October 18, 2021

Know The Best Ways to Apply for An MSME Loan in India


Introduced by the Indian government, micro, small and medium enterprises or MSMEs are strong economic drivers associated with the manufacturing, processing and preservation of commodities. 

The sector contributes to socio-economic development and creates employment opportunities in the market. To support these small businesses financially, owners can apply for an MSME loan that addresses their unique needs.     

  • Over 63 million MSMEs are currently operational in India in FY2020. 
  • 99.4% of these enterprises are micro-units.  

Despite their contribution, enterprises in this sector face numerous challenges that often clog their path to growth and expansion. These include lack of credit, lack of cutting-edge technology, insufficient marketing and advertising scope, overlapping debts, etc.

The best way to tackle such issues is to apply for MSME loan, which is a type of business funding with zero collateral. You can enjoy many other benefits of MSME loans when availed from reputed lenders.  

Borrowers can apply for such a credit online, eliminating the need to visit a brick-and-mortar location and extensive verification process. The process required to apply for credit is fairly intuitive and straightforward as well; let’s take a look at the steps involved.

Does your business qualify as an MSME?

Availing this business loan to meet your financial requirements is possible when your firm qualifies as an MSME. 

Owing to the stressed national economic growth, the government has modified the categorisation of MSMEs in India on 13th May 2020. The new definition segregates micro, small and medium businesses depending on their investment and turnover. 

  • Micro enterprises – Up to Rs.5 crore annual turnover and up to Rs.1 crore of investment.
  • Small enterprises – Up to Rs.50 crore of annual revenue and up to Rs.10 crore of investment.
  • Medium enterprises – Up to Rs.250 crore of turnover and up to Rs.50 crore of investment.   

Registering a business under the MSME Act qualifies it for exclusive schemes and benefits. 

Fulfil additional eligibility criteria & document requirements 

Once your business qualifies as an MSME, there are certain other loan eligibility parameters that you need to fulfil, such as:   

  1. Only Indian nationals, residing within the country, can avail this credit.
  2. Age should be between 25 and 55 years. 
  3. A minimum business vintage of 3 years. 

Apart from such parameters, borrowers need to provide a few essential documents for MSME funding. These include KYC documents, financial documents and business proof. You may need to submit additional documents depending on your business type as well; for example, partnership firms must provide a partnership deed or registration certificate.

Again, companies should submit articles of association, certificate of incorporation or memorandum of association. 

Also Read: Essential to Calculate the Cash Flow in Business

What are the best ways to apply for business funding?

Firstly, make sure you learn to make a great business plan before applying for credit. Once ready, go for the two most convenient ways to apply for an MSME loan: 

  1. Online application forms

Eligible borrowers need to follow a simple application process. 

Step 1: Visit the official website of your preferred lending institution. 

Step 2: Access the online application form and fill it up with appropriate details. Recheck and submit the application form. 

Step 4: Reputed lenders offer doorstep document collection facility. So, wait for an authorised representative to get in touch and hand over the documents to him/her safely. 

Step 5: Once the lender completes the verification process, your sanctioned amount is disbursed directly to your account.  

  1. Pre-approved offers 

Alternatively, existing customers can apply for an MSME loan with pre-approved offers. NBFCs like Bajaj Finserv bring pre-approved offers to existing customers, which ease the application process and help save time. These schemes are applicable to a number of financial products, including personal loans, business loans, credit cards, etc. Submit the necessary information like contact number, name, etc. to check your pre-approved offers online.  

As lenders already possess your details and documents, you need not submit any additional papers or fulfil eligibility criteria. 

Borrowers can make both investments and expenditures using a high-value business loan for MSMEs. Instant financing with one-step verification eliminates the waiting period and allows borrowers to address monetary emergencies effortlessly. All they need is a dependable budget for the appropriate utilization of MSME funding.