The Micro, Small and Medium Enterprises (MSMEs) employ more than 111 million individuals and contribute 31% to India’s GDP. To boost the growth of MSMEs and to provide them with adequate funds for investments, the Government of India has launched various schemes. One such MSME loan scheme is the MUDRA Yojana and Credit Guarantee Funds Trust for Micro and Small Enterprises, which provides financial assistance to entrepreneurs.
Given below are some of the details of such schemes:
Pradhan Mantri Mudra Yojana (PMMY)
This Yojana came into effect on 8thApril and aimed to provide collateral-free loans to the MSMEs in India. The amount provided under this MSME loan scheme is up to Rs. 10 Lakh with a tenor of 5 years.
The documents required for a business loan under this scheme are:
Residency proof – like water bills, gas bills, electricity bills, telephone bills, etc.
KYC documents –such as Aadhaar card, PAN card, Voter ID, passport, driving license, etc.
Business address proof –like electricity bills, rental agreements, etc.
Business existence proof –such as GST registration certificates, SEBI registration certificates, partnership deeds, etc.
In addition, applicants have to submit their passport-sized photographs. Those belonging to the SC, ST or OBC category have to furnish their caste certificates along with the above mentioned documents.
The application process is as follows:
Visit the official website and download an application form
Fill the application form with the necessary details such as name, contact number, date of birth, address, parents’ name, annual income, etc.
Search for a lender providing loans under this scheme and complete all the formalities of that lender.
After the documents are verified, the loan amount will be sanctioned and disbursed accordingly.
In addition to the above, applicants should hold a healthy credit score, and their firm should be registered under GST. You can register for GST online by providing your Aadhaar details and a contact number.
Under this scheme, there are three types of loans:
Shishu – Loans up to Rs. 50,000 under this loan.
Kishor –Loans between Rs. 50,000 and Rs. 5 Lakh.
Tarun –Loans between Rs. 5 Lakh and Rs. 10 Lakh.
However, if the mentioned amount does not feed your professional purpose, you can avail loans with a higher amount from financial institutions and NBFCs.
Credit Guarantee Fund Trust
The Credit Guarantee Fund Trust for Micro and Small Enterprises, also known as CGTMSE scheme came into effect in 2000. Under this scheme, applicants are eligible to avail advances up to Rs. 2 Crore. A substantial loan amount and affordable interest rates are some of the reasons why business loans are financially beneficial for your organisation.
To avail such guaranteed credits, applicants are required to pay a minimal amount as service charges and annual fee. These charges are payable at a rate from 0.75% to 1.5% depending on the location and applicant’s profile.
Individuals can avail loans under the CGTMSE scheme by approaching financial institutions and NBFCs offering such loans. They will also have to provide a feasible business plan to their lender. After the formalities are completed, your lender will sanction the amount, and the sum will be disbursed accordingly. Borrowers should also hold an ideal credit score when applying for loans under the Credit Guarantee Funds Trust scheme.
Besides the above, the MSME loan scheme provides credits at an affordable interest rate. For example, the MUDRA loan scheme can be availed at an interest rate ranging anywhere between 8.40% and 12.45% based on the applicant’s financial profile.