A Step by Step Guide to Apply for an MSME Loan Online

Financing a business is no child’s play. Almost every business, especially small ones, is commenced with external funding help in the form of loans. While many entrepreneurs might turn to family for a part of the capital, most of the funding comes from banks and other financial institutions. 

People must know how to apply for MSME loans with banks since they can take informal loans from unreliable sources. MSME loan interest rates are far lower than that of everyday loans and can save thousands for entrepreneurs.

Applying for an MSME Loan in a Few Simple Steps:

Step 1: Registration

This step is only applicable for MSMEs which are not yet formalized. In India, most of the MSME sector is informal, and thus, cannot easily accept formal financing. Registration of the firm is a necessary step that has to be taken to apply for proper credit from a financial institution.

The government has made it easy for businesses to register themselves. Entrepreneurs can log on to the Udyam Registration portal, provide a few basic details, like their Aadhar Card number, and receive their MSME registration number within 24 hours. 

Step 2: Know What Your Business Needs and Decide on a Lender

There are a plethora of loan packages available. Generally, even on lender has tons of different loan schemes, it becomes easy to get confused among them. Finding the right fit for your business needs is essential. For that, the entrepreneur must think it through, make some projections in various scenarios, and decide on a particular package. 

Step 3: Apply for the Loan Online

Loan application is not the drawn-out process that it used to be years ago. One seldom has to visit the bank nowadays. Most banks allow interested customers to apply for a consultation online, after which they send an officer to the entrepreneur to hash out the details. A few simple details might be required at the time of application, such as the business registration number, PAN Card details, GST number, if any, etc. 

Step 4: Choose the Plan that Suits Your Business Needs

Banks have ready-made loan plans, as well as tailor-made loan plans for their customers. Browse through the whole list of choices available and decide on a loan package most suited to your business. 

Eligibility Criteria for an MSME Loan

Loan providers have basic and simple eligibility criteria that must be ticked off before the application is considered for approval. These include the following. Also, (calculate business loan eligibility here)

  • The applicant must be at least 22 years of age while applying for the loan.
  • At the age of maturity, the applicant must not be above 65 years.
  • Companies eligible to apply for an MSME loan include private companies and sole proprietors involved in the manufacturing, trading, and services sector.
  • The applicant must have experience of at least 5 years and must be involved in the current business (for which the loan is sought) for the preceding 3 years.
  • Other than generating a basic income of Rs. 2 lacs a year, the business must be developing a turnover of Rs. 10 lacs a year while also making a profit for the preceding 2 years.
  • The business must be formalized and have a business registration number.

List of Necessary Documents While Applying For An MSME Loan

There are quite a few documents applicants have to carry with them while applying for an MSME loan. Not furnishing these documents will stall the application process, leading to greater delays and, ultimately, losses for the business. Similarly, providing the right documents is of utmost importance. The basic list of documents to be presented are here. 

  • The Personal Account Number (PAN) card of the applicant and that registered in the company’s name.
  • Proof of address of the applicant as well as the business. Electricity bills can be used for both these proofs. 
  • Bank and income statement.
  • Form 16.
  • Income tax return and the company’s audited financial statements for the preceding two years to demonstrate the profit made during that period. 
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