Loan Eligibility Criteria For New MSME Businesses

Loan Eligibility Criteria For New MSME Businesses

 The new MSME policy of the government is raining sops to MSME units. Contribution of these units to the revenue and growth of India is no secret. The ministry of finance has given MSME friendly instructions to financial institutions. You can have all the information on getting a loan for new units registered as MSME by contacting Taxrobo.

The Gazette Notification

The notification S.O. 2119(E) dated 26.06.2020 (Annexure-I) has given very clear and precise information on classification of MSME units as well as a new definition. This gives a great advantage to MSME units to grow and prosper.

What All Loans Are Available?

Banks and financial institutions provide loans to new MSME units for the below purposes:

i. Urgent requirement for raw materials.

ii. To buy plant and machinery.

iii. Acquire land and factory.

iv. Construction and modification of buildings.

v. Financial assistance for other eligible matters.

Requirements For Availing Loans By New MSME Units

All loans to MSME businesses are secured by the government of India. So an MSME business is eligible to get a loan without producing collateral security. At the same time, an applicant has to meet all other eligibility criteria as stipulated by the government as well as various financial institutions.

How To Apply For Loan

There is a specific website managed by the government to receive MSME loan applications. You can open the site and fill all fields. There are a number of documents that need to be uploaded. Utmost care should be given to get them digitalized before visiting the portal. A knowledgeable financial services provider will assist you to get your loan sanctioned without any hassles. 

Types Of MSME Loans

These business loans carry a lot of incentives. The rates of interests begin from 13.5% and shall depend upon the loan disbursing agency. There are a number schemes for new MSME units:

1. CGTMSE (Credit Guarantee Funds Trust for Micro and Small Enterprises)

2. PMEGP (Prime Minister's Employment Generation Programme)

3. MUDRA (Micro Units Development and Refinance Agency)

Term Loans And Working Capital Loans

a. Term Loans: They can be availed for:

i. Purchasing fixed assets.

ii. Capital expansion.

iii. Capital expenditure.

b. Working Capital Loans: Immediate financial requirements of MSME units are taken care of through these arrangements:

i. Letter of credit.

ii. Facility for bills discounting.

iii. Cash credit arrangements. 

Eligibility Factors To Apply For An MSME Loan

All approved financial institutions function under the guidelines of the Reserve Bank of India adhere to certain eligibility criteria for MSME businesses to apply for a loan under any of the available schemes.

1. Investment Limits

a. The investment limit for the manufacturing sector is ten crore rupees.

b. The investment limit for the service sector is five crore rupees.

2. Listed Category

The business of the applicant should not fall under any of the blacklisted categories either by the government or the RBI.

3. Age Of The Applicant

The minimum age limit to apply for an MSME loan is 25 years.

4. The Sector Of The Business

The nature of business should be either in the manufacturing or service sectors.

5. Age Of Business

This is applicable only if you are applying for a loan to expand business.

The unit should have functioned for at least six months till the date of application. 

Drafted By:
CS.A.Maniraj.,B.Com.,ACS.,CA(Fin), Independent Director 
Certified CSR Professional., Certified GST Professional.

Loan Eligibility Criteria For New MSME Businesses
Maniraj Anantham 1 March, 2024
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