India’s economy and employment relies greatly on the micro, medium and small sectors. According to a March 2020 report, India has more than 6.33 crore businesses in this sector at present.
Collectively known as the Micro, Small and Medium Enterprises or MSME, this business sector has received immense encouragement from the Government of India.
Businesses can avail MSME loans, which are special lines of credit with favourable terms. Thus, with plenty of funding and several other schemes to help them out, it is the ideal time to invest in such enterprises.
However, before learning more about the various schemes, one should understand what is MSME.
MSME and its eligibility
Micro, Small and Medium Enterprises are classified based on their initial investments and industry.
Listed below are some of the eligibility factors for a business to become MSME –
- Service sector
● Micro enterprise – Investment in equipment must not exceed Rs.10 lakh.
● Small enterprise – Investment between Rs.10 lakh and Rs.2 crore
● Medium enterprise – Equipment-related investment should be between Rs.2 crore and Rs.5 crore.
- Manufacturing sector
● Micro enterprise – Plant and machinery investment must not exceed Rs.25 lakh.
● Small enterprise – This investment should remain between Rs.25 lakh and Rs.5 crore.
● Medium enterprise – To become eligible as a medium manufacturing business, an enterprise’s investment must be between Rs.5 crore and Rs.10 crore.
A business that wants to avail MSME status, but lacks the necessary investment can avail MSME loans to achieve this status.
MSME schemes launched by the government
While there are several MSME schemes supported by the government, listed below are some that can significantly reduce hassle for such small businesses.
- Incubation Scheme
This scheme provides financial assistance to promote new and ingenious products, primarily in the technological sphere. The scheme also funds brand new design concepts, provided they are effective and innovative. The maximum financial assistance that a business can seek under this scheme is capped at Rs.8 lakh.
- Udyog Aadhaar Memorandum
Unlike the Incubation Scheme, Udyog Aadhaar Memorandum does not offer any financial assistance to enterprises. Instead, it accelerates the application procedure for potential MSME businesses. Previously, companies needed to fill up 11 different forms to be classified as MSME.
With the launch of the Udyog Aadhaar Memorandum, businesses today need to fill just two forms – Entrepreneur Memorandum-I and II. Additional benefits of this scheme include a completely free and online application process.
- Credit-Linked Capital Subsidy Scheme or CLCSS
Micro and small businesses require financial assistance in the form of business loans, just like the larger enterprises. Nevertheless, the former businesses cannot bear similar interest payments on their credits, due to limited revenue and scale. Thus, under CLCSS, MSMEs can avail funding at subsidies of 15%, which is capped at Rs.15 lakh. The related credit should only be used to upgrade a company’s technology.
Loans under this scheme can provide an efficient financing solution for micro, small and medium enterprises.
- Credit Guarantee Scheme
Another business finance-related MSME scheme, this initiative offers collateral-free capital loans to MSMEs. Features of this scheme include –
● Rehabilitation to MSMEs who fail to repay capital loans due to sickness that is beyond its control.
● Maximum loan principal available under this scheme is Rs.50 lakh.
Apart from the initiatives listed above, entrepreneurs can look for other government business loan schemes in India to fulfil their needs.
Reputed financial institutions, such as Bajaj Finserv, also provide Business Loan and approve applications in 24 hours, helping enterprises meet their emergency liquidity needs.
The company also provides pre-approved offers, which makes the loan application process smoother and faster. These offers are available on business loans, personal loans, and a host of other financial products. Interested individuals can check their pre-approved offers by providing basic details, such as name and contact information.
The government constantly supports the MSME sector to increase self-employment and a healthier economy. An aspiring entrepreneur must know all about the different schemes to support the growth of small businesses.
