Getting an MSME Business Loan
Getting a medium, small, micro-enterprise business loan (MSME loan) requires you to meet specific eligibility criteria. Firstly, your business needs to fall under the category of a micro, small or medium enterprise as per the government’s definition. Furthermore, the MSME loan is granted only after evaluating the business’s financial health, revenues and annual turnover. This is done to evaluate the ability of the business enterprise to repay the loan and reduce the risk of the lender.
How to Apply for an MSME Loan?
If you are looking to apply for an MSME loan and don’t know how to get started, this guide will help you.
- Understand the requirements of your business
Considering the specific needs of your business should be the first step, and then you can commence your search for the most appropriate lender.
Knowing your business requirements lets you plan out your financial goals, short and long-term business needs and why you are applying for an MSME loan. Doing this will simplify your loan proposal process.
- Search for the right lender
Several banks and NBFCs offer MSME loans. Choosing the right lender based on your specific business needs would be best. The essential criteria must be the simplicity and flexibility of application when opting for a loan. You can connect with 750+ lenders on the Yubi platform, interact with them and simplify the selection process.
- Apply for the loan online
The ideal way to apply for an MSME loan is online. It is one of the most straightforward processes with minimal to no documentation, and funds are disbursed within three to five business days. You need to register on the Yubi platform and complete the onboarding process. Then, connect with more than 750 lenders to apply for an MSME loan.
- Keep the relevant documentation ready
The relevant documents play a critical role in the successful process of your loan application. Therefore, it is important to know the documentation process of the lender before beginning your loan application process. All the documents must be kept ready for fuss-free submission.
- Loan sanction and disbursement
Once the details and documents in your loan application form are scrutinized and verified, the lender will sanction your loan. The lender will consider your repayment capacity during the sanction process. Once the application is approved, funds are disbursed within days into your bank account. The funds can be utilized for the agreed-upon end use of the MSME loan.
The Fastest and Cheapest Way to Get an MSME loan!
Features of MSME Loan
1. No hidden costs
The loan quotation provided by the lender includes the entire amount you owe. Typically, the processing fees are fixed and cost 2% of your loan amount. Hence, you need not worry about hidden fees and extra charges.
2. Flexible repayment terms and longer tenure
The repayment terms are flexible, and you can pay off the outstanding loan amount according to the cash flow of your business. Generally, lenders offer businesses ample time and options to repay the loan amount.
The loan tenure offered by financial institutions is flexible and long. The repayment tenure can start at one month and go all the way up to thirty-six months. The loan repayment tenure depends on the sanctioned loan amount. So, you can repay the loan as per your schedule.
There’s also the option of repaying your loan in monthly or bi-weekly instalments or EMIs. It will give you the opportunity to sync your account’s receivables with loan repayment.
3. Loan amount up to Rs. 2 crores
Whether you want to purchase new machinery, upgrade your existing machinery, hire more workers or expand your manufacturing unit, you can easily avail of the loan amount that caters to your specific business requirements. The amount sanctioned for MSME and SME loans can range from as low as Rs. 50,000 and can go up to Rs, 2 crores. The repayment tenure will depend on the sanctioned loan amount.
4. Digital documentation
There’s no need to go through the hassle of paperwork. You can apply online and upload the documents required for an MSME loan along with your loan application.
5. Quick loan approval and disbursal of funds
There’s no need to wait for an update on your loan status anxiously. The processing and approval of loan application forms are completed within a few working days. The sanctioned loan amount will be deposited into your business account.
6. Apply for MSME loan schemes online
By applying for an MSME loan online, you are removing all the steps that could have slowed down the loan approval process. When you apply for an MSME loan online, you can expect same-day loan approvals with fund disbursals pending the verification of the submitted documents.
7. MSME loans without collateral
The MSME loans are unsecured and you don’t have to provide the financial institutions any collateral to get the loan. Therefore, you do not have to worry about asset security when getting a loan.
8. Best interest rates for MSME Loans
Financial data analytics are used to calculate the best interest rates for your company. In the entire process, there’s no manual intervention. Therefore, you can expect the most competitive and fair interest rates according to your business’s ability to repay the MSME loan.
9. Zero prepayment charges
MSME loans come with zero prepayment charges. Hence, businesses can choose to settle the debt early without attracting any form of penalty for early prepayment of your loan in full.
10. MSME/SME loan in 3 days
Thanks to the online submission of documents, most lenders can process MSME loan application forms as quickly as possible. Since there’s no wait time between submitting and receiving the documents, the loan disbursal process is completed within three working days.
Benefits of MSME Loan by Yubi
MSME loans by Yubi help the growth of your business and improves your ability to exploit opportunities. By registering on our platform, you can enjoy the following benefits:
1. Opportunity to meet 750+ lenders
On the Yubi platform, you can connect and interact with over 750 lenders. You can go through their MSME loan schemes, compare interest rates and make an informed decision. You can also upload your documents digitally and enjoy quick disbursal of your loan amount.
2. Stay in control your business
Unsecured MSME loans ensure you are in complete control of your business. Your assets remain protected in case there’s a loan default. Yubi does not take control of your credit policy, enabling businesses to stay in control of your enterprise.
3. The journey from planning to execution is completed quickly
Thanks to our quick turnaround time, businesses can move from planning to execution within a matter of days. You don’t have to wait weeks or months to execute your business plans. As you can avail the loan quickly, you can utilize the funds to boost production, get ahead in product marketing or increase your supply network.
4. Ability to manage company’s capital better
MSME loans can be utilized in several ways. Businesses can use the funds to expand their business by purchasing machinery and plant or opening at a new location. The loan amount can also be used to streamline day-to-day business operations and enhance general cash flow. With the help of an MSME loan, businesses can balance their company’s capital.
5. Augment the credibility of the company in the market
By giving your business the much-needed boost, you can improve your company’s profitability and credibility in the market. It will create goodwill for your business in the industry and improve your credit rating.
What are medium, small, micro-enterprise business (MSME) Loans?
Financial institutions offer unsecured loans to startup owners and women entrepreneurs to meet their business needs. These loans are generally provided at lower and affordable interest rates with flexible loan repayment options. Moreover, these loans do not require complex documentation and time-consuming application procedures. MSME loans can be broadly categorised into two types: working capital loans and term loans. Depending on your requirements, you can opt for either of them. For instance, if you need funds to carry out your day-to-day business operations and meet your short-term needs, you can choose to get a working capital loan. Similarly, if you need money to fund your long term requirements, you can opt for term loans.
The investment and turnover figures that have been revised are indicated below.
Who is Eligible for medium, small, micro-enterprise business (MSME) Loans?
The eligibility criteria for MSME loans are kept to the bare essentials so that loans can be processed faster and businesses can quickly get funds to meet their short and long-term needs. Unnecessary paperwork and documentation are eliminated to avoid a hold-up in the loan approval process.
If you want to apply for an MSME business loan, you need to meet the following criteria –
- Your business should have been operational for at least 6 months prior to applying.
- The turnover of your business in the previous 3 months immediately preceding the date of application must be more than 90,000.
- The business should not be blacklisted or be a part of the SBA finance excluded list.
- You should not be a trust or an NGO as they are not eligible for MSME loans.
- The location of your business should not fall under the negative location list.
- Your business type must belong to the manufacturing or service sector.
- If you are in the manufacturing sector, your business size in terms of investment must be less than 25 lacs (micro), less than 5 crores (small) and less than 10 crores (medium).
- If you are in the service sector, your business in terms of investment must be less than 10 lacs (micro), less than 2 crores (small) and less than 5 crores (medium).
In addition to the above eligibility requirements, as per the MSME loan scheme 2021, SMEs can also get a subsidy of up to 15% on a loan amount of a maximum of 1 crore. This MSME loan subsidy is available only to specific sectors or technologie
Top NBFCs Offering MSME Loans Interest Rates
There are several NBFCs in India offering MSME loans at lucrative interest rates. Some of the NBFCs from whom you can get an MSME loan are given below.
| NBFC Name | Interest Rate |
|---|---|
| Fullerton India | 17% to 21% p.a. |
| LendingKart | At the lender’s discretion |
| Muthoot Fincorp | At the lender’s discretion |
| Mahindra Finance | At the lender’s discretion |
MSME Loan Fees & Interest Rates by Top Banks
| Bank Name | Interest Rate |
|---|---|
| Oriental Bank of Commerce | 10.70% p.a. onwards |
| Allahabad Bank | At the lender’s discretion |
| Andhra Bank | At the lender’s discretion |
| Indian Bank | 9.75% p.a. onwards |
| Central Bank of India | 11.25% p.a. onwards |
| Punjab National Bank | At the lender’s discretion |
| Punjab and Sind Bank | 9.95% p.a. onwards |
| State Bank of India | 7.65% p.a. onwards |
| UCO Bank | 8.85% p.a. onwards |
| Syndicate Bank | At the lender’s discretion |
| United Bank of India | 10.25% to 16.25% p.a. onwards |
| Union Bank of India | At the lender’s discretion |
Which Bank is Best for MSME?
HDFC and SBI are the popular banks for providing MSME loans. The interest rate for SBI is 9.65% p.a. onwards and HDFC is 15.75% p.a. onwards. The processing fee for SBI is up to 2% of the loan amount and 0.99% of the loan amount for HDFC.
From SBI, you can secure a loan amount according to the MSME loan scheme and the loan repayment tenure is up to 120 months. On the other hand, HDFC offers up to Rs. 50 lac loan amount and the repayment tenure is up to 48 months.
Therefore, it is difficult to say which bank is the best because it would depend on your specific business requirements and repayment capability.
Other MSME Loan Schemes
Besides the loan schemes offered by NBFCs and banks, there are some government schemes that are worth checking out. These are listed below.
- MUDRA Scheme – Under this scheme, there are several sub-schemes like Credit for Micro Finance, Micro-Credit Scheme, Mahila Uddyami Scheme, Refinance Scheme for Banks, Equipment Finance Scheme and Credit Guarantee Scheme.
- Prime Minister’s Employment Generation Program
- Credit Guarantee Fund Trust for Micro and Small Enterprises
Collateral for an MSME Loan
In India, most lenders offer MSME loans without businesses having to provide any form of security or collateral. Hence, MSME loans are considered unsecured business loans.
However, some lenders might require you to provide security. In such cases, you need to contact the lender and find out the details regarding what type of security they need to process your loan application.
Why Choose Yubi Loans to Get an MSME Business Loan?
Yubi Loans is the largest debt marketplace in India. This marketplace helps both borrowers and lenders to find each other and select the best options based on their needs and requirements. Trusted by more than 750 lenders, Yubi Loans is one of the best places for your requirements.
Here are the unique features offered by the Yubi Loans Platform:
Find the Best Match: Yubi Loans uses AI/ML technology to find your best match in terms of lenders or borrowers. The platform facilitates connection with 1000+ lenders and 500+ using Yubi Match. Interoperability: It provides integrated solutions for different customer life cycles. Moreover, it provides access to different debt instruments with a single click.
Quick Decision Making: It uses advanced decision-making technologies like Yubi Automate and Yubi Analytics. These suites make decision making 5 times faster than the market and make the entire loan application and approval process faster and easier.
Automated Reports: Yubi Monitor helps you keep a track of your portfolio and maintain a high quality of assets. The platform segments 100s of data points and creates custom reports, custom alerts and early signals of warning.
This platform has helped many businesses scale their operations by helping them find cheap loans based on their requirements. One of the most significant benefits of this platform is that it makes the loan application process quick and easy. Yubi Loans is trusted by 1000s of SMEs as it has helped small and mid-sized organisations meet their fund requirements.
How Does Yubi Loans Platform Make MSME Loan Application Easier for You?
Yubi Loans is a large debt marketplace that allows you to choose from multiple credit-based products depending on your needs and requirements.
Here’s why you should choose Yubi Loans MSME platform –
✓ It provides credit for a tenor of 3 months to 180 months
✓ The loan amount can vary from as low as Rs. 5 to as high as 500 crores.
✓ The entire process or loan transaction time is 5 times faster than a normal marketplace.
In addition to the above, Yubi Loans is a fairly easy-to-use platform that helps you get a customised experience. This platform is trusted by over 500 lenders, and this provides the borrowers with a diverse choice. They can simply match the MSME loan details with their criteria and make their decision.
What Documents are Required to Apply for an MSME Loan?
To apply for an MSME loan, businesses need to submit the following documents:
- Proof of business ownership
- KYC documents or proof of identity (PAN card, voter’s ID, Aadhaar card and passport)
- Proof of business address (lease agreement, rental agreement and utility bills)
- Proof of residence (ration card, rental agreement and utility bills)
- Proof of income (balance sheets and profit & loss statements)
- Proof of securities provided (photocopies of title deeds or lease deeds offered as collateral)
- Tax documents (sales tax returns, IT returns and PAN card)
- Other documents (project report, projected balance sheet, etc.)
Depending on the type of business, you might be required to submit additional documents.
Which business is eligible for an MSME loan?
All existing micro, small and medium enterprises in the services or manufacturing industry are eligible for MSME loans.
How to Get MSME Loan Through Yubi Loans?
Now that you have selected the lender and loan type, the next step is to make an application. Here are the 2 simple loan application steps that you need to follow –
Step 1.Fill the form on this page or visit the Yubi Loans page
Step 2.If you visit the Yubi Loans page, A basic survey form will pop up. Fill this form and click on submit.
Once you have submitted either of the forms, a representative from Yubi Loans will get in touch with you either through an email or a call to explain the further process.
So, follow the simple steps mentioned above and Get your loan now!
FAQs
No, the MSME loan is not interest-free but is unsecured. However, the rates of interest on MSME loans is lesser than corporate loans.
Any person applying for an MSME loan should be 25 years old or more.
Although CIBIL score is not necessary, some institutions might consider it as a criterion for approving loans.
You must choose the Yubi Loans platform for MSME business loans because borrowers enjoy the following benefits:
- The opportunity to meet more than 750 lenders and go through their MSME loan schemes, compare interests and make an informed decision.
- Borrowers can quickly upload their documents digitally and enjoy quick disbursal of the loan amount.
- The platform provides a quick turnaround time, allowing businesses to move quickly from planning to execution in a few days.
-
Thanks to AI/ML technology, the platform allows the best match for borrowers or lenders.
General documents required for an MSME loan are:
- Identity proof – voter’s ID, PAN card, Aadhaar card, passport, driving license, etc.
- Financial documents – audited balance sheets and profit and loss statements, last two years ITR, projected turnover, and last six months’ bank statements.
- Address proof – the electricity bill, ration card, trade license, lease agreement, etc.
- Business proof – memorandum and articles of association, registration certificate and other certificates of business’ existence
Besides these, borrowers need to show other documents that are specific to their business type:
- Companies – memorandum of association, certificate of incorporation and articles of association
- Sole proprietorships – registration certificate, ITR or another proof of business identity
-
Private limited companies – registration certificate, articles and memorandum of association
Business owners can apply for an MSME loan by completing the online application form and uploading the relevant documents. You will get the loan sanctioned if you meet all the lender’s eligibility criteria.
Business owners wanting to secure an MSME loan must meet the following criteria:
- Applicants must be between 25-55 years of age.
- The applicant’s business vintage must be more than three years.
- The credit score must be 750 or above
- The applicant must have filed Income Tax Returns for the business for one year, at least
-
The applicant must not have any record or history of loan default in their business or their name
As part of the financial sector liberalisation, all credit-related matters of banks, including charging interest rates on MSME loans, are deregulated by RBI. Therefore, the interest rates are governed by the banks’ lending policies.
All India’s public and private sector banks have targets prescribed by RBI (the Reserve Bank of India) for lending to the MSME sector. Under these guidelines, foreign banks with more than twenty branches and domestic scheduled commercial banks (except regional rural banks and small finance banks) will allocate 7.5% of their ANBC (Adjusted Net Bank Credit) or equivalent credit amount of off-balance sheet exposure to the MSME sector.
According to RBI regulations, banks must provide MSME loans of up to Rs. 10 lacs without collateral/security. However, depending on the MSME units’ track record and financial position, banks may increase the loan amount to Rs. 25 lacs.
If the borrower fails to make the payment for their MSME loan on time, they are liable to pay compound interest with monthly rests to the lender on the amount from the appointed day or on the agreed day, at three times the bank rate notified by RBI.
RBI directs all public sector banks to open at least one specialised branch in each district for lending to the MSME sector. The banks are permitted to categorise their MSME general banking branches as having sixty per cent or more of their advances to the MSME sector. These specialised branches provide better service to the industry as a whole.
According to the policy package announced by the Indian Government for stepping up credit to the MSME sector, the public sector banks must make sure specialised MSME branches are in identified centres or clusters with a preponderance of small enterprises. This allows the entrepreneurs hassle-free access to the bank credit and equips bank personnel to develop requisite expertise.