As per TransUnion CIBIL, the credit exposure in the MSME sector reached Rs.19.09 lakh crore in September 2020 with a y-o-y growth of 5.7%. The booming credit growth can be attributed primarily to the Government’s Emergency Credit Line Guarantee Scheme (ECLGS) and a rise in demand and consumption.
Micro, Small and Medium Enterprises (MSME full form) require additional funds from time to time. A borrowing solution like an MSME loan caters to their exclusive business requirements. Moreover, almost all financial institutions in India offer this fund to eligible business owners.
Besides the easy availability of the fund, it also accompanies some features and benefits that entrepreneurs or existing business owners need to know to optimise the borrowing experience.
What makes MSME loans the best for business owners?
Knowing only about MSME full form is not enough for business owners. They should also consider the following aspects before applying for the funds.
- High value to meet big expenses
Since an MSME loan is designed exclusively for entrepreneurs and small businesses, lenders offer this credit with easy-to-meet eligibility criteria. It enables business owners to raise a considerable amount of up to Rs.45 lakh without pledging any collateral.
- Flexible tenor that facilitates repayment
This fund also comes with a flexible tenor of up to 84 months, along with high loan volume. Hence, borrowers can select a period that fits their repayment capacity. To estimate the monthly instalments, they can also use a business loan EMI calculator to instantly show the net cost of borrowing and the interest payable.
- Competitive interest rates
The cost of borrowing primarily depends on the interest accrued on the loan availed. This rate further depends on the eligibility of the borrower and several macroeconomic aspects like repo rate, parity between demand and supply, etc. Hence, like MSME full form, knowing about each of these factors is crucial to understanding the current market scenario.
Although the rates differ from lender to lender, generally, you need to have a credit score of 750 and above to get the most competitive interest rates. However, there are a few things to do if your business credit score is low; for instance, clear the existing debts as soon as possible to improve the same.
- Minimal documentation
Knowing only about eligibility is not sufficient; business owners also need to know how to get MSME loan within a short period. Being a collateral-free fund, business owners need to present some essential documents to avail it.
Following is the document checklist required to avail of an MSME business loan in India.
- KYC documents of business owners.
- Business PAN Card.
- GST certificate.
- ITR documents of at least one year.
- Proof of business ownership
- Documents supporting the business vintage minimum of 3 years.
- Bank account statement for the last 6 months.
Depending on the lender, borrowers may need to submit additional documents as well.
- Prompt approval
Another valid reason an MSME loan is one of the most sought-after credit options for business owners is its prompt approval. If prospective borrowers can fulfil the eligibility, the lenders approve and disburse the amount within 24 hours of application. It ensures that they have access to sufficient funds at the right time and tackle business operational cost with greater convenience.
Business owners can further expedite their loan processing through pre-approved offers that selected NBFCs like Bajaj Finserv provides. Such offers are available on various unsecured loan products like personal loans, business loans, credit cards and several others. All you have to do is enter your name and mobile number to check your pre-approved offer instantly.
Therefore, besides knowing the MSME full form, business owners should also know the facilities they are entitled to when they opt for this credit solution. It will help them to reap all the benefits an MSME loan has to offer.