What Are SME and MSME Loans?

A loan offered to a company registered as a Small and Medium Enterprise (SME) is referred to as an SME loan, whereas a loan sought by a company registered under Micro, Small and Medium Enterprises (MSME) is an MSME loan.

Below are some of the loans available to SMEs and MSMEs along with their details. 

Micro Units Development and Refinance Agency (MUDRA)

This scheme provides loans up to ₹10 lakh to  non-corporate, non-farming small/micro enterprises under Pradhan Mantri Mudra Yojana (PMMY). These loans are given by commercial banks, Regional Rural Banks (RRBs), small finance banks, finance institutions and Non-Banking Financial Companies (NBFCs).

The borrower could approach any of the lending institutions mentioned above or  apply online through the portal www.udyamimitra.in.

Eligibility Criteria for MUDRA

An Indian citizen who is of minimum 18 years of age and maximum 65 years of age with no criminal record and is running a small business enterprise is eligible to apply for a Mudra loan. Mudra Yojana loans are given under three different categories. The first category known as Shishu (for extremely small business units) covers loans upto ₹50,000. The second category known as Kishor (slightly bigger units) covers loans above ₹50,000 and upto ₹5 lakh. The third category known as Tarun (relatively bigger units) covers loans above ₹5 lakh and upto ₹10 lakh. 

Interest Rates for MUDRA

The maximum loan amount covered under the MUDRA scheme is up to ₹10 lakh with a repayment tenure of up to five years. Applicants are not required to submit any collateral/security or any third-party guarantee to apply for a Mudra loan. Even the processing fee and foreclosure charges are nil or 0.50 percent of the loan amount.

Documents Required for MUDRA

1. Duly filled application form of the appropriate loan category with recent passport size photographs
2. Identity proofs of the applicant such as Passport, Aadhar card, PAN card, Voter ID card, Driving License, Birth Certificate, utility bills (water & electricity)
3. Proof of belonging to a special category such as SC, ST, OBC, Minorities etc
4. Business establishment certificate, if applicable
5. Business address proof
6. Income proof –  Last year’s income tax returns, if applicable.
7. Any other document required by the bank 

PSB Loans In 59 Minutes

PSB Loans In 59 Minutes is a part of PM Modi’s 12-point action plan for the growth of MSMEs. Using this scheme (MSME loan in 59 minutes), the borrowers can borrow up to ₹5 crore with a minimum limit of ₹1 lakh from the most authorised banks. 

Under this scheme, the partner banks (public sector banks and a few private sector banks) as well as select NBFCs will provide instant approval of the loans to the MSME sector within a maximum of 59 minutes. Further, the disbursal of these loans will be done within 7-8 business days from the approval of the loan. 

Eligibility Criteria for PSB Loans – Small businesses which are registered under GST

Interest Rates for PSB Loans- Flexible tenure with an interest rate starting from 8.5 percent

Women entrepreneurs could avail this loan at lower interest rates. Besides, there is no minimum loan amount and low processing fees.

Documents Required for PSB Loans

1. GST identification number
2. Income tax returns of minimum one year 
3. Bank statements 
4. Identity proofs 
5. Details of the directors or owners 
6. In-principle approval of the lender bank
7. Any other requirement asked by the bank

List of Partner Banks Under this Scheme

‌SIDBI 

SBI 

Bank of Baroda 

‌Punjab National Bank 

‌Indian Bank 

‌Bank of India

‌Bank of Maharashtra

‌Canara Bank

‌Central Bank of India 

‌IDBI 

‌Indian Overseas Bank 

‌Punjab and Sind Bank 

‌UCO Bank 

‌Kotak Mahindra Bank

‌IDFC First Bank 

‌Saraswat Bank

‌Indulsnd Bank

‌ICICI Bank

‌Yes Bank 

‌Federal Bank 

SIDBI Make In India Loan for Enterprises (SMILE)

This scheme is aimed at making MSMEs an active part of the Make In India campaign and focuses on providing financing to small businesses within the MSME sector.

Eligibility Criteria for SMILE

1. All MSMEs as per MSME Act, 2006
2. New enterprises in manufacturing as well as service sectors
3. Existing enterprises undertaking expansion, modernisation, technology upgradation and other projects for growing the business.
4. The loans extended under SMILE cannot be used for repayment of earlier loans.

Interest Rates for SMILE

For the first three years, the interest rate is 9.15 percent to 9.3 percent per annum. From the fourth year onwards, it is 11.70 percent to 12.70 percent per annum depending on the bank. The repayment period for the loan under SMILE is upto 10 years inclusive of moratorium upto three years.

Security for SMILE

1. Residual charge over all the assets 
2. Personal guarantee of the promoters/owners

Documents Required for SMILE

1. Identity proof
2. Proof of residence 
3. Proof of business address 
4. Details of promoters/guarantors
5. Net worth statement and latest income tax returns
6. Udyog Aadhar Memorandum (UAM) registration 
7. Certificate of Incorporation of the business 
8. Any other document as may be specified 

 

Udyogini

Udyogini means ‘women entrepreneur’ and as the name suggests, this scheme aims exclusively to promote women entrepreneurship and financial empowerment. 

Eligibility Criteria for Udyogini

Annual family income of the applicant should not be more than ₹1.5 lakh.

Age Limit for Udyogini- Minimum age of the applicant should be 18 years and maximum age should be 55 years.

For widows or disabled women, there is no income limit. Collateral security is not required and the processing fee is nil.

Interest Rates for Udyogini

Interest rates in this loan scheme are competitive and additionally, highly subsidised or free loans to special category/cases.

Stand-Up India Scheme

The Stand Up India scheme aims at promoting entrepreneurship among women, scheduled castes and scheduled tribes. 

The objective of this scheme is to facilitate bank loans between ₹10 lakh and ₹1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch for setting up a greenfield enterprise. This enterprise may be in manufacturing, services, agri-allied activities or the trading sector. In case of non-individual enterprises, at least 51 percent of the shareholding and controlling stakes should be held by either an SC/ST or a woman entrepreneur.

Eligibility Criteria for Stand-Up India Scheme

1. Age – SC/ST and/or women entrepreneurs above 18 years of age
2. Loans under the scheme are available for only green field projects. Green field signifies, in this context, the first time venture of the beneficiary in the manufacturing, services, agri-allied activities or the trading sector.
3. In case of non-individual enterprises, 51 percent of the shareholding and controlling stakes should be held by either SC/ST and/or a women entrepreneur.
4. Borrower should not have been a default to any bank or financial institution in the past.

Interest Rates for Stand-Up India Scheme

The rate of interest would be the lowest applicable rate of the bank for that category (rating category) not to exceed (base rate (MCLR) + 3 percent + tenor premium).

Documents Required

1. Proof of identity 
2. Proof of residence 
3. Proof of business address 
4. Memorandum and Articles of Association in case of companies, Partnership Deed in case of a partnership
5. SSI/MSME registration if applicable
6. Documents to establish whether the applicant belongs to SC/ST Category, wherever applicable
7. Certificate of Incorporation from ROC to establish whether majority stake holding in the company is in the hands of a person who belongs to SC/ST/Women category
8. Any other document as may be specified