Understand the MSME loan scheme in full in this article, as well as how to choose the scheme and apply for a loan for your business.
Cash is needed to start and expand micro, small, and medium-sized businesses (MSMEs). The Indian government has made a number of attempts and developed a number of schemes to help SMEs get loans. MSMEs provide a vital contribution to the economic development of our country. The ability of MSMEs to acquire funding is one of their most important attributes.MEMS requires loans or capital in order to establish a new business or expand an existing one.
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Let’s go through some fundamentals of the MSME lending program.
What exactly is an MSME loan?
A Micro, Small, and Medium Enterprise (MSME) loan is a form of a business loan made available by financial institutions to individuals, MSMEs, and new enterprises with the goal of increasing their businesses and supporting the MSME sector. MSME loan programs are largely used by business owners and entrepreneurs to meet their working capital requirements, manage or improve cash flow, and expand their operations, among other things. Most banks and non-bank financial institutions (NBFCs) provide MSME loans without requiring borrowers to provide collateral or security.
Government Schemes for MSME Loans – 2021
Various banks and non-banking financial companies (NBFCs) offer Micro, Small, and Medium Enterprises (MSMEs) SME/MSME programs created by the Ministry of MSME. Some of the most prominent MSME programs offered by financial institutions and initiated by the Indian government are as follows:
The Indian government has created a number of lending plans and programs to help MSMEs obtain credit, and the banking industry and financial institutions also lend to them.
Prime Minister’s Employment Generation Programme (PMEGP) Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE) Credit Linked Capital Subsidy Scheme (CLCSS) Equity Infusion for MSMEs through Fund of Funds SIDBI Make In India Loan For Enterprises (SMILE) MSME Business Loan for Startups in 59 Minutes
- MSMEs (micro, small, and medium-sized enterprises) require capital to start and grow. The Indian government has made tremendous efforts and developed numerous schemes to assist MSMEs in obtaining loans. MSMEs contribute significantly to our country’s economic development. The ability of MSMEs to acquire funding is one of their most important attributes.
Pradhan Mantri Mudra Yojana is an acronym for the Pradhan Mantri Mudra Yojana (PMMY)
This scheme allows non-corporate and non-farm small or micro-enterprises to apply for loans of up to ten lakh rupees.PMMY classifies these loans as MUDRA (Micro Units Development and Refinance Agency Limited) loans.
MUDRA is a non-banking financial institution (NBFI) that fosters the growth of small and medium-sized enterprises (SMEs). MUDRA works with banks, microfinance institutions (MFIs), and non-bank financial firms (NBFCs) to refinance loans to micro-units with credit requirements of up to ten lakh rupees. Commercial banks, small finance banks, MFIs, and NBFCs make loans under this technique.
Prime Minister’s Job Creation Initiative (PMEGP)
The Prime Minister’s Employment Generation Programme (PMEGP) is a merger of the Prime Minister’s Rojgar Yojna (PMRY) and the Rural Employment Generation Programme (REGP) (REGP). By establishing micro-enterprises, this program intends to give jobless youngsters and traditional craftspeople self-employment opportunities in the non-farm sector. It is carried out by the Khadi and Village Industries Commission (KVIC), which also serves as the initiative’s national coordinating authority.
Eligibility – Any person or persons over the age of 18 are eligible. Individuals must have at least a VIII grade pass for projects costing more than Rs.10 lakh in the manufacturing sector and more than Rs.5 lakh in the commercial or service sector.
- This strategy only considers new projects for approval. Self-help groups, Societies Registration Act of 1860 institutions, production-based cooperative societies and charitable trusts are also eligible.
- Any unit/s currently involved in PMRY, REGP, or any other program run by the Government of India or a state government are disqualified. Units that have previously received Government Subsidy under any other scheme administered by the Government of India or a state government are also ineligible.
Micro and Small Enterprise Credit Guarantee Trust Fund (CGT MSE)
Trust Fund for Micro and Small Enterprise Credit Guarantees (CGT MSE)
The Credit Guarantee Fund Trust for Micro and Small Enterprises was founded by the Ministry of Micro, Small, and Medium Enterprises and the Small Industries Development Bank of India (SIDBI) (CGTMSE). The CGTMSE was formed to create a credit guarantee scheme for MSMEs.
The scheme’s fund is supported by both the Government of India and SIDBI. This trust’s purpose is to give financial assistance to small and medium-sized businesses without the need for third-party guarantees or collateral. Guarantee coverage under this plan ranges from 85 percent for Micro Enterprises (up to Rs 5 lakh), 75 percent for others, and 50 percent for individuals.
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Eligibility – The program is open to both existing and new enterprises. Candidates who meet the eligibility conditions may approach banks or financial institutions and select from a list of Regional Rural Banks qualified for help under this strategy.
Nature of Assistance – The guarantee cover given under the plan is 50%, 75%, 80%, or 85% of the credit facility’s sanctioned amount. For micro-enterprises up to 5 lakhs, the degree of guarantee protection is 85 percent.
The guarantee cover is 50% of the credit facility sanctioned amount for loans between 10 lakhs and 100 lakhs per MSME borrower for retail commercial operation.