Government of India has come out with the stimulus to help the struggling MSME sector of India in this pandemic time. The Government has made provisions of massive ₹ 3 lakh crore for Micro, Small and Medium Enterprises sector. Under this MSME loan scheme, there would be no requirement for the collateral security and the Government will be the guarantor for the borrower.
The loan will have tenure of 4 years and the moratorium period i.e. period in which only interest is to be served will be 12 months from the date of disbursement of loan. These MSME loan can be used either to establish new enterprises or to stepping-up i.e. for modernization, expansion, technology up-gradation, diversification, modernization etc. Some of the purposes where the MSME loan can be used are as follows:
- Acquisition/Purchase of factory, land and construction of building spaces.
- Purchase of Plant and Machinery including lab equipment, testing equipment, furniture, electric fittings etc.
- Meeting working capital requirements like raw materials, stock-in-progress, finished goods, etc.
- Trade Finance (Bill discounting) for paying the creditors, while awaiting payment from debtors.
- Launch of new product range, expansion of business, warehousing need, credit for marketing and advertising purpose.
- Additional monitory assistance for any eligible purpose.
MSME Loan Schemes 2020
Before moving forward with the process and documentation for MSME loan, let us first understand what MSME is.
What is MSME?
MSME (Micro, Small and Medium Enterprises) can be segregated into two categories:-
- Manufacturing Enterprises: Enterprises engaged in manufacturing of the Goods pertaining to any industry through deploying plant and machinery.
- Service Enterprises: Enterprises engaged in rendering or providing services.
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Exclusions from MSME Sector
Ministry of Micro, Small and Medium Enterprises (MSME) has clarified as per notification S.O 2576 (E) dated 18.09.2015 and subsequent notification no S.O 85(E) dated 10.1.2017, activities that would be specifically not included in the manufacturing or service sector.
- Forest and Logging
- Fishing and aquaculture
- Wholesale, retail trade and repair of motor vehicle and motorcycles
- Wholesale trade except for motor vehicles and motorcycles.
- Retail Trade Except of Motor Vehicles and motor cycles
- Activities of households as employees for domestic personnel
- Undifferentiated goods and services producing activities of private house-holds for own
- Activities of extraterritorial organizations and bodies
The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery and Service Enterprises are defined in terms of Annual Turnover as stated below:
|Enterprises||Manufacturing Sector (Investment in Plant & Machinery)||Service Sector (Annual Turnover)|
|Micro Enterprises||Does not exceed one crore rupees||Does not exceed five crore rupees|
|Small Enterprises||More than one crore rupees but does not exceed ten crore rupees||More than five crore rupees but does not exceed fifty crore rupees|
|Medium Enterprises||More than ten crore rupees but does not exceed twenty crore rupees||More than fifty crore rupees but does not exceed hundred crore rupees|
|The definition of Investment and Annual Turnover are yet to be notified|
How to Register as a MSME?
Any existing enterprise or new business set up fulfilling the eligibility criteria as mentioned above can apply for MSME registration through the national portal for registration of MSME i.e. https://udyogaadhaar.gov.in/
Since Aadhar Card is compulsory in the registration of MSME, make sure you have an Aadhaar Card (proprietor, partner or director, as the case may be) before starting the registration process.
Apart from aadhaar card there are few other documents namely Enterprise Name, address, bank account details, PAN etc. There are no registration fees.
Documents Required for Applying for MSME Loan Online
MSME Loans up to ₹ 10 crore
- Proof of Identity: Aadhaar Card / Voter’s ID Card / Passport / Driving License / PAN Card / Signature identification from present bankers of proprietor, partner of director ( if a company)
- Proof of residence: Aadhaar Card / Recent telephone bills, electricity bill, property tax receipt /Passport / voter’s ID Card of Proprietor, partner of Director (if a company)
- Proof of business Address
- Applicant should not be a defaulter in any Bank/Financial Institution
- Memorandum and Articles of Association of the Company / Partnership Deed of partnership firms, etc.
- Assets and liabilities statement of promoters and guarantors along with latest income tax returns.
- Rent Agreement (if business premises on rent) and clearance from pollution control board if applicable.
- SSI / MSME registration / Udyog AADHAAR Memorandum, if applicable.
- Projected balance sheets for the next two years in case of working capital limits and for the period of the loan in case of term loan.
- Copies of lease deeds/ title deeds of all the properties being offered as primary and collateral securities.
- Certificate of incorporation from RoC in case of company (CIN No. and DIN no. of directors)
- Bank Account details wherever applicable (with details of outstanding in case of existing loans / limits)
- GSTN No., if applicable.
- Credit Rating details and report, if available
- ZED rating, if available.
Additional Requirement for MSME Loan above ₹ 25 lakh
- Profile of the unit (includes names of promoters, other directors in the company, the activity being undertaken addresses of all offices and plants, shareholding pattern etc.
- Last three years balance sheets of the Associate / Group Companies (if any).
- Project report (for the proposed project if term funding is required) containing details of the machinery to be acquired, from whom to be acquired, price, names of suppliers, financial details like capacity of machines, capacity of utilization assumed, production, sales, projected profit and loss and balance sheets for the tenor of the loan, the details of labour, staff to be hired, basis of assumption of such financial details etc.
- Manufacturing process if applicable, major profile of executives in the company, any tie ups, details about raw material used and their suppliers, details about the buyers, details about major-competitors and the company’s strength and weaknesses as compared to their competitors etc .
(The check list is only indicative and not exhaustive and depending upon the local requirements at different places addition could be made as per (necessity).
How to Apply Online for MSME Loan?
To apply online, click at the link https://site.udyamimitra.in/Login/Register
The page to apply online for MSME Loan at the SIDBI Udyami Mitra website will appear as shown below:
Borrowers have wide choices of lenders 24×7 (Banks / NBFCs / SFBs/ FinTechs) who can access your application and according to the geographic location the nearest lender may approach the borrower or a fintech from another city may also get in touch with the borrower. MSMEs can avail of the MSME Loan scheme until 31 October 2020.
Benefits of registering as MSME
- 70% to 80% funding by the Government for new design, ideas or products.
- 1 to 1.5%. Lower Rate of Interest in comparison to regular loans.
- Credit linked Subsidy Scheme for up-grade the old and obsolete technology
- Protection against delayed payments
- Various Tax Benefits and Sops available to MSME.
- MAT credit to be carried forward for up to 15 years instead of 10 years.
- MSME gets higher preference for government license and certification.
- One Time Settlement Fee for non-paid amounts of MSME.
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New Benefits under “Atmanirbhar Bharat Scheme”
- Emergency Credit Line to Businesses/MSMEs from Banks and NBFCs up to 20% of entire outstanding credit as on 29.2.2020.
- Borrowers with up to ₹ 25 crore outstanding and ₹ 100 crore turnover eligible
- Loans to have 4 year tenor with moratorium of 12 months on Principal repayment
- Interest to be capped
- 100% credit guarantee cover to Banks and NBFCs on principal and interest
- No guarantee fee, no fresh collateral
- ₹ 20,000 crores Subordinate Debt for Functioning MSMEs which are NPA or are stressed
- ₹ 50,000 cr. Equity infusion for MSMEs through Fund of Funds
- Global tenders will be disallowed in Government procurement tenders up to ₹ 200 crores
- Scheme can be availed till 31st Oct 2020.