"

For an MSME (Micro, Small and Medium Enterprise to be initiated and expanded there is the need for funding. The Government of India has always held on to its belief that MSME's can contribute greatly to strengthening the economy of the country. In keeping with these beliefs, the Government has gone a long way over the years in providing the required credit for their starting up and expansion through various loan schemes.

Recognizing the problems faced by MSME especially in these unprecedented circumstances, the Government of India has come up with various loan schemes. A great incentive has been provided with special schemes during the 'Covid19' times to help them tide over the present crises and stay afloat.

Purpose of the Loan

SME loans are offered to existing businesses to purchase the equipment or machinery and the raw material required for production. The loan may also be granted to MSMEs as working capital. The loans are offered by financial institutions or Banks. They may be availed by Sole Proprietors, Manufacturing or service-oriented Micro or small enterprises, and by Partnership firms.

Key Features of the Government Loan

1. The loans are sanctioned to start up or expand an existing Small or Medium business.
2. The loan is sanctioned to ensure the availability of funds to the MSME sector.
3. It may be granted toward expenses in setting up the business and for the initial running of the business in the case of a start-up.
4. The loan may be issued to existing enterprises to upgrade themselves with the latest technology.
5. The loan may be availed by individuals, partnership firms, companies, both private limited and public limited engaged in small-scale manufacturing or delivery of related services.
6. It must be noted that the borrowers cannot be educational or training institutions and persons engaged in retail trade or agriculture.
7. The maximum tenure of repayment of the loan is 15 years.
8. The interest rate is determined by the lender and starts from a rate of 13.5%
9. The loan may be secured or unsecured and will be decided by the lender by taking into consideration their related policy and the ability of the borrower to repay the loan.
10. The maximum loan account is ₹500 crores and is at the discretion of the lender based on the credibility of the borrower.

Eligibility for the Government Loan Scheme

1. The applicant's age must be in between 18 years and 65 years
2. Sole proprietors, Partnership Firms, Professionals or Micro and Small Enterprises run by either male or female, especially those belonging to SC/or OBC category provided that they are engaged in business in the manufacturing or trading sector and in the case of running enterprises whose turnover is a minimum of ₹10 lakhs
3. A CIBIL score of ₹700 or above.
4. Applicant must not be a defaulter.

Five-Step Simple Application Process

• Check out the various loan schemes and choose the one that best suits your needs
• Fill up the application form
• For guidance concerning the first two steps contact us
• Submit the form inclusive of all the necessary documents to the representative appointed by the bank for the purpose
• The amount granted as a loan may be credited to your Bank Account.

Documents to Submit

1. Photo Identity - Passport, Aadar Card, Driving license, and such other document
2. Proof of Credibility - Bank Statement of the past 12 months from date of application
3. Proof of Enterprise - Certificate of incorporation
4. The intent of Business - Business plan
5. Proof of Address - Passport, Voter's ID, or Aadar card, or Electricity or telephone bill
6. Application forms- duly filled up along with photographs of applicants

Pradhan Mantri Mudra Yojana (PMMY)

The scheme was launched with the sole purpose of providing loans to Micro enterprises whose business is of a non-farming or non-corporate nature with an intent of funding them and sustaining them. They are provided only to Micro businesses, 'Mudra' stands for Micro Units Development And Refinance Agency Ltd. Under the scheme, finance is granted to banks and financial institutions which finance MSME. A maximum sum of ₹10 lakhs is sanctioned under the scheme.

Executors

• Non-Banking Financial Companies (NBFC)
• Commercial Banks
• Small Finance Banks
• Micro Finance Institutions

Application to be submitted to

1. The above-mentioned banks and institutions
2. UdyamiMitra Portal (online)

Available Three Schemes under PMMY

1. Shishu Loan Scheme
2. Kishore Loan Scheme
3. Tarun Loan Scheme

The scheme is chosen based on the development stage of the enterprise. Under the Shishu Scheme assistance, up to ₹50,000 is on offer, Kishore loan scheme offers from₹50,000 to ₹5,00,000 a Tarun from ₹5,00,000 up to ₹10,00,000

Prime Minister’s Employment Generation Programme (PMEGP)

The Government of India has merged the Prime Minister's Rojgar Yojna and Rural Employment Generation Programme to formulate PMEGP to promote self-employment among the unemployed youth of the country. Traditional artisans engaged in the non-farming sector have been especially encouraged to start Micro enterprises. The loan can be applied for by a person who is 18 years of age or above and has passed at least the basic education (8th standard). The applicant must be engaged in the manufacturing or delivery of related services, costing above ₹10, 00,000 and ₹5, 00,000 respectively. The loan is granted only to start-ups. Loan under this scheme is also granted to Societies registered under the Societies Registration Act, 1860, Charitable organizations or trusts, Production-based cooperative societies, and self-help groups.

Executors of the Loan

• National level - Khadi and Village Industries Commission
• State-level - State Khadi and Village Industries Board
• Banks
• State KVIC Directorates
• District Industries Centres
• The amount of loan is sanctioned from the KVIC by way of Government subsidies via the banks chosen for the purpose to the bank accounts of the applicants.

Points to be noted

The project cost must not exceed ₹25, 00, 00 in the case of the manufacturing industry and ₹10, 00, 000 in related services or business. The rate of subsidy is 15% in urban areas and in the rural areas, it is 25% in the general category and 25% in urban areas and rural areas 35% for the special category.

Credit Guarantee Trust Fund (CGTMSE)

The scheme was formulated in collaboration between the Micro, Small and Medium Industries Development Bank of India (SIDBI) and the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to provide a financial guarantee to MSME, free of co-lateral security. The Trust is backed financially jointly by the Government of India and SIDBI. It aims to provide a guarantee cover of a minimum of 85% to Micro Ventures, which amounts to a sum of ₹5, 00, 00, 75% to enterprises run by women and those enterprises which have their base in the North East parts of India and 50% for retailers. Credit under this scheme is extended to start-ups and existing enterprises.

Executors of the Loan

• Banks or financial institutions.
• Regional banks
• Assistance is given to both Start-ups and existing ventures
• Availability of Guarantee Cover is based on the extent of loan and is as follows: -

• For an amount up to ₹5, 00, 000 the cover will be 85% of the loan amount.
• For an amount, up to ₹10, 00,000 to ₹100, 00, 000 the cover will be 50%
   In case of borrower default, the Trust will make good the amount up to 75% of the loan amount.
   An annual Guarantee Fee of 1.5% for the rest of the country and 0.75% for the North Eastern States inclusive of Sikkim.

Credit Linked Capital Subsidy Scheme (CLCSS)

To function more effectively, to be profitable, and to keep up with and beat the competitors an MSME must resort to technology up-gradation, which involves heavy expenditure. It is to tide them over this crisis the CLCSS has been formulated, by which subsidies are made available for the same.

Executors

SIDBI, Andhra Bank, SBI, Canara Bank, PNB, Corporation Bank, SBBJ, Indian Bank, NABARD, Andhra Bank, BOI, BoB and TIIC.

Points to be noted

1. A subsidy of 15% is provided for an additional investment of ₹1 crore to facilitate technology up-gradation.
2. The technology should be the latest and more efficient.
3. New should replace the old and not second-hand machinery

Equity Infusion for MSMEs through Fund of Funds

Through this scheme, funding is provided to an MSME to avoid a shortfall in equity. Growth-stage funding is provided with the intent of urging MSME to expand and to get themselves listed at stock exchanges; financial aid is sanctioned to potential MSMEs.

Executor

Available Investor funds which are registered.

Points to be noted

• The Private Equity firms or the Venture Capital Firms, supported by the Government invest in MSME

• Investments up to ₹50,000 crores encouraged.

Credit Guarantee Scheme for Subordinate Debt (CGSSD)

Among the many MSME's there are some of them have been declared to be a Non-Performing Asset (NPA) as of 30the April 2020. Under this scheme financial assistance is sanctioned to the founders or promoters of the so declared NPA. The sanctioned funds are used by the promoters or the founders who in turn will apply to the MSME which will enable him to increase the liquidity of the venture and sustain the debt-equity ratio. The funds give a new lease of life to those MSME's that have reached the NPA stage and will reach the stage soon. Under this scheme, the promoter of the NPA MSME's will be granted finance up to 15% of their holding of equity and debt included or ₹ 75 Lakhs which is the lesser amount.

--> Executors
--> Commercial Banks

Points to be noted

• It is offered only to promoters of MSMEs that have been declared NPA.
• Only 90% of the guarantee will be sanctioned under the scheme, the rest of the 10% will have to be borne by the promoters or founders.
• Tenure of repayment is 7 years
• A moratorium of 7 years will be given only if the principal amount is paid by then.

SIDBI- Make in India Loan for Enterprises (SMILE)

Taking a step forward in its 'Make in India' Campaign the Government of India under the SMILE scheme makes available loans to MSMEs to facilitate their active involvement in the campaign. It is issued as a quasi-equity or soft loan. Term loans are granted to MSMEs to maintain the necessary debt-equity ratio for their enterprises. Existing MSMEs are granted loans under his scheme for expansion and growth.

Points to be noted

• Under the scheme, the cover is granted to the ventures involved in manufacturing and related service.
• Existing ventures may opt to receive benefits from the scheme for exploring new prospects, growth and expansion, renovations in keeping with modern times, up-gradation of technology, and such other projects required for the growth of the enterprise and its business
• Smaller enterprises within the MSME may be financed under this scheme.
• The size of the loan depends on the purpose for the utilization of the same.  A minimum amount of ₹ 10 lakhs is sanctioned for the purchase of equipment and financial needs and ₹25 lakhs for the rest.
• Tenure of repayment is 10 years inclusive of a moratorium of a maximum of 36 months.

MSME Business Loan for Start-ups in just 59 Minutes

Fully aware of the urgent need for funds by Start-ups, the Government of India has introduced an express processing feature for MSME loan schemes. A new portal has been launched specifically for this purpose. The loan on this portal is processed within 59 minutes and is fully automated. The loan amount is credited to the bank account of the applicant within 7 working days of processing the same.

Points to be noted

• The loan is approved to a venture that complies with IT, GST registered and has a Bank Statement Facility for 6 months.
• For firms that are not compliant with IT or GST registered and do not have the Bank Statement Facility of 6 months, under the Mudra scheme must present a self-declaration of the related details.
• Loans may be granted as Mudra loans, term loans, and working capital loans.
• The credibility of the applicant is determined by the lender by looking into the statement of Income and revenue, capacity to repay, and existing credit facility.
• The minimum amount issued under the scheme is ₹1 lakh and the maximum  I ₹5 lakhs
• Collateral not required
• The rate of interest is from 18.5%
• Mudra loans range from ₹10,000 to ₹10 lakhs.

MSME Loan Scheme - Covid19 relief

SBI following the RBI COVID 29 regulatory package, has deferred the payment of installments, EMI's, and interest of term loans which are due between 1st March 2020 to 31st May 2020, and the repayment tenure has been extended by 3 years over the original period of repayment.

The working capital that is granted as an Overdraft or cash credit facility an interest will be charged during the said period, However, the payment of the same will be deferred and the accumulated interest must be paid on expiry of the deferred period inclusive of the monthly interest for June.

Executor

State bank of india

Points to be noted

• The options may or may not be utilised by the beneficiaries.
•  The one who would like to utilise this option may communicate their choice in this regard may be emailed to the bank or handwritten and submitted to the bank. 
•  Those who have already made the payments may receive a refund if they wish to use the facility by emailing the Application (Annexure-I) to the bank.
•  Those who do not want to utilise the same may continue to do so.

Frequently Asked questions

1. What is an MSME Loan?
   In recognition of the financial constraints faced by the MSMEs, the Government of India has formulated numerous schemes to offer the necessary financial help to help them stay afloat and grow. These schemes are known as the MSME loans.
2. Are non-collateral loans available for start-ups?
   These loans are available when applied to financial institutions. For the various schemes, contact Tax Advisory, we would love to guide you.
3. How do I apply for an MSME loan and get Bank approval for it?
   The first step to applying for an MSME loan is to register on the portal launched by the Government for this purpose. Create an account for yourself and fill up the application form and upload the required documents. It can all be done contactless through the online portal from the comfort of your home. For a bank approval check the criteria of eligibility, if this criterion is satisfied, you will get the approval.
4. Is the MSME loan available for any kind of business?

The kind of business doesn’t matter. Loans are granted for business and the kind of business is not a criteria. You could choose between a Government loans or against collateral.

1. How does one obtain the loans that have been launched during the COVID19 lockdown?
   Loans schemes have been specially launched and provisions are made to existing ones to help those who have been badly hit by the COVID19 lockdowns.
   Receive the benefits by registering for them online through the portals especially launched for the purpose.

How can we help you- The TAX ADVISORY

Help is at hand for those who are willing to reach out to the right channels… Find the right channel, choose right, and choose Tax advisory!

Irrespective of the kind of business, we work to help you with your documentation and licenses. If in need of legal assistance concerning your business, feel free to get in touch with us.
Our team of experts are sure to find the right solution for you.

We don’t believe in having many clients, we believe in building long-term relationships with them!

.

.

"