MSME Loan / SME Loan – Apply For MSME Business Loan Online

An Micro Small Medium Enterprise loan, also known as a SME loan, is a type of credit facility given to micro, small, and medium-sized businesses by banks, small finance banks, and non-bank financing companies like Lendingkart. Financial institutions offer these loans, which can be secured or unsecured, to individuals, single proprietorships, and partnership corporations, as well as businesses, to cover a range of expenses. These loans are also available to startups. These loans can be used for a variety of things, such as purchasing inventory, investing in plant and machinery, and paying employees or suppliers.

Benefits and Features of SME/MSME Loan

Lendingkart’s SME/MSME loans serve as financial catalysts, providing businesses with the agility to swiftly transit from strategic planning to execution. These loans empower businesses to leverage emerging market opportunities, control their operations, and manage capital effectively. By bolstering financial health, Lendingkart’s loans also aid in elevating market credibility, which can enhance credit ratings and unlock new vistas for investment. Features of MSME/SME Loans by Lendingkart:

• Quick Finance for Businesses: Offers speedy online approval for MSME and SME business loans, ideal for the fast-paced business world.
• Flexible Loan Amounts: Loan amounts range from ₹50,000 to ₹35 lakhs, catering to a wide spectrum of business needs.
• Online Application: Streamlines the process with online applications and document submissions for same-day loan approvals.
• Rapid Disbursal: Guarantees loan disbursal within 3 days post-document verification, eliminating wait times.
• No Collateral Required: Loans are unsecured, removing the need for asset security and making it easier for businesses to apply.
• Competitive Interest Rates: Utilises financial data analytics to offer the best interest rates, tailored to your business’s repayment capability.
• Flexible Repayment: Offers loan tenures from 1 to 36 months with options for monthly or bi-weekly EMIs, aligning with your cash flow.
• Transparent Costs: Charges an upfront processing fee of 2-5% with no hidden fees, ensuring maximum loan value.
• Zero Prepayment Fees: Allows early loan settlement post the first EMI without any extra charges.

Apply for MSME Loan Online

MSME/SME Loan EMI Calculator:

An MSME loan EMI calculator simplifies the task of determining your monthly outlay towards loan repayment, aiding in financial planning.

Benefits of Opting for Micro Small, and Medium enterprise Loans from Lendingkart:

• Accelerated Execution: The quick turnaround time transforms plans into actions swiftly, facilitating market leadership and operational expansion. Lendingkart leverages big data which makes the assessment procedure lightning quick, we pass on this advantage to our customers in the form of accelerated execution and quick disbursal.
• Asset Safety: Being unsecured, these loans keep your assets safe even in default scenarios, ensuring your business remains yours.We understand that arranging for a collateral to secure collateralized debt funding for your MSME business can be a tough nut to crack! Hence our unsecured loan proposition keeps your asset safe!
• Capital Management: Versatile use of loans for expansion or cash flow improvement helps balance your financial strategies without hampering operational funds.
• Enhanced Credibility: Boosts your business profile and market standing, making it attractive for future investments and financial opportunities by improving credit ratings.

Purpose of loans for enterprises of Micro Small, and Medium size:

Online enterprise  loans are pivotal in bolstering the backbone of the economy – the MSME sector. They facilitate inventory management, the acquisition of new equipment, debt consolidation, marketing, and working capital management. By catering to immediate financial needs and promoting enterprise scalability, these loans play an integral role in sustaining business operations and fueling expansion.

MSME / SME Loans Fees & Interest Rates

For more details visit Lendingkart MSME/SME interest rates and charges. Apply for MSME Loan Online

Eligibility Criteria for MSME Loan:

To qualify for a Lendingkart MSME Loan, your enterprise needs to meet specific financial criteria. These prerequisites ensure that loans are extended to businesses poised for growth and are used to maximize their operational efficiency. Lendingkart aims for rapid SME business loan processing by minimizing SME eligibility requirements and reducing document and paperwork demands.

• Business Operational Duration: Your business should have been operational for at least 6 months in the msme industry. This indicates that the business is in going concern, and will continue to operate even after funding injection.
• Financial Requirement: A minimum business turnover of ₹90,000 in the three months prior to applying for the loan. Minimum turnover requirement is usually kept to ensure that there is a real business in place that is making money, and once the amount is disbursed, the business will be in a position to repay the loan.
• Industry Eligibility: Your business should not be on the blacklisted/excluded list for SBA finance.
• Location Criteria: The enterprise must not be located in areas designated as negative by Lendingkart.Certain locations are high risk locations for the lenders, and it is refrained to disburse any debt to businesses based off in these locations, due to high risk of fraud and non-repayment. If your business is in such a location, chances are lenders will reject the application.
• Type of Organization: Trusts, NGOs, and charitable institutions are not eligible for these small business loans.
• Since these organizations by definition are not for profit organizations, lending to such organizations is off-limits since these are not businesses whose goal is to earn profits.

Documents Required for MSME / Small, and Medium Enterprise Loans:

A concise list of essential documents is required to process your Micro, small, and medium enterprises loan, streamlining the application to disbursement pipeline.

Mandatory for All Applicants:

• PAN Card: Essential for validating the applicant’s identity and tax status.
• Aadhaar Card: Crucial for verifying the applicant’s identity and address.
• Bank Statement: Required to assess the financial health and cash flow of the business.
• Registration Proof: Necessary to confirm the legal existence of the business.

Specific to Business Type:

• For Partnership Firms, Private Limited, and LLC Companies:
  • Partnership Deed: Needed to verify the terms and agreements among partners.
  • Company PAN Card: Required for tax identification purposes specific to the company.

These documents play a vital role in the loan approval process, ensuring that businesses meet the eligibility criteria and adhere to regulatory requirements.

Do’s and Don’ts when applying for an MSME Loan Online:

Do’s:

• Check Your Credit Score: Ensure your credit rating is in good standing before applying, as it significantly influences loan approval decisions. A good credit score is imperative if you wish to secure a debt at a favorable interest rate and terms and conditions. Lenders prefer approving loans where the applicant has a good credit score, as it signifies good repayment ability and track record to back the claim. For whatever reason, if the credit score is on the lower side, take measures to improve it further as the credit score is never final, and it keeps changing.
• Organize Documentation: Gather all necessary documents in digital format beforehand, especially for platforms like Lendingkart that require online submissions.Accurate, legible, and legal documents are absolutely essential while applying for loans, having documents in order may help you save all the hassle and make the application process smooth.
• Prepare a Business Plan: Draft a comprehensive plan detailing how you’ll utilize the loan and the expected return on investment, even if not all lenders request it.
•  A business plan should cover industry and business scope, strength, weaknesses, opportunities, threats, etc. and also outline the plan to navigate through the business.
• Assess Loan Needs Accurately: Carefully evaluate how much funding your business really needs to avoid applying for too much or too little.

Don’ts:

• Avoid Multiple Applications:Having too many applications in a short span of time may negatively impact your credit score, and may cause lenders to reject your application. Applying with numerous lenders simultaneously can lower your credit score and signal desperation, potentially deterring lenders. 
• Keep Up with Current Debts: Don’t neglect repayments on existing loans, as doing so can harm your credit score and your reputation with lenders.Missed or delayed payments have a severe impact on the credit score, and these data points are recorded in the cibil bureau, for every lenders’ reference. Deferred payments not only affect the current application but also make it really difficult to get future loans.
• Steer Clear of Upfront Fees: Be wary of lenders requesting large fees for loan approval; reputable lenders like Lendingkart charge a reasonable fee only upon loan disbursal.

By adhering to these guidelines, you can enhance your chances of securing an MSME loan or SMEs finance while minimizing the risk of rejection.

What are MSME Loans? 

These loans, or Micro, Small, and Medium Enterprises loans, are customized credit options designed specifically for small and medium-sized businesses. These loans provide essential capital to fulfill various financial needs, including acquiring new assets, upgrading equipment, expanding infrastructure, and covering employee salaries.MSMEs in India can leverage these funding options to operate their businesses efficiently while having flexibility in repayment.

Importance of MSME Loans for Business Growth:

• Financial Inclusion: MSME loans enable smaller businesses to access formal credit, levelling the playing field and promoting financial inclusion.
• Business Expansion: With capital infusion from MSME loans, businesses can expand operations, invest in inventory, and upgrade technologies for enhanced efficiency and productivity.
• Job Creation: The growth of MSMEs, facilitated by loans, leads to increased employment opportunities, contributing to overall socio-economic development in a region.

Types of loans for enterprises of Micro, Small and Medium size

Here are the main types of Micro, Small and Medium Enterprise loans in India:

Term Loans

Term loans are a major category of MSME finance that provide funds for long-term capital expenditure. They can be used to purchase machinery, set up a new unit, expand an existing unit, or undertake other capital-intensive projects. Term loans are repaid in fixed installments over a predetermined period, and the interest rate may be fixed or floating. These loans are a great way to fund smaller or larger projects of a business. Since the repayment is made over a fixed term with a set repayment structure, during the initial repayment period the interest component is usually high compared to the principal component in the repayment, which switches the other way around as more and more repayments are done.

Flexi Loans

A Flexi loan is a type of personal loan that offers the flexibility to access funds whenever needed. With a pre-approved loan limit, you can borrow from this limit multiple times without having to reapply for a new loan each time.

Working Capital Loans

Working capital loans are one of the leading SME loans in India, these loans can help the entrepreneur navigate through daily business operations by injecting debt funds for the short term, so that entrepreneurs can better manage their business. Working capital loans provide funds to meet the day-to-day operational expenses of a business, such as raw material purchases, inventory management, salary payments, and other working capital requirements. These short-term loans help ensure smooth business operations by providing adequate cash flow. Working capital loans can be secured or unsecured, depending on the lender’s requirements and the borrower’s creditworthiness.

Overdraft Facilities

Number of MSMEs in India has shot up considerably over the last couple of years, naturally for business sustenance, these businesses often require a lot of capital to keep afloat. Overdraft solution is a type of MSME loan where businesses can withdraw more funds than the balance available in their current account. Overdraft solution provides flexibility for managing cash flow by allowing businesses to overdraw to a certain limit from their account. The limit is sanctioned by the bank or financial institution, against which they charge interest on the amount withdrawn.

Other MSME Loan Types

In addition to term loans and working capital loans, MSME businesses can also avail of other specialized loan types, such as:

• Equipment/Machinery Loans: To purchase machinery or equipment,these loans are specifically designed to enable entrepreneurs to make the machinery purchases. This is essential for business operations and expansion.
• Invoice Financing: Also known as factoring, where businesses can obtain funds by selling their outstanding invoices to a financial institution at discounted rates, once the invoices are purchased by the third party, the responsibility for collections of bills receivables gets transferred to the purchaser of the invoice. This is a great way for businesses to secure funding where there are pending bills receivables and the business cycles are longer.
• Bank Guarantees: Where a bank or financial institution guarantees payment to a third party on behalf of the borrower, in case the borrower defaults, the bank becomes liable for making payment to the supplier who has supplied the material based on the bank guarantees.
• Letters of Credit: Where a bank or financial institution issues a letter of credit on behalf of the borrower to guarantee payment to the beneficiary. These letters of credit act as bank guarantees to the suppliers on the behalf of the borrowers.

Government Schemes for MSME Loans

CGTMSE

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE) is a key government scheme that provides collateral-free credit to MSMEs. Some key features of the CGTMSE scheme:

• It covers collateral-free credit facilities (term loans and/or working capital) up to ₹100 lakh extended by banks and financial institutions to new and existing micro and small enterprises.
• The guarantee cover provided is up to 75% of the credit facility up to ₹50 lakh (85% for loans up to ₹5 lakh to micro enterprises, 80% for MSEs owned/operated by women and all loans to the North-Eastern Region).
• For credit facilities above ₹50 lakh and up to ₹100 lakh, the guarantee cover is 50% of the credit exposure.
• Eligible lending institutions can apply to the CGTMSE office to avail the guarantee support, while MSMEs can directly approach banks and financial institutions for the collateral-free loans.

Emergency Credit Line Guarantee Scheme (ECLGS)

The ECLGS was launched in 2020 as a special scheme to provide additional credit to businesses, including MSMEs, impacted by the COVID-19 pandemic. Key features of the ECLGS:

• It provides 100% guaranteed emergency credit lines to eligible MSMEs and businesses to meet their operational liabilities and restart their businesses.
• The scheme covers loans up to ₹4.5 crore for MSMEs and ₹200 crore for other eligible borrowers.
• The loans have a tenure of 5 years, including a 1-year moratorium on principal repayment.
• The interest rate on ECLGS loans is capped at 9.25% for banks and 14% for NBFCs.
• The scheme is available to all MSME borrowers with loans up to ₹50 crore and turnover up to ₹250 crore as on 29th February 29, 2020.

Both the CGTMSE and ECLGS schemes have been instrumental in providing timely and collateral-free credit support to MSMEs, especially during the challenging times of the COVID-19 pandemic.

Case Studies of Successful MSME Loan Applications

When women encounter obstacles, they see opportunities to break through and spark change, believing failure is impossible. Harjinder Kaur Talwar, MD & CEO at Comvision (India) Pvt Ltd, embodies this spirit. With the support of an MSME loan, she founded Comvision in 1995 with modest beginnings. Today, Comvision is a CMM level 3, ISO 9001:2015, ISO 27001:2013, and ISO/IEC 20000-1:2011 certified medium-sized business with over 150 employees and four offices across India. Harjinder stands as the only businesswoman in the field of intelligent traffic and transport solutions, transforming government services with innovative concepts like providing multiple services under one roof. Harjinder’s initial business challenge was revolutionizing government-to-citizen services, which she achieved with the “TWINS” project in Hyderabad in 1999. This project, made possible by MSME loan support, redefined G2C services and was replicated across India, even showcased to then US President Bill Clinton. As her business grew, Comvision specialized in the road sector, forming strategic partnerships for advanced traffic and transport solutions. Today, Comvision is a leader in Smart City projects, intelligent traffic signal optimization, and innovative toll collection technologies. Harjinder’s remarkable achievements, fueled by MSME loans, have earned her numerous accolades, including the IWEC Award, FICCIFLO award, SAARC Women’s Economic Forum Award, and recognition as one of the Top 10 women CEOs by India Today. Read such 100 cases studies and real-life examples of businesses that successfully secured MSME loans in India  and became successful.

Common Mistakes to Avoid When Applying for MSME Loans

Here are some common mistakes to avoid when applying for MSME loans:

Insufficient Documentation

One of the biggest mistakes businesses make is providing incomplete or inaccurate documentation. Lenders rely heavily on the information you provide to assess your creditworthiness. Failing to submit all required documents or providing inconsistent information can lead to delays or rejections. To avoid this, carefully review the lender’s documentation requirements and ensure you provide all necessary paperwork. Be meticulous in your record-keeping and double-check all information before submission.

Neglecting Credit Score

Your business’s creditworthiness is a critical factor in loan approval. Many SMEs fail to monitor and maintain their credit scores, which can negatively impact their loan applications. To prevent this, regularly check your business credit score, address any inaccuracies, and work on improving it over time. Paying bills on time and managing debts responsibly is key to maintaining a strong credit profile.It is imperative to continuously monitor your credit score to ensure that the lending terms remain favorable for the business. There are several reasons due to which the credit score may take a hit, factors such as delayed repayments, missed repayments, default on loans, are among a couple of many factors which may result in your credit score taking a hit. Being aware about your current score, helps you understand what practices can you follow to increase and improve credit records.

Over-borrowing

Another common mistake is borrowing more than your business can realistically repay. While securing a larger loan may seem tempting, it can lead to financial strain and difficulties in meeting repayment obligations. Before applying, carefully assess your business’s financial needs and borrow only what you can comfortably pay back. Use online tools like EMI calculators to determine the monthly installments you can manage based on your cash flow.

Ignoring the Fine Print

Understanding the terms and conditions of your loan is crucial. Some businesses make the mistake of overlooking the fine print, which can result in unexpected costs, penalties, or unfavorable terms down the line. Always read and comprehend the loan agreement thoroughly, and if necessary, seek legal or financial advice to ensure you fully understand the terms.

Lack of a Solid Business Plan

A well-thought-out business plan is essential for demonstrating to lenders that you have a clear strategy for repaying the loan. Some applicants make the error of not developing a comprehensive plan or providing one that lacks detail and substance. To avoid this, invest time and effort in crafting a robust business plan that outlines your business’s goals, financial projections, and repayment methods. By being mindful of these common pitfalls and taking proactive steps to address them, you can enhance your chances of securing an MSME loan that aligns with your business’s needs and goals.