MSME Loans- Eligibility Criteria and Required Documents

The MSME sector is an essential aspect of the Indian economy and bolstering it has been on the GOI’s radar for a while. Right from several attractive loan schemes to optimising ease of doing business- the central government is doing it all!

The increased minimum investment required to qualify businesses as micro, small, or medium enterprises has expanded the pool of eligible businesses for MSME programmes. So, if you are an MSME, being aware of the MSME loan eligibility criteria in India is essential in order to avail benefits. The money from MSME loans may be utilised as you see fit. You may use it for expanding your business, paying off existing debt, or stocking up on inventory.

MSME Loan Eligibility Criteria in India- List of Required Documents

Taking care of paperwork and having all the necessary documents in place is crucial before you set out to apply for an MSME loan. So, we have compiled a list of required documents for your ease. Take a look!

  1. Aadhaar, Voter ID, Passport, and PAN
  2. Proof of residency eg. rental agreement, distribution card, and bills among others
  3. Proof of physical address of the business viz lease deed, sale deed, and utility bills etc.
  4. Proof of Income
  5. Two years’ PL statements and balance sheets
  6. Invoices, receipts, and other paperwork
  7. IT returns, GST returns and business PAN
  8. A copy of the title or certificate of ownership of the collateral (if any)
  9. Budgets, progress reports, and other project documentation

This is merely a reference list for the documents. To meet the lender’s requirements, you may need to submit additional paperwork.

MSME Loan Application Process Explained

An application for an MSME loan can be made in one of two ways. If the financial institution accepts online applications, you can submit yours by filling out a form and submitting it. Application form is also available at branch offices of financial institutions. Inquire about any prerequisite paperwork by calling ahead of time.

Accepted Collaterals
Loans to micro, small, and medium-sized enterprises (MSMEs) are considered to be collateral-free loans. It is common in India for financial institutions to provide MSME loans without pledging collateral. If the lender insists on collateral, you’ll need to contact them to find out what kind of security is required.

FAQs on MSME Loan Eligibility Criteria in India

Here are some of the most commonly asked questions by applicants for MSME loans in India.

What is a “priority sector loan”? Do MSMEs count?
The term “priority sector lending” refers to financial assistance provided to industries that have a large impact on the economy. It includes businesses that employ and support the most marginalised members of society. So, the MSMEs are included as priority sectors.

Does every bank provide MSME loans?
The Reserve Bank of India (RBI) has mandated minimum lending amounts to micro, small, and medium enterprises (MSEs) for all Indian banks to meet. So, almost all scheduled commercial banks provide MSME loans under some programme/ scheme.

Is it necessary for MSME borrowers to have credit history?
Borrowers from micro, small, and medium-sized enterprises (MSMEs) are not required to have a credit rating, but having one can help with lower interest rates, lower processing fees, etc.

The Conclusion

We hope that this article from us at MSME Blog will help clear many of your doubts with regards to MSME loan eligibility criteria and help you get a detailed understanding about the documents required to apply for a loan.

Leave a Reply

Your email address will not be published. Required fields are marked *