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Eligibility Criteria for MSME Loan and Required Documents to Apply

August 24, 2023 • 1152 views

The Micro, Small, and Medium Enterprises (MSME) sector in India plays a crucial role in driving economic growth, employment, and exports. According to the Press Information Bureau, over 42.67% of the nation’s exports came from this sector and it provides employment to more than 84,23,452 individuals. Safe to say, this sector acts as the backbone of the Indian economy.
Despite its significant growth, the MSME sector still holds immense untapped potential. One of the primary challenges faced by the sector is a huge credit gap.

To fill this credit gap, many leading financial institutions now offer attractive Business Loans tailored as MSME Loans to ensure the smooth operation and expansion of businesses without disrupting cash flow. So, entrepreneurs can now apply for MSME Loans to fuel their business’s growth without any hassle. However, before applying for an MSME loan, entrepreneurs must ensure that they meet the eligibility criteria and have all the necessary documents ready. To know about MSME Loan eligibility and MSME loan documents, read this article further.

But First, Let’s Understand What is Considered MSME/SME?

Ministry of Micro, Small, and Medium Enterprises categorises enterprises as ‘micro’, ‘small’, and ‘medium’ based on their annual turnover, irrespective of whether they are in the manufacturing or the service sector. The criteria are provided in the below table

Enterprise

Annual Turnover (in Rs.)

Micro

Up to Rs. 5 Crore

Small

Up to Rs. 50 Crore

Medium

Up to Rs. 250 Crore

 

What is the MSME/SME Loan Eligibility Criteria?

Though the MSME/SME loan eligibility criteria may vary from one lender to another, here are some common eligibility criteria that are common to all. Let’s have a look at the MSME/SME Loan eligibility criteria

Criteria

Requirement

Age

Your minimum age must be 24 years at the time of loan application and 65 years at the time of loan maturity

Business Vintage

Your business should have been operational for a minimum of 2 years

Annual Turnover

Your business must have an annual turnover of at least Rs. 6 Lakh

 

In addition to the above-mentioned eligibility criteria, there are some additional requirements as well. Please have a look at them

  • Business Type: Your business must fall under the definition of MSME, which is based on investment in plant and machinery or equipment for manufacturing units and investment in equipment for service enterprises.
  • Loan Purpose: MSME Loans are generally provided for business-related purposes, such as expansion, working capital, purchase of machinery, or technology up-gradation.
  • Credit Score: A good credit score indicates your creditworthiness and repayment capacity. Lenders usually prefer applicants with a credit score of 650 or above.
  • Profitability: Your business should have a consistent track record of profitability to demonstrate its ability to generate income and repay the loan.
  • Collateral: While some lenders offer collateral-free MSME Loans, others may require collateral depending on the loan amount and your credit profile.

What are the Documents Required for MSME Loan?

Just like the MSME Loan eligibility criteria, the checklist of MSME loan required documents also varies from lender to lender. Also do note that these documents serve as essential supporting evidence during the loan application process and significantly influence your eligibility for the loan.

Below are the required documents that you will need to provide when applying for an MSME Loan

Type of Document

Requirement

KYC

PAN Card of the business, Director/Proprietor/Partner PAN Card Aadhaar Card, and Passport

Business registration and business address proof

Business Address Proof

Utility bills and/or rent agreement

Financial Documents

Your bank account statements for the past 6 months.


Note: As said earlier, the specific documents required may vary depending on the lender and the type of MSME Loan you are applying for. It is essential to check with the lender or financial institution for the most up-to-date and accurate document requirements.

How To Apply for MSME/SME Loans?

Applying for an MSME/SME Loan at Poonawalla Fincorp is very easy. Apart from the minimal MSME loan document requirement, the entire process can be completed online from the comfort of your home. Just make sure that you have all the soft copies ready to be submitted. Here are the steps involved

  • Visit the loan application page.
  • Enter your business name, its type, your PAN card number, mobile number and email, the loan amount you want to borrow, and the tenure.
  • Verify your mobile number by entering the OTP sent to you.
  • Fill out your details and upload the required documents.
  • Submit the application form. If you are eligible for the loan, you will be notified.
  • Once your loan application is approved, the funds will be disbursed to your bank account.

Conclusion

In conclusion, MSMEs form the backbone of the Indian economy, and ensuring their financial health is vital for sustained economic growth. By following this checklist of required documents for MSME loan eligibility, entrepreneurs can enhance their chances of a successful loan application and secure the necessary funds to fuel the growth and expansion of their businesses.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

We are a team of expert writers and editors passionate about providing our readers with authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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