According to the Ministry of Micro, Small & Medium Enterprises report, there are over 12 million registered MSMEs in India. The MSME sector is undeniably the backbone of the country, contributing rapidly to the economic progress of the nation.
Therefore, significant steps have been taken by the Government of India and other financial institutions so that these businesses can receive adequate MSME loans to ensure they can enjoy uninterrupted business growth. Here is a quick run-down of 10 such schemes that can be advantageous for this sector.
10 Best MSME Loan Schemes in 2023
1. MSME Business Loans in 59 Minutes
With this scheme, an eligible MSME can avail a credit amount ranging from ₹1 lakh to ₹5 crores. Available from both traditional institutional lenders and NBFCs, a business owner can get this MSME loan at a yearly interest rate of 8.50%.
2. Growth Capital and Equity Assistance Scheme (GEMs)
Operating as a mezzanine debt instrument, this method of fundraising can come in handy for the MSME sector of India. If a company is looking for financial means for further expansion or modernisation of its mechanism protocols, this scheme can be an ideal alternative. The loan amount is variable based on the requirement, but usually it is at least Rs. 25 lakh.
Interestingly enough, this fiscal boost can also be helpful in non-asset creating investment measures such as lump sum spending required for research and development or marketing purposes.
3. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)
Small businesses often lack collateral that they can use as security while making a credit application. Therefore, they can often be labelled as high-risk borrowers – getting their loan application rejected. W
To eradicate such obstacles for these businesses, the Government of India has launched this business loan for the MSME sector. Under this policy, new as well as existing businesses can opt for a collateral-free credit (up to Rs. 200 lakh on an outstanding basis) from select financing institutions of this nation.
4. Credit Linked Capital Subsidy Scheme for Technology Upgradation
Bearing the upfront capital cost needed to procure an asset can oftentimes be burdensome for a small business. However, such assets can be directly related with the sustainable growth capacity of this enterprise.
Keeping these factors in mind, the MSME ministry of India had launched this aforementioned scheme. To elaborate, a business considered eligible under the parameters of this scheme can receive 15% of capital subsidy in order to improve its technological infrastructure. Notably, this sanctionable amount is limited to the threshold of Rs. 15 lakh.
5. Prime Minister Employment Generation Programme (PMEGP)
This scheme by the Indian government has enjoyed notable success as a credit-linked subsidy programme. In other words, a substantial portion of the project cost of a business can be subsidised by the government authorities under this scheme. Credits starting from Rs.5 lakh and up to Rs.25 lakh are available under this programme.
A primary target of this programme is to generate newer job avenues in the rural sector by turning entrepreneurs into large-scale employer entities. So, micro enterprises have been under the spotlight of this scheme.
6. Pradhan Mantri MUDRA Yojana (PMMY)
Keeping non-farming and non-corporate business entities in mind, the government here has launched this scheme. So, enterprises from trading, manufacturing, as well as the service sector can receive up to Rs. 10 lakh from different financier intermediaries as an unsecured business loan for MSMEs.
7. National Small Industries Corporation (NSIC) Scheme
A twofold credit and marketing support scheme under NSIC provides a necessary edge to small-scale businesses to take on their competitors in the open and free market. To elaborate, small businesses eligible for this scheme can receive a lump sum to boost their advertising capacities. Notably, the NSIC organises tech fairs and exhibitions to promote such small-scale enterprises.
Single MSME units can avail credit up to Rs. 5 crore, at interest rates charged between 9.5% and 12%.
8. Udyogini Scheme
Spearheaded by the Women Development Corporations, this scheme has received universal appraise for supporting the businesswomen of this nation. Under this programme, a small or micro enterprise lead by women entrepreneurs can be eligible to receive a subsidised MSME loan if it is based in a rural or underdeveloped locality. Applicants are eligible for loan quantum of up to Rs. 3 lakh.
9. Stand Up India Scheme
The Stand Up India Scheme helps MSMEs from underprivileged areas of India. Under the objectives of this loan, it has been targeted that at least one SC/ST and one woman borrower can borrow a certain amount in order to set up their greenfield projects. Supported by the Small Industries Development Bank of India (SIDBI), the sanctionable credit is limited in between ₹10 lakhs and ₹1 crore.
10. SMILE Scheme
The SIDBI Make in India Soft Loan Fund for MSMEs or SMILE scheme is another measure undertaken by the authorities to provide necessary financial backing to small and micro enterprises. New enterprises can get credit up to Rs. 50 lakh while existing enterprises can get a minimum of Rs. 25 lakh. An MSME loan under this scheme has comparatively flexible terms, so a debt-equity ratio balance can be maintained.
Why Razorpay Line of Credit Is an Ideal MSME Loan Option
Razorpay, the only converged payment solution provider in India, has emerged as a game changer in the fintech market. With its end-to-end digitised facilities, this platform has made it easier for small businesses to opt for alternative means of capital generation.
Razorpay can be highly effective for enterprises considering applying for an MSME loan. For instance, with its Line of Credit facility, your business can receive a total sanctioned credit amount of up to Rs. 25 lakhs, with a credit line from which you can withdraw 24*7 as per your need. You can repay & reuse the line again.
Why should you go Razorpay for Line of Credit?
- Line set up in just 2 business days with 24*7 cash withdrawals
- No collateral. No hidden charges. No pre closure fees
- Interest rates starting at 1.5% per month
- Pay only on what you use & save on interest by repaying early
For example: If you withdraw Rs. 1 lakh at 1.5% and repay in 20 days, you pay only Rs. 1000 as interest.
You also get 100% flexibility. You can repay in easy EMIs or manually from Line of credit dashboard; use your line again without a new application for every withdrawal.
Frequently Asked Questions
Q1. What are the documents required for MSME loan?
Ans. The paperwork necessary for an MSME loan includes the following:
- Bank account statements
- VAT returns
- Profit and loss report
- Tax audit report
- Business establishment certificate
- Proof of address, etc.
Q2. What are the projections about the Indian MSME field?
Ans. As per reports, around 96% of MSMEs in India have been projecting a rise in their total profit margin in the financial year of 2023.
Q3. What is the processing fee for the Razorpay line of credit?
Ans. Razorpay does not charge any processing fee for its Line of Credit facility.