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MSMEs form a large part of our country’s economy. It is the MSMEs that have employed a lot of people from various walks of life and have let them earn a living. While setting up MSMEs is not a difficult job, the real challenge lies in arranging the capital. However, with the introduction of the MSME loan, establishing an MSME is a breeze. So, whether you are setting up a new enterprise or planning to step up your enterprise, an MSME loan can be of immense help.

Let’s know more about it in the following sections.

MSME Loan Usage

Most of the entrepreneurs as well as common people must be aware of the MSME full form, which stands for Micro small, and medium enterprises. Like most business loans, MSME loans aid small business owners in a variety of ways. These are as follows:

  • Acquisition of factory or industry land, and construction of factory buildings.
  • Purchase of plant and machinery. It includes lab equipment, furniture, tools, electric fittings, and more.
  • Procuring the working capital such as raw materials, stock-in-progress, finished goods, etc.
  • Payment of creditors or trade finance.
  • Launch of new products and acquisition of credit for marketing and promotional purpose.
  • Expansion of business, its diversification, modernization as well as technology upgradation.
  • Fulfillment of warehousing needs.
  • Additional monetary assistance for other important purposes.

Where you can avail MSME Loan?

After you are all set for applying for an MSME loan, the next thing that comes to your mind is where you can get such a loan. You have a wide range of lender choices to opt for based on your eligibility, location, and other aspects. MSME loans are usually offered by banks, NBFCs (Non-Banking Financial Companies), SFBs (Small Finance Banks), and FinTechs. They access your loan application and based on your current location, the nearest lender approaches you. Furthermore, different city-based fintechs may also get in touch with you after analyzing your application.

MSME Loan Application

Applying for an MSME loan is easy and you can apply online anytime anywhere. All you need is to keep your budget, documents, and information ready before filling the application form. Before filling the application, you need to go for MSME registration by giving your name, email id, and mobile number in the definite portal. The portal itself will help you proceed through the form fillup and also find you the right agency. You just need to fill in your basic details as and when required. The person/agency may charge a small amount in some cases.

Subsidies & Incentives for MSMEs

In order to promote a healthy and prosperous business, the Government provides various subsidies and incentives for MSME owners. Thus, an entrepreneur needs to learn about these subsidies or incentives that can be availed to reduce their capital cost and slash down their interest burden and promote faster business growth.

Security for MSMEs

To ensure enhanced collateral security, the Central Government and SIDBI have established Credit Guarantee Fund Trust for micro and small enterprises. Besides, the National Credit Guarantee Trustee Company has also been set up by the Government of India to operate the credit guarantee funds. These funds include educational loans, skill development loans, and other funds that are required from time to time. You can opt for such guarantee benefits based on your loan requirements through your lender.

Constraints in MSMEs

Although MSMEs help sustain the lives of so many people involved, it has its fair share of constraints associated with it too. The most common among them is the liquidity issues. MSMEs often face problems in obtaining adequate finance as in converting their trade receivables into liquid funds. To minimize this constraint, various platforms such as the TReDS as well as the Receivables Exchange of India have come up to promote higher discounts and promote greater liquidity.

Final Thoughts

MSMEs, though suffer certain constraints, are one of the largest building blocks of the economy. And MSME loans play a crucial part in sustaining this major sector through timely payments, transparent process, competitive pricing, timely cash flows, and most importantly, quality products and infrastructure. Thus, MSMEs are yet to achieve more milestones and support the lives of millions in the years to come through its enhanced loan system and vibrant business culture.

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