To start a small business, you will need capital. You can use your savings or funds to finance the initial expenses of buying inventory, equipment, machinery, etc. But, even your savings are not sufficient sometimes to meet all your business requirements. Besides that, it would be wise to risk every penny you have to start a small business. 

In such a case, you can apply for an MSME loan to get funds and start your small business. It is a great way to manage your finances without touching your savings. MSME can not only help you start your business, but you can also expand operations without worrying about finances. 

What is an MSME loan? 

An MSME loan is an unsecured credit facility offered by financial institutions. It enables small business owners and women entrepreneurs to meet their businesses’ financial requirements. It comes with minimum MSME eligibility criteria and can be obtained without pledging your assets as collateral. The loan amount, interest rate, and loan tenure depend on your lender, your credit profile, business history, etc. 

Why should you opt for an MSME loan? 

An MSME loan comes with features and benefits that make it easy and hassle-free for small business owners to manage their finances when starting a new business. Here are the reasons why an MSME loan is a better loan option for small business owners :

  • Minimum Eligibility

The MSME eligibility criteria are a bare minimum. You must meet the following requirements to apply for an MSME loan: 

  • You must be an Indian citizen.
  • You must be at least 21 years at the time of application and 65 years during the loan maturity.
  • Must have an established business that has been active for at least six months. 
  • Minimum turnover in the past three months, based on your lender’s policy. 
  • Your business should not be excluded from the SBA finance list. 
  • It is worth noting that Trusts, NGOs, and charitable organizations are not eligible to apply for an MSME loan. 
  • Easily available

As a startup, there will come a time when the demand for additional financial support may rise to meet immediate business requirements. For instance, you may need to replenish stock or new machinery. In such cases, you can apply for an MSME loan that comes with minimum MSME eligibility criteria and is easily available. The process of applying for a loan is easy and hassle-free, ensuring your access to funds in no time. So, if you have an immediate financial need to meet a business requirement, it is better to apply for an MSME loan than to redeem your savings. 

  • Collateral-free

Since an MSME loan is an unsecured loan, borrowers are not required to pledge their assets as security. However, before approving your loan application, your lender checks your GST records. If you have regular payments of tax, your loan application will likely be accepted. Paying your taxes regularly indicates your business stability and profitability. Besides that, you do not even need to submit financial statements or balance sheets. 

  • Affordable interest rate 

The best thing about an MSME loan is that you can avail yourself of lower interest rates compared to other business loans. Just keep in mind to evaluate your business needs and draft a proper repayment plan to avoid any default or delay in your loan payments. 

  • Minimum documents required 

For an unsecured business loan, you need to furnish several documents. But, to apply for an MSME loan, there is minimum documentation involved. You will need to provide proof of your business registration such as GST registration, bank statements, PAN Card details, Income Tax filings, and KYC documents. 

  • Enhance your credibility

As a small business owner, you can get an MSME loan to raise your credibility in the market and encourage more profits. More profits will reflect positively in your books and may create a reputation for your business in the market. This way, the Credit Bureau of India will take note of your improvements and increase your business’s credit rating. This way, you can rest assured to get business finance in the future as well.


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