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    The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSME) Act, 2006 in terms of which the definition of micro, small and medium enterprises is given below.

    The Ministry of Micro, Small and Medium Enterprises, a branch of the Government of India, is the apex executive body for policy making and administering laws relating to micro, small and medium  enterprises in India

    Based on investment and turnover criteria a business falls in one of the three categories of Micro, Small or Medium.

    Development of MSMEs - MSME Registration- Startmybusiness

    Types of MSME loan Options:

    We will cover MSME Lending for private enterprises for you to get a gist of the loan options. The loan options available are:

    1. Working capital loans: As the name suggests, this is required by enterprises which need instant capital to keep the business moving forward and to sustain their operations. They also need funds to bridge the gap between delivery of finished products and payment for the same. As an MSME, they can avail such loans at better terms and have a repayment tenure of 1-2 years. The lending is collateral free. The MSME enterprise should be in business for over a year and its annual turnover should be greater than INR 24 Lakhs. The documentation required for loan eligibility includes KYC documents, business registration certificate and the Current Account statement for the last 6 months.

    2. Merchant Cash Advance: This is a form of lending wherein disbursal is quick. The MSME receives a lump sum amount required and the repayment is done daily as per the sales done at the organizations point of sale terminals. An MSME whose product or service is consumed by customer and instantly paid for through a point of sale terminal is aptly suited for such kind of loans.

    3. Line of Credit: Line of credit enables enterprises to have credit options at their disposal for meeting their daily expenses. While the enterprise has access to a pool of funds here, the interest is charged only when they avail a loan. The enterprise can enjoy a revolving line of credit and get a reduced interest rate for their loan. Are you looking for such loans? Know more by clicking here. While the loan is not backed by collateral, users can avail loans in the range of INR 50,000 to INR 1 Crore. The repayment tenure is 1 year.

    4. Invoice Financing: Invoice financing, as the name suggests, enables MSMEs to raise capital against invoices that are yet to be cleared. It helps them to maintain their cash-flow better and manage day-to- day operations. In this model of financing, the lending organization takes a percentage of the invoice upon clearance wherein it covers for the processing fee, the principal and the accrued interest. Any enterprise which has been operational for more than a year and has a turnover of over INR 24 Lakhs can avail this type of financing. It should however have raised the invoice to a reputed corporate entity and should have valid invoices of work of at least INR 1 Lakh.

    Is the Government of India helping to scale up MSMEs?

    The government of India has been increasingly digitizing and accelerating capital raising processes to enable faster disbursals and help create more entrepreneurs. For MSME’s, the government is running a series of schemes as below:


    The initiative provides funding to MSMEs whose lending requirements are less than INR 10 Lakhs. The PM Mudra Yojana takes a longer time to process but offers competitive interest rates and a relaxed repayment tenure. In the meantime, if you wish to avail an MSME loan, Consult our Business Advisor.


    SMILE is a Government of India initiative that works alongside “Make in India” and has a budget of INR 10,000 Crores to enable MSMEs to accelerate growth. They offer loans at 8% rate of interest and the repayment tenure is up to 120 months.

    As you have read, it is beneficial to register as an MSME if you fall in the category in terms of revenue. The government has made it compulsory for large corporations to have a minimum set transaction with the MSME sector. All these factors will lead to great MSME growth. Register today to avail the benefits. If you need money right away as you register to become an MSME, please get in touch with us to avail a MSME loan.

    Benefits of MSME Registration in India:

    Enterprises which register themselves as an MSME can avail many benefits ranging from lending options to cluster financing to the adoption of latest technology and quality management standard. Some of the key benefits include:

    1. 50% Subsidy on Patent Registration: As an entrepreneur, you may be aware of the hefty fee that an enterprise must shell out to get a patent registered. Have you faced such an issue? With MSME registration, the patent registration will come to you at a 50% subsidy. Safeguard your IP today and accelerate your dream of becoming a renowned corporation of tomorrow.

    2. Collateral Free Loans: An enterprise that is registered as an MSME can enjoy collateral free loans options which are facilitated through banks and NBFCs. Isn’t it great to avail a working capital loan or a credit line without having to put some of your assets at stake?

    3. Exemption of interest on Overdraft: As a registered MSME, an enterprise can enjoy a 1% exemption on interest on an overdraft facility. Even a slight decrease in the cost of funds is extremely beneficial for small businesses and MSMEs are no different.

    4. Reservation Policy: MSMEs are a labour-intensive group that generates a lot of employment and hence enjoy some special privileges from the government. The government has given exclusive rights to manufacture certain products to MSMEs. Under the Government Stores Purchase Program, the central government has reserved around 300 products exclusively for the MSME sector.

    5. Technological Upgradation for MSME’s: The government, under the Capital Aid for Technological Upgradation Scheme, is enabling MSMEs to upgrade their equipment through latest technology. To do so, the government is encouraging more MSMEs to upgrade their technology and infrastructure and is enabling them to get low-interest loans from banks.

    6. Protection against delayed payments: The biggest advantage of an MSME registration is the protection received from the government for delayed payments. If an MSME supplies a product or delivers a service, the buyer must pay on or before the date of payment. In case there is no date mentioned, the payment must be made within 15 days of acceptance of the product or service, failing which the buyer is required to pay a fine to the MSME registered company. This enables them to maintain free cash flow and keep bad debts to a minimum.


    Name of Applicant (Authorised Director/ Partner/ Owner)

    Copy of PAN Card of Individual/Directors

    Address of Registered Office

    Passport Size Photograph

    Copy of Aadhaar Card of Authorised Person

    Name of Business (COI /LLP DEED/ Partnership Deed)

    Bank Account Number + IFSC Code

    Number of Employees.

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      Frequently Asked Questions

      Most states offer those units registered under the MSMED Act a subsidy on power, taxes, and entry to state-run industrial estates. In particular, there is a sales tax exemption in most states and purchase preferences on goods produced. The Central and State Governments provide certain important benefits to MSME in the initial years of business. Exemption in excise and certain direct taxes are just to name a few.

      Although it is ideal to have an MSME registration which makes it easier to apply for government incentives, subsidies and tax rebates, it is not compulsory to apply for one. However, in the absence of this certificate, one is likely to lose out on monetary advantages like reimbursement of expenses in infrastructure development, getting ISO or international licensing, availing priority sector lending from banks and also non-monetary benefits such as access to trade exhibitions abroad, promoting entrepreneurship development, etc.

      The process of registering a business has been simplified by the government through the introduction of the Udyog Aadhaar in 2015 for existing business units after the government made it a simple one-page registration form for businesses. Instead of filing detailed forms of entrepreneur Memorandum while registration, a business owner can now register online through quick steps. Over the past few years, more than 54 lakh registrations under the Udyog Aadhaar scheme have been granted.

      The PRC expires at the end of five years, at which point you may re-apply if the unit is not yet operational, or if the unit exceeds investment limits set by the MSMED Act. Once you commence operations, you can apply for the Permanent License. For a registration, total plant and machinery cost should be up to Rs. 25 crore for manufacturing units and Rs. 10 crore for service units. While calculating this number, the value of land and building will not be counted toward the total investment. Also, the original cost of the equipment and plant and machinery is taken into account. Depreciation cannot be factored in.

      All financial institutions, including the major banks recognise MSMEs/SSIs and have devised special schemes for them. MSMEs and SSIs are earmarked for priority sector lending. This increases the likelihood of you being granted a loan considerably. Major Indian Banks also provide loans to MSMEs at lower interest rates. You may also expect to get preferential treatment in case of any future delay in repayment.