Understanding the Meaning of MSME Loan for your Business Growth

Powered by government schemes like Make in India, Micro, Small and Medium Enterprises (MSME full form) are fast becoming the growth engine, driving India’s progress. Today, the country is home to as many as 6.8 million MSMEs registered on UAM (Udyog Aadhar Memorandum).

Plus, the Union Budget 2019-20 also saw a significant allocation towards improving the sector’s growth and development.

  • $1 billion – Total budgetary allocations to the Ministry of MSME for 2019-20.

With 20% of total MSMEs based in rural areas, India aims towards a parallel growth for both urban and rural locations. However, while remarkable steps have been taken for the sector’s growth, it still suffers a noteworthy gap in credit availability.

  • 16 lakh crore – Approximate credit shortage in the MSME sector, as per a report from IFC-Intellecap.

The financial market thus brings high-value MSME loans to help medium and small enterprises in the country to bridge this funding gap.

Such advances can help meet operational and other business expenses with ease. Now, take a closer look at what such an efficient financing solution for MSMEs brings.

MSME loan – Meaning and scope

Leveraged by digitisation, the MSME sector is moving towards mastering competencies in manufacturing as well as reducing regional discrepancies. Also, it accounts for a majority of the country’s workforce.

  • 69% – Share of Indian workforce employed in MSMEs.

Such an operative capacity certainly calls for increased financial infusion via MSME loan, a type of advance customised to meet varying funding needs of a micro, small or medium enterprise.

Companies can thus utilise the accompanying benefits of MSME loans to drive the business towards growth and expansion.

These advances come tailored to suit diverse business requirements and offer sufficient flexibility of repayment over a long tenor. Affordable EMIs only bring these loans within the repayment capacity of a business, even if it is in the initial stages of operation and not generating high profits.

All businesses that classify as MSMEs (check MSME full form above) can avail these business loans to meet infrastructural investments, fulfil different types of working capital requirements, and many more.

An MSME further requires meeting minimum eligibility criteria and providing a handful of documents to avail this loan.

Lenders like Bajaj Finserv further make repayment of these loans convenient and affordable via Flexi Loans. With this facility, borrowers can choose to withdraw any amount from the pre-sanctioned loan and pay interest only on that.

They also bring pre-approved offers that simplify the process of financing and help you save valuable time.

Utilising MSME loans for business growth

MSME loans can help an enterprise expand its operations as well as scale-up for improved business performance.

So, once your company qualifies the Micro, Small and Medium Enterprises (MSME full form) classification, it can proceed to apply for the loan to meet following business requirements.

  1. Improvement in cash flow.
  2. Plant & machinery purchase.
  3. Office space renovation.
  4. Up-gradation to the latest technology and equipment.
  5. Overcoming seasonal and non-seasonal business flow.
  6. Fulfiling bulk orders through the purchase of additional raw materials.
  7. Working on bigger projects with increased cash inflow.
  8. Leasing premises at prominent locations for better exposure.
  9. Inventory stock-up.

A business loan can help tap into the available opportunities in the market and increase the chances of growth. However, since multiple lenders provide these loans with different features, the choice of a suitable lender is equally important to maximise benefits.

Features to look for when availing a business loan for your MSME

  • Unsecured advances of high value

Unsecured loans keep you free from mortgaging any asset to avail the loan. Plus, financial institutions also provide collateral-free advances of up to Rs.30 lakh to help you sufficiently meet the necessary funding needs.

  • Hassle-free approvals

Easy availability of finance is also essential to meet immediate funding needs and make the most of available opportunities. Seek lenders who provide quick approval of business loans against minimum eligibility and documentation.

  • Competitive interest rates

Affordability of repayment is another essential factor you must consider when comparing lenders. Look for competitive rates of interest that bring EMIs within your repayment capacity.

Once you consider these factors, choose a suitable lender and proceed to apply for your business loan. Make sure to check the credit score and try to fulfil all eligibility criteria before making a choice.