6 ways to leverage your MSME Funding

MSME funding

The micro, small, and medium enterprise (MSME) sector keeps the wheels of Indian Economy running. Being the sector that the majority of Indians are dependent upon for employment and living, MSME is rightfully the most important sector that needs attention. They have been pivotal in shaping the economic development of India especially in the rural and tier-2,3 towns.  

By the MSMED act of 2006, the country has over 60 million MSMEs. For building an Atmanirbhar Bharat, MSMEs are going to be the skeleton and that tells enough how significant this sector is going to be in Financial and Economic planning and strategy. Investment in MSMEs is going to reap benefits in the long term for the country. 

We are going to look at 6 ways we can leverage our MSME funding. To begin with, let us see how MSMEs have been technically defined by the government. 

Micro enterprises: Enterprises with investment up to Rs 25 lacs 

Small enterprises: Enterprises with more than Rs 25 lacs but less than Rs 5 crore 

Medium enterprises: Enterprises with more than Rs 5 crore but less than Rs 10 crore 

in the Service sector, 

•Micro enterprises – Investment of less than 10 lakh 

•Small enterprises – Investment ranging between Rs 10 lakh and Rs 2 crore 

•Medium enterprises – Investment ranging between Rs 2 crore and Rs 5 crore 

MSME registration 

MSMEs need to register their business on the ‘Udyog Aadhaar Memorandum (UAM) ‘portal. Registration on the portal is free and simple. Though Registration of one’s MSME is not compulsory, registering business gives an excise exemption scheme from direct taxes as well as avail special schemes from banks customised for MSMEs 

Also, registered MSMEs enjoy support from the govt in numerous areas like electricity, govt preference to MSMEs, low-interest rate bank loans, easily accessible credit, reimbursement of Product quality certification, the scope for International Trade Fairs, one-time settlement fee for unpaid dues. 

So, what are the documents register for MSMEs 

1) Aadhar No 

2) PAN 

3) Bank Account no 

4) The basic business activity 

5) NIC 2-digit code 

6) Address 

7) Investment details (Plant details)  

8) Licenses and bills of purchased machinery copies. 

9) Sale and Purchase bill copies 

10) Purchase Deed 

Registration is also possible for a business without Aadhar Card, in such cases other ID proof documents such as Passport, Voter Id can be used. 

Financial government schemes for MSMEs- 

The Govt of India has launched numerous schemes for the MSME sector. Here are some of them: 

1) Udyog Aadhaar Memorandum Scheme – With This scheme loans for Subsidies, credit are easily processed for MSMEs. 

2) Zero Defect Zero Effect- This scheme is launched for security of MSME products against substandard quality products. Benefits include rebates and concessions for export goods. 

3) Credit Linked Capital Subsidy Scheme- Funds can be availed by registered MSMEs for replacement of old equipment and upgradation to new technology. This is easily accessible by MSMEs from banks. 

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4) Incubation-Innovators can use this scheme for implementation of design, ideas or new products. Government finances around 75% of the project. 

5) Pradhan Mantri Mudra Yojana (PMMY)- Under this scheme, non-corporate and non-farm small or micro-enterprises can avail loan from commercial banks , microfinance institutions up to 10 lakhs. Loans can also be applied online through the ‘Udayami Mitra’ Portal. 

6) MSME loans The Government of India defined MSME loans as “loans for business enterprises for support in terms of finance, infrastructure, and other areas.” These loans are provided by banks and other such institutions under schemes like Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Set up by the Government of India, Ministry of MSME and SIDBI, these are targeted to facilitate the flow of credit to the MSME sector without the need for collaterals. 

For failure to repay a loan by MSMEs, the CGTMSE would cover the loss incurred by the lender up to 85 percent of the default outstanding amount. However, there are specific eligibility criteria to be met. With adequate documentation and credentials availing MSME loans are easy and quick with fast processing time. 

MSME loans are generally for short term duration and less likely for long term this leading to efficient cash flow. Benefits of MSME loans are Reduced Interest Rates, Collateral-Free loans and Flexibility. MSMEs are the engine of economic growth and equitable development. The sector has a lot of opportunities to grow and investing properly will only accelerate it.

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