The Government of India has launched various policies and schemes in order to bring a change in the country's economic conditions. The contributing factors related to the future approach of different types of business need to make sure and backed up with some financial help from the government.
It will not be wrong to say that finance is one of the key elements for any kind of business whether it is a big or a small organization. Ultimately, it results in capital generation. The additional financing and financial liquidity can help businesses with involvement in different schemes as a helping arm.
There are various Micro Small and Medium Enterprises (MSME) that are a combination of unregistered as well registered businesses. Apart from that, the government has considered several schemes in order to boost the MSME business for the growth and enhancement of the economy of India.
Micros Small and Medium Enterprises called MSME are the businesses that fall under the said category. To maintain their business, additional financial liquidity is crucial. In order to build a gap, some of the banks and financial institutions are offering MSME loans.
It is a loan scheme that can be obtained by Micro, Small, and Medium Enterprises in order to expand the business and its purchase. It will help to purchase the equipment and machinery, raw materials and working capital requirements, fixed asset investments, rent payment, monthly expenses, salaries, cash flow management, and other financial expenses need for day-to-day operational purposes.
The MSME loans are offered at competitive rates with flexible tenures. However, banks offering these loans will have fixed rates as specified by the Reserve Bank of India. With the simplification of the MSME loan scheme, the enterprises are eligible for the type of loan scheme for a sole proprietorship, manufacturing units, partnerships, and service-based micro and small enterprises.
However, it is to be noted in case the falls fall under the retail trader category, educational training institutions, self-help groups, and agriculture will not be eligible to apply for an MSME loan.
The Government of India in May 2020 made an alteration in the definition of the MSME. According to the new definition of MSME, the MSMEs are not uniform for both service enterprises as well as manufacturing units. The criteria have been changed since therefrom investment to investment including the annual turnover. The limit in every segment has also been increased which suggests that more and more enterprises can avail of the MSME loan scheme and use the same according to the below-mentioned meaning concerning Manufacturing and Service enterprises;
• Micro: The value of the investment must exceed Rs. 1 crore and the annual turnover must not exceed Rs. 5 crores.
• Small: The value of the investment must not exceed Rs. 10 crores, and the annual turnover must not exceed Rs. 50 crore.
• Medium: The value of the investment must not exceed Rs. 20 crore and the annual turnover must not exceed Rs. 100 crore.
The following are some of the loans schemes provided to small businesses under the MSME loan scheme;
• The MSME loan was introduced by the Central Government considering it as a working capital loan.
• It focused on the aspect that, it can be preferable by both new as well as an existing business providing financial assistance of Rs. 1 crore.
• At least 59 minutes is required for the application to be approved in case all the relevant documents are successfully verified.
• The rate of interest is 8% per annum. However, for women entrepreneurs, it is 3% per annum.
• The loan processing is generally 8-12 days depending on the accuracy and successful verification of the documents.
• The aforesaid scheme offers collateral-free loans to Micro, Small, and Medium Enterprises.
• Usually, Regional Rural Banks and Scheduled Commercial Banks offer this type of loan scheme by selecting themselves as a leading authority.
• Under Scheme, an MSME can get a loan up to Rs. 10 lakh without providing any collateral security.
• The credit facilities are the minimum and maximum Rs. 10 lakh and Rs. 1 crore respectively.
• In these types of loans primary security and mortgage of assets include buildings and land.
• The full abbreviation of MUDRA is Micro Units Development and Refinance Agency.
• It provides funding to small businesses and startups in order to get financial support for cost credit at a lower rate of interest.
• Mudra loan provides the micro and small businesses operating in trading, manufacturing, and service sectors.
• This loan is registered in both public as well as private sector banks including scheduled commercial banks, small banks, and rural area banks.
• The MUDRA loan scheme offers guaranteed loans under the below-mentioned three categories:
a. Sishu Loans: Rs.50,000
b. Kishor Loans: Rs.5,00,000
c. Tarun Loans: Rs.10,00,000
• This loan offers funds which include funds for technological upgrades in the business. Usually, it is used to revamp different processes such as marketing, supply chain, manufacturing, etc.
• The cost of production can also be reduced in order to create and provide goods and services to Small and Medium Enterprises.
• The aforesaid scheme also offers a capital subsidy of 15% per annum to eligible businesses.
• The maximum loan limit under the said scheme is Rs. 15 lakh.
• Sole proprietorship, Partnership Firm, Private and Public Limited Company, and Co-operative Societies are eligible to get this loan.
• This subsidy can opt for the assistance of raw material scheme where the business can generate funds for the indigenous cost and imported raw material needed for the business.
• With the application of good marketing strategies, this find can be utilized in the creation of competitive market value for the offerings of the businesses.
• Apart from that, it also helps in the smooth function of MSME and accordingly enhances both quality and production.
• National Small Industries Corporation Subsidy offers the following kinds of funding to MSMEs;
A. Marketing Assistance and,
B. Raw Material Assistance
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