Best Tips to Grow Your Business with MSME Loan in India

MSMEs are crucial for India’s growth, contributing to a third of the country’s GDP. These enterprises need enough funds to buy raw materials, equipment, increase working capital and expand operations. 

To help these small businesses, financial institutions offer MSME business loans at affordable rates. However, before applying for the said credit, one should know what is MSME and how businesses can grow with its support.

4 tips for growing businesses with MSME loans

The following are some ways you can grow your business with MSME loans:

  1. Inventory management

Being able to quickly replenish an inventory is essential for a small firm to generate profits. An MSME loan allows businesses to safeguard their supply chain, deliver large-volume orders and manage seasonal dips. 

  1. Managing working capital

Working capital is the amount of cash flow required for a business to conduct its day-to-day trading activities and operate independently. However, smaller firms need outside help to ensure they never run out of working capital. 

  1. Debt consolidation

With an MSME loan, businesses can combine a bunch of loan payments into a single EMI. This relieves them from the financial burden on their monthly budget and helps to match liabilities with invoicing schedules. 

  1. Marketing

Marketing is an expensive affair for companies, especially smaller ones. It is essential to acquire new clients in existing or new areas. Therefore, it is advisable to get the necessary funds for a marketing campaign. 

What is an MSME loan?

Before understanding these loans, first, one needs to learn what an MSME is. The Micro, Small and Medium Enterprises Development (MSMED) Act 2006 defines MSMEs as manufacturing enterprises with investments of less than Rs.10 crore or service providing enterprises with investments less than Rs.5 crore.

MSME loans are unsecured business loans provided to Micro, Small and Medium Enterprises to support infrastructural development, and other areas. These business loans come with easy-to-meet eligibility criteria and can be easily availed by smaller businesses. 

Features of MSME loans in India

The following are some of the salient features of MSME loans:

  • Highly accessible: Getting access to adequate capital can be fairly difficult for small businesses. An MSME loan is easy to avail and comes with a hassle-free loan approval process making it easy to raise capital. 
  • Short processing cycle: Timing is crucial for businesses as they may require immediate access to funds in an emergency. An MSME loan is a useful solution as it requires minimal documents and offers fast disbursal.
  • Low-interest rates: An MSME business loan comes with competitive interest rates, making them suitable for small businesses. This makes it easy to take these loans regularly as there are no excess charges involved. 
  • Flexible tenor: Some financial institutions offer flexible tenor to help small businesses manage their debt comfortably. With MSME loans, you can easily plan your finances and not risk defaulting on your debt. 

Eligibility criteria for MSME loans

The eligibility criteria for MSME loans differ from one financial institution to another. Given are some of the standard eligibility criteria for these loans.

  • Eligible entities: SMEs, MSMEs, self-employed professionals, private limited companies, partnership firms, business owners etc. can apply
  • Age: 24 to 70 years
  • Nationality: Residing citizen of India
  • Business vintage: Must have a running business for at least three years
  • Good repayment history 

Leading financial institutions provide pre-approved offers to make it easy to apply for their loans. They provide this facility for a bunch of financial products like business loans, credit cards, and personal loans. You can check your pre-approved offer in only a few seconds by entering your contact information. 

Now that you know what is MSME and how to use MSME loans, you can grow your business to new heights. It is an ideal solution for large expenditures and provides immediate access to funds.