What is MSME LOAN
MSME loans are financial instruments intended exclusively for small and medium-sized businesses (SMEs) in India. These loans can be used for a variety of objectives, including growing a business, purchasing equipment or inventory, and funding working capital. Banks and financial institutions in India offer MSME loans, which may be eligible for government schemes and incentives.
Types Of MSME Loan
The old MSME classification system was based on traits like capital investment in machinery, equipment, or plants. As a result, MSMEs must restrict their investment to a lower level to qualify for MSME incentives, as shown below:
Existing MSME
| Sector | Criteria | Micro | Small | Medium |
| Manufacturing | Investment | < Rs.25 lakh | < Rs.5 crore | < Rs.10 crore |
| Services | Investment | < Rs.10 lakh | < Rs.2 crore | < Rs.5 crore |
Since they were unable to scale their businesses any further, these lower constraints were killing their will to grow. A long-standing demand was also made for the MSME classification to be changed, allowing them to expand their operations and yet qualify for MSME benefits.
The government updated the MSME categorization under the Aatmanirbhar Bharat Abhiyan (ABA) by including composite criteria for both investment and yearly turnover. In addition, the MSME definition no longer distinguishes between manufacturing and service industries. This change brought the sectors closer together.
The following is the new MSME categorization, which considers both investment and annual revenue when identifying an MSME :
| Criteria | Micro | Small | Medium* |
| Investment & Annual Turnover | < Rs.1 crore & < Rs.5 crore | < Rs.10 crore & < Rs.50 crore | < Rs.50 crore & < Rs.250 crore |
Registration Process
An Aadhar number is required for registration under the MSME Act. The MSME Act allows any business that meets the MSME criteria to get Udaym Registration. To obtain Udyam, you must submit an application online through the.
The Udyam Registration procedure is entirely online, and the registration certificate will be delivered within a few days after the form is completed and submitted on the Udyam Registration site. Unless revoked, the Udyam Registration is valid for life.
Documents Required
- Identity Proof: PAN Card, Aadhaar Card, Voter’s ID Card, Passport.
- Address Proof: Ration Card, Rental Agreement, Utility Bills.
- Business Address Proof: Rental Agreement, Lease Agreement, Electricity Bills.
- Income Proof: Profits and Loss Account And Balance Sheet Copies Of last 2 Years.
- Tax Documents: Income Tax Returns, Sales Tax Return, PAN Card.
- Proof Of Securities Offered: Photocopies of lease deeds or Title Deeds.
- Other Documents: Project Report, Estimated Balance Sheet, Project Report.
