Difference Between a Business Loan and MSME Loan

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Difference Between a Business Loan and MSME Loan

A business can be of many types and sizes. There are small businesses working with a staff of only 10, there are medium sized businesses working with a team of 100, and there are mega companies working with even 10,000 people at once. Depending on the size of the company, different lending institutions offer different sizes of loans. For example, bigger the company, bigger the revenue, and hence, higher the chances of loan repayment. For small and medium sized businesses, the owner’s repayment capability is looked into before the loan is approved or sanctioned.

This article discusses business loans vs MSME loans and includes details on which one you must prefer for your business.

Types of Business Loans

There are mainly 9 types of business loans for entrepreneurs in the country today, namely for:

  1. Business Loans for Chartered Accountants
  2. Startups Loans
  3. Working Capital Loans
  4. Business Loans for Women
  5. Business Loans for Manufacturers
  6. SME/MSME Loans
  7. Business Loans for Doctors
  8. Machinery Loans
  9. Business Loans for Shopkeepers

Be it to open a new branch, launch a fresh advertising campaign, repair immobile assets, or extend the existing workspace, micro, small, and medium enterprises require business loans for such capital. The classification between micro, small, and medium enterprises is a little more elaborate. It depends upon their input and output finances as well as the type of industry they operate in. Considering plant and machinery or equipment as investments, the categories are as follows:

  • Micro enterprises are those with a maximum input of INR 1 crore and a maximum output of INR 5 crore.
  • Small enterprises are those with a maximum input of INR 10 crore and a maximum output of INR 50 crore.
  • Medium enterprises are those with a maximum input of INR 50 crore and a maximum output of INR 250 crore.
Must Read: Business Loan vs Equity Financing

Business Loan vs MSME Loan

 Business Loan  MSME Loan

 This type of loan is given on the condition that the business in question is already stable and will put the funds to use for expansion, executing advance strategies, and acquiring new branches.

 This kind of loan is for small businesses who are looking for financial support for stability; for instance, an MSME loan can be used to buy new machinery, update the current inventory, restock raw material, or carry out skill training.

 This loan is given to any entrepreneurship venture where the output of the company exceeds INR 250 crore.

 This loan is only for those businesses the size of whose output is capped at INR 250 crore.

 There are some business loans that do not require collateral, and there are some that are given against property.

 Usually, the requirement of a collateral is absent when it comes to taking up an MSME loan.

 Loan tenures for such loans are comfortable for loan repayment but are restricted to a limit of 48 months.

Loan tenures for MSME loans are extended over a period of 60 months.

Business Loan Details

Financing your business through a business loan can be an important decision to make. Here are a few details about a business loan:

Overview

When you consider financial lending institutions like Fullerton India, you can avail business loans at competitive interest rates. The loan amounts can range from INR 50,000 to INR 50,00,000 and you can choose a repayment plan for any timespan between 12 and 48 months.

Eligibility

The basic eligibility criteria for taking up a business loan is that you must be an Indian citizen between the ages of 22 and 65 running a business in the manufacturing, trading, or services domains. Your business should be considerably stable, producing a minimum turnover of INR 10 lakhs every year and seeing significant profits in the past two years.

Moreover, you must have worked in the current business environment for at least 3 years, but should have a total business experience of 5 years. You are also expected to hold in possession a minimum ITR record of INR 2 lakhs annually.

To know more about your eligibility for the loan, you can check out Fullerton’s online business loan eligibility calculator.

Documents For Business Loan

The following basic documents required for a business loan under Fullerton are:

  • Identity proof: PAN card and business licence
  • Address proof: Ration card, Aadhaar card, voter’s ID
  • Financial statements: Account details and transactions for the past 6 months
  • Income proof: ITR for the past 2 years, balance sheet, P&L statement, and CA certification
  • Other documents: Trade licence, sales tax certificate, NOC, sole proprietorship declaration, etc.

Conclusion

If you’re looking for a loan to take up to support your business or MSME, you can consider borrowing from Fullerton India. Its flexible repayment tenures, comfortable interest rates, and top-notch customer service with 100% online application and approval procedures will make your experience hassle-free.

*Terms and Conditions apply. Loans are disbursed at the discretion of Fullerton India.