What You Need To Know Before Applying For An MSME Loan

What You Need To Know Before Applying
Published: Jan 30, 2023

The MSMEs, or the Micro, Small and Medium enterprises, are the most significant contributors to India’s exponential entrepreneurial spirit, generating employment for its people and advancing its socioeconomic state of affairs. Financing them through MSME loans can help them upgrade themselves, meet their working capital requirements, purchase new plants or machinery or meet overhead costs like accounting fees, advertising, rent etc. The essential criteria to apply for an MSME loan is to be an existing micro, small or medium enterprise entrepreneur in the manufacturing or services industry and have a good credit rating to avail of the loan.

CIBIL, an acronym for Credit Information Bureau (India) Limited, is an auto-generated number from credit bureaus that summarise your loan or credit card repayment history. The score depicts the possibility of a borrower getting a loan from various lenders. Maintaining a good credit score is always helpful in getting quick loan approval and ensures that your business requirements are met promptly. MSME entrepreneurs must ensure that they maintain a good credit score to get loans at low-interest rates with added benefits.

Eligibility Criteria for MSME Loan Application

Different lenders have different eligibility requirements from borrowers. If an MSME business owner wants to apply for an MSME loan online or offline, they must fulfill the basic eligibility criteria, which are stated below:

●The candidate must be at least 22 years of age while applying for the loan and a maximum of 65 years of age at the time of loan maturity.
●Private companies, sole proprietors, and private MSMEs engaged in trading, manufacturing or service sector are eligible to apply for an MSME loan.
●The applicant should be a registered MSME registered in the Udyaan portal and must have an MSME registration certificate.
●The business should generate a basic income of at least INR 2 lakhs annually with a turnover of INR 10 lakhs annually and should have generated profits for at least two years.
●The candidate must not have any previous loan default with any financial institution.
●The candidate should be engaged for at least three years in the MSME business and at least five years of experience in the concerned business.
●The candidate must have a good credit record to obtain an MSME loan. The higher the credit score, the better the chances for loan approval.

Documents Required for MSME Loan Application

Once you meet the eligibility criteria to apply for an MSME loan, you must submit the necessary documents for successful MSME loan approval. The list of documents required for an MSME loan application is as follows:

●Proof of identity like PAN card, Aadhaar card, Driving License, Passport etc.
●Proof of address like electricity bill, ration card, lease agreement, voter’s ID etc.
●Business address proof like rental agreement, electricity bills etc.
●Tax documents like Income Tax Returns, PAN cards, sales tax returns etc.
●Proof of securities offered, like scanned copies of lease deeds or title deeds.
●Bank statements for the past six months.
●Other documents like project reports, estimated balance sheets, project reports etc.

Factors Affecting MSME Loan Application

The interest rates offered by various banks, NBFCs, RRBs and MFIs are based on various factors, which are stated below:

●The applicant’s income, credit score, repayment capability, financial history, and stability.
●The desired loan amount and repayment tenure.
●Business annual turnover and longevity of the business.
●Business’s credit rating, realistic projections, the volume of business etc.

Through Capri Loans, one can swiftly avail of an MSME loan for their business to set up or expand their business. Capri Loans have tailored its MSME loan application schemes to suit every borrower with the lowest interest rates and a plethora of added benefits like the MSME loan EMI calculator. The EMI calculator lets you check your EMI before applying for an MSME loan to make an informed decision. To apply for an MSME loan online with Capri Loans, explore the website to know more.