How to Apply for MSME Loan Online? (Step by Step Guide)

Published on Dec 28, 2020Updated on Oct 12, 2022

How to Apply for MSME Loan Online? (Step by Step Guide)

MSMEs’ are the heart and soul of the Indian economy. They are the second-largest employer, second to only agriculture and contribute to approximately 24.6 percent of the service sector GDP of our country. Their contribution to our economy is notable. Financing in the form of loans can help them upgrade themselves, seize opportunities and make sure that they thrive in today's competitive business scenario.

What are MSMEs’ and what are MSME Loans?

According to the definition formulated by The Micro, Small and Medium Enterprises Development Act 2006, MSMEs are Micro, small and medium industries involved in the manufacturing or processing of commodities. They are classified based on investment and turnover. To be classified as a micro-enterprise, an enterprise should have an investment of less than Rs. 1 crore and a turnover of up to Rs. 5 crores. A small enterprise is one that has an investment of less than Rs. 10 crores and a turnover of up to 50 crores and a medium enterprise is one that has an investment of less than Rs. 50 crores and a maximum turnover of Rs. 250 crores.

An MSME loan is one that can be availed by a company registered under the MSME scheme in the Udyaan portal to obtain finances to improve their operations or cater to their requirements for working capital.

Must Read: Avail A Business Loan To Grow Your Business

What are the Advantages of Opting for an MSME Loan?

This is why you should consider opting for a loan to meet your financing needs:

  • Loan providers understand your need for urgent financing and strive to ensure quick and hassle-free processing and disbursal of funds on the occasion that the loans borrowed are less than Rs. 50 lakhs.
  • Most prominent loan providers allow the option of applying online to reduce the hassle of excessive documentation. Log into the website of your provider, enter the required details, upload the documents required and avail of customized plans based on your borrowing requirements.
  • Avail of an attractive repayment tenure as per your convenience that ranges from 12 to 60 months and opt for foreclosure if you desire at no extra cost.
  • MSMEs can avail of business loans at interest rates ranging between 17 to 21 percent, entrepreneurs can avail of loans at a rate of interest starting 11.99 percent. The interest payable is computed on various parameters that range from income, location, loans payable, etc.
  • You can access tools like business loan eligibility calculator to calculate your eligibility & also check documents required etc. to help you reassess your requirements and help you plan your finances better.
  • There are also a number of schemes by the Government of India which have been introduced to help the indigenous industry of India and MSMEs in particular. Such loans are distributed by the govt. through various banks and NBFCs. For instance, the Pradhan Mantri Mudra Yojana scheme provides collateral-free MSME loans up to INR 10 lakhs to small businesses. Under some of these schemes, eligible applicants can also get a moratorium for a few months.

Eligibility Criteria to Apply For an SME/MSME Loan

Loan providers have laid down basic business loan eligibility criteria for individuals as well as companies to be able to apply for an MSME loan. People who can avail MSME loan are as follows:

  • An individual should be at least 22 years of age while applying for the loan and a maximum of 65 years at the time of maturity.
  • Private companies, sole proprietors, private companies engaged in trading, manufacturing or services sector are eligible to apply for an SME loan.
  • The applicant should be engaged for a minimum of 3 years in the business concerned and at least 5 years of experience in the business.
  • The business should generate a basic income of at least Rs. 2 lakhs a year, should have a turnover of Rs. 10 lakhs a year and should have generated profits for at least two years.
  • The business should be registered as an MSME in the Udyaan portal and should provide the MSME registration certificate.

How to Apply for an MSME loan?

Follow these simple steps to avail for an MSME loan:

  • Log into the website of your loan provider and fill in the application form by accurately filling in the required details. A designated representative from the loan provider will get in touch with you shortly with all the possible permutations and combinations related to your loan and the options that could be the best fit for your requirements. 
  • Post determination of your eligibility, you are required to submit the documents for verification. The required documents can be scanned and submitted online. 
  • You can choose to go the offline route and request the loan provider to collect physical copies of the relevant documents. Once all the relevant documents are collected, they are forwarded to the relevant team for verification.
  • Post verification of the documents and approval of your loan, the loan provider creates and shares the loan agreement. Post signing the agreement, the funds are disbursed to the applicant’s account within 48 hours.
Must Read: What are the Business Loan Benefits & Advantages?

What Documents do I require to Submit while Applying for an MSME Loan?

The documents required to apply for an MSME loan include:

  • The PAN card of the applicant and company desirous of applying for the loan.
  • Proof of address of the business and the applicant.
  • Bank and income statements in addition to Form 16.
  • Income tax returns of the company for the previous two years and audited financial statements of the company that demonstrate profit for at least two years.

Assessing your requirements accurately and opting for the right provider helps in ensuring that it does not adversely affect your finances in the long run.

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

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