Before we jump to SME Business Loan, Let’s under the concept of SMEs.
What are Micro, Small & Medium Enterprises (SMEs)?
Industries Act 1951 & MSMED Act 2006 have divided SMEs into two : Manufacturing Sector Enterprises and Service Sector Enterprises. Further, Manufacturing Sector Enterprises are defined to be engaged in the process of value addition to the final product having distinct name or character or use. Service Sector Enterprises are defined to be engaged in Providing or rendering services . These SMEs are the backbone of any developing economy. They provide large numbers of employment and Business Opportunities.
Which SME Category you belong to?
It has been categorized as per the investment in Plant, Machinery or Equipment of the enterprise of business units.
|Sector of Business||Micro Enterprises||Small Enterprises||Medium Enterprises|
|Manufacturing (Investment in Plant & Machinery)||25 Lakhs||25 Lakhs-5 Crore||5 Crore-10 Crore|
|Service (Investment in Equipment)||10 Lakhs||10 Lakhs-2 Crore||2 Crore-5 Crore|
What are the SME Business Loan Options?
Without monetary Support SMEs do not take off easily. The finance is done as Loan to these organisations.
- Long & Medium Term Loans
- Short or Working Capital Loans
- Risk Capital
- Seed Capital/Margin Money
- Bridge Loans
Mainly there are 2 types of Loan for SMEs. You may find they easy to avail.
Working Capital Loan– This loan is meant for day-to-day business expenses like payment of rentals, payment of electricity bills etc. These loans are offered generally for the period of 12 months. The rate of interest is commonly between 12 %-16 %. These loan may be secured or unsecured both.
Term Loan– These loans are used to buy fixed assets. It helps you to start a new business vertical or expand the organisation. These loans are secured by company assets. Repayment period is also longer. The rate of interest is kept negotiable as the loan amount is higher and for longer period. Tax benefit is also available for these loans.
Now Government have also customized these loans as per industry demand. They are know as below:
- Credit Gurantee Scheme (CGS)– SIDBI (Small Industries Development Bank of India) in collaboration with Government of India run this scheme. Under this you may apply for the loan as term loan or working loan for the loan amount upto 1 Crore as per your eligibility. These loans are unsecured in nature.
- Mudra Loan– It is a new type of business loan started by government of India. Under Pradhan Mantri Mudra Yojna, You may apply for the loan starting from 50,000/- to 10,00,000/- as per your requirement and eligibility. We have gathered complete information on Mudra Loan
- Standup India Scheme- This is specially for SC/ST and Women applicants. Under this you apply for loan from 10 Lakhs to 1 Crore. The repayment period is upto 7 years. This is a good options of loan when you plan to start a manufacturing, trading or service business unit.
To avail the SME business below are the types of organisations you must fall into:
- Proprietorship Firm
- Partnership Firm
- Private Limited Companies
- Public Limited Companies
- Manufacturing or Trading or Service Unit (Registered)
Documents required for SME Loan Application
- Certified Copy of Memorandum and Articles of Association
- Certificate of Incorporation or Certificate for the Commencement of Business
- Audited 3 years financial statements
- List of Directors, Promoters, Partners or Shareholders
- IT Return of last 3 years
- KYC documents of Directors and Guarantors
- Detailed project report
- Land Conversion document
- Site Map and Building Plan
- Quotations, Marketing Plan
- Power Sanction and Installed
- NOC from Pollution Control Office
- List of Plant, Machinery
- Sale or lease deed of collateral securities
- Agreements, Collaborations or Consortium if any
- HR Structure with Key Personne’l details
- Bio data, net worth statements of Directors, Promoters or Guarantors
Where to apply for SME business Loan?
- State Bank of India : Apply online SBI SME Loan
- Punjab National Bank : Apply online PNB MSME Loan
- Bank of Baroda : Apply BOB Online SME & MUDRA Loan
- IDBI Bank : Apply online IDBI MSME Loan
- Bajaj Finserv Apply for Business Loan
- IIFL : Apply IIFL SME Loan
There are more than 100 online application platforms provided by Public & Private sector Banks and NBFCs. These are also available at the branches of banks for physical application of loan. It depends on your choice how you want to apply for the SME Business Loan.
We shall keep updating you on this. Keep visit our blog post and Stay Connected-Stay Updated. You may like to visit our business loan page for more details on Business Loan .
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