Know MSME Loan Tips for Young Entrepreneurs in India
Indian Micro, Small and Medium Enterprises (MSMEs) are contributing immensely to the development of entrepreneurship in the country. They contribute around 30% of India’s GDP and employ thousands of people in both urban and rural areas.
As such, it would not be wrong to call the MSME sector the backbone of the Indian economy.
To support this vibrant and dynamic sector, the government has put in place several loan programs for MSMEs. If you are a young entrepreneur, read on to learn more about MSME loans and some useful tips to improve your eligibility.
MSME loans are tailor-made loans for micro, small and medium enterprises. Businesses can use the loan to jump-start their startup, expand their existing business, or meet other business needs.
Unsecured and available at attractive interest rates, loans can provide a much-needed boost to start-up MSMEs.
Financial institutions offer loans to MSMEs under various government programs such as the Credit Guarantee Trust Fund for Small and Medium Enterprises (CGTMSE) or the Credit Linked Capital Subsidy Programs (CLCSS).
The programs provide access to credit to MSMEs without the need to secure it with titles such as land and buildings. However, business owners must meet certain criteria mentioned in the scheme to avail its benefits.
Tips for Young Entrepreneurs to Benefit from MSME Loans
An MSME loan can put your small business on a rapid growth trajectory. But before you apply for a loan, here are some things to consider in getting a loan. instant loan online.
Check and confirm your eligibility
Before applying for an MSME loan, check their eligibility requirements and make sure you meet them.
For example, a MSME loan for doctors of Poonawalla Fincorp requires you to have a minimum practice of at least one year.
It is essential to follow these steps because too many inquiries and loan applications in a short period of time can hurt your credit score and affect loan terms. In the worst case, this may even result in the rejection of your loan application.
So visit the lender’s website and confirm your eligibility. Research specific industry requirements, location, years of operation, income requirements, credit scores, and more. Then, narrow down your choices to 2 or 3 lenders based on those specs.
Keep your documents ready
Lenders will not process your loan unless you submit all essential documents. Although requirements may differ from lender to lender, here are some of the most common ones you should keep ready:
- Personal identity documents: PAN, Aadhaar, passport, voter card or any other government ID to establish your identity
- Company KYC documents: Business PAN, registration certificate, tax returns, rental agreement, bank statements, utility bills, etc.
- Special licenses: Some industries require you to hold special licenses as a sanction to operate in that industry. Lenders will ask you the same to confirm your compliance with state and local laws.
Here are some examples of such special licenses:
- FSSAI certificate to practice in the food sector
- Forest Department Certificate
- Pollution Control Certificate
- No Certificate of Objection
Determine the purpose of the loan
Before applying for a loan, you must determine why you need the loan and where you will use it. Having clarity will help you choose the right type of loan.
For example, if you need a loan to meet your working capital needs, you should ideally opt for a business line of credit.
Most lenders provide loans for various purposes. Specifying your goals helps ensure that the loan goes toward achieving that goal.
Limit the loan to your needs
All loans have a cost and you must repay them in the future. So, instead of burdening yourself with heavy borrowing, make a calculated decision with your expenses and income in mind.
Describe your repayment plan
Repayment is a crucial part of your loan cycle and you need to plan for it in advance. You must ensure that you are comfortable with your monthly IMEs and that they do not become burdensome.
Any default or late repayment will impact your credit score and negatively affect your chances of getting a loan in the future.
MSME loans are a necessary catalyst for small entrepreneurs to fuel their business growth. However, it is essential to first identify your needs and the lender’s eligibility criteria. It will help you find the right lender who can give you an instant loan online without any delay.