Want to Apply for an MSME Loan? Here Are the Steps to Follow

  1. Introduction
  2. Steps to Apply for an MSME Loan
  • Choose the Type of Loan
  • Filling the Form
  • Uploading Documents
  • Credit History Analysis
  • Loan Disbursement
  1. Conclusion

MSMEs are the lifeblood of any community, city, or economy. If you run an MSME enterprise, you are likely responsible for employing anywhere between tens and hundreds of people. This gives you direct responsibility for their lives and regular employment, ensuring that they work in a facilitating environment and helping them bring the best out of themselves in your facilities. Regardless of the kind of enterprise that you run, these features that are common to all MSMEs. The financial burden of these responsibilities can often require you to apply for an MSME loan.

As with any business, running an MSME requires a significant quantum of funds. Since MSMEs employ several people concurrently, they need to follow the labour code of the region that they are based in. This includes processing employee payrolls on time, forming a significant part of the enterprise’s monthly expenditure. Similarly, most MSMEs also need to hold some inventory and order more when levels reach a minimum order quantity. Ordering finished goods or raw material, depending on which domain you are working in, also requires significant funds. To add to this, an MSME that wants to scale can also meet with a severe shortage of disposable income apart from the business’s operational costs.

“Once you can demonstrate certain financial robustness and viability of your business, your MSME loan can be approved in no time.” 

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This is the reason why such businesses choose to apply for an MSME loan. All types of financial institutions provide such loans. Once you can demonstrate certain financial robustness and viability of your business, your MSME loan can be approved in no time. However, every financial corporation requires you to follow a certain protocol when applying for an MSME loan. Let us look at the process to apply for an MSME loan.

Steps to Apply for an MSME Loan

Choose the Type of Loan

When you apply for an MSME loan, the first step is to choose the type of loan you need. There are several options you can choose from. You can opt for a regular term loan, the tenure of which is a few years, and you are required to repay through EMI. Another option you can choose is a loan against POS, which works efficiently if your primary retail is through POS services offline. You do not need to pay an EMI but instead can pay daily through your POS machine itself. You can borrow an amount that is equal to the average monthly sales.

It is also possible to opt for a line of credit facility, through which you can hedge against the seasonal nature of your business or uncertainties of the market. The line of credit facility can be availed for anywhere between a few months to a couple of years, and the method of payment is also generally flexible. Finally, if you are a part of an MSME that is a vendor for large corporations, you can avail of a loan against your pay order. Simply by showing that you have a sizable pay order from the corporation, you can take out a loan of the equivalent amount that you may then invest on scaling your facility.

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Filling the Form

Once you have decided the type of loan you want to apply for, the next step is to fill the required forms. Through these forms, you will be able to put forward your case for the sanction of a loan. You will be required to input your personal details, as well as the details of your business. If your business is a partnership, you will also need to provide the number of partners or directors you have in your company.

Uploading Documents

When you apply for an MSME business loan, the final step that you will participate in is uploading the required documents. Over the years, the number of documents needed to apply for a loan for your business has decreased significantly. You will need to provide a personal KYC document in the form of your PAN card, as well as proof of your personal residential address generally issued by the government. Next, you will require your bank account statements for the past six months and a registration certificate for your business.

Credit History Analysis

Once you have done your part in the process to apply for a business loan in India, the NBFC or bank will use its internal criteria to assess the loan and interest rate that you are eligible for. This will be partly based on the documents you have provided and partly on your credit repayment history. 

Loan Disbursement

After analyzing your credit history, the NBFC or bank will provide you with an assessment of your eligibility and the amount that can be sanctioned to you. You will also get to know the interest rate applicable and the repayment period. Once you agree to the terms, the loan amount will be disbursed to the bank account according to the details you have provided.

Conclusion

Taking out an MSME loan can be essential to scale your business or fulfil your obligations to customers, employees, or vendors. Using the sanctioned amount, you can put the financial house of your business in order and commence on a journey of true success. Choose FlexiLoans for your MSME loan to realize a truly seamless and smooth application process!

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Christophe Rude

Christophe Rude

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