from whom you should get the MSME loan. 

If you need the loan to buy new inventory but don’t have any collateral that you can offer the lender in exchange for the MSME loan, an unsecured business loan is the one you should get.

Alternatively, if you want to buy new machinery to upgrade and streamline your manufacturing process, a business machinery loan fits your needs better. 

Learn more about the different types of MSME loans available. 

Which lender should I get the MSME loan from?

Finding the right lender and loan product used to be a time-consuming and stressful exercise for MSMEs and big businesses alike. If you choose the traditional borrowing route, you would have to go from one lender to another to enquire about their loan offerings and terms and conditions. Then you would manually compare each loan to decide which one best fits your needs, desired repayment period, and ROI. 

But you don’t have to do any of that anymore! 

CreditEnable’s technology platform has made it fast and simple for small businesses to apply for SME loans! We partner with over 25 leading lenders in India to help SMEs get business loans in record time! 

All you need to do is register on our platform, answer a few questions about your business and your loan requirements. Then, we’ll check your loan eligibility. Based on the information you give us, if you meet our lender criteria, we’ll ask you to submit your KYC and other loan documents online. After we get all your documents, we’ll do a complete assessment of your needs, and our lender-matching algorithm will pair you with a lender and loan product that perfectly meets your business loan requirements! Did we mention all of this happens online, and we don’t charge a service fee?

Our smart algorithm will match you with a lender who meets your requirements and is most likely to approve your loan application. Once we find a match for you, we’ll get your consent and send your complete loan application package to the lender so that they can conduct their assessments and approve your loan request! 

It’s that easy! 

We’ve helped our SME customers get unsecured business loans starting from Rs. 1 Lakh within 2-3 days and secured business loans starting at Rs. 15 Lakhs in 7 days! We can help you too. 

Start your MSME loan application with CreditEnable today! 

What is the basic eligibility to get an MSME loan?

If your business is a micro enterprise, there are some credit support schemes the government offers that you may be eligible for. These include:

  1. Prime Minister’s Employment Generation Programme (PMEGP)
    1. Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE)
    1. Interest Subsidy Eligibility Certificate
  2. Micro Unit Development and Refinance Agency (MUDRA Loan)

You can see the complete list of all MSME schemes offered by the Ministry of MSME here.

If you are an SME, the basic eligibility to apply for a small business loan with a formal lender is:

  1. The minimum age of the applicant is 25 and above.
  2. You have a credit score of 750 or more.
  3. You have a business vintage of 2 years or more.
  4. You can provide legal business registration proof that will prove your business vintage.

What documents do I need to apply for an MSME loan?

When applying for an MSME loan, each lender may have a slightly different required documents list. We recommend knowing the list of required documents in advance and having them handy to share with the lender when submitting your MSME loan application.

In general, lenders ask for the following documents*:

  1. Individual PAN Card
  2. Individual Aadhar Card
  3. GST Registration Certificate for GST registered companies
  4. If not a GST registered company – Provide any Trade or Business Registration Certificate (Business vintage and place of business) e.g. Shop and Establishment License, Trade License, Labour License.
  5. Business PAN Card for businesses that are not Sole Proprietorships
  6. Last 12 months business Bank Statements for all bank accounts (Current, Saving, Credit Card/Overdraft)
  7. Last 2-years ITR Acknowledgement & Computation of Income (if the loan amount is above Rs. 10 Lakhs)
  8. Last 2-years financials (Balance Sheet, Profit and Loss Statement and notes to accounts) that have been certified by a CA (if the loan amount is above Rs. 10 Lakhs)

*Note: This list is not an exhaustive one. Based on your financing needs, type of business, and type of loan, the lender may ask you for additional documents.

When you apply for a small business loan with CreditEnable, we’ll tell you upfront exactly what documents you need to provide. 

If your business is not registered yet, don’t worry. You can apply for your Udyam Registration online within minutes! Get it now. 

At CreditEnable, we collect these documents upfront and send the lender your complete application package so that you’re not bothered by individual document requests one after another. This way, the lender can complete their assessment swiftly, and you get the business loan you need faster.

Start your business loan application.

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