Benefits of MSME Registration
MSME stands for micro, small and medium enterprises, and these are the backbone of any developing economy. To support and promote MSMEs, the Government of India through various subsidies, schemes and incentives promote MSMEs through the MSMED Act. The Indian government has provided many benefits for small scale units or medium small and micro enterprises (MSME).
Though India is still facing infrastructural problems, lack of proper market linkages, and challenges in terms of the flow of institutional credit, it has seen tremendous growth in this sector. The advantage of this sector is it requires less investment, thus creating employment on a large scale, and reducing the employment and underemployment problems. Moreover, this sector has survived almost all threats emerging out of still completion from both the domestic and international market. In order to be eligible to get these benefits, any entity should register itself as MSME/SSI enterprise under the MSMED Act.
Registration under MSME
To avail the benefits of MSME and the various schemes and subsidies provided by the government, one needs to ensure they are registered under the MSME Act. Registration under the MSME Act is not mandatory, however, only those who are registered under the act can avail the various benefits an MSME would get. Whether a company is an LLP, Sole Proprietary, Partnership, Public or Private Limited Company, registration is necessary for all. You can register as an MSME by following this link. Ensure that you need to have a valid Aadhar number for the registration of MSME and if you do not have one, you can follow this link to get your Aadhar number.
To know more about the MSME registration, the process, documents required and eligibility criteria read our blog on MSME Registration process.
Benefits of MSME Registration
As mentioned above, the registration of MSME is not mandatory, but the registration process has been provided so that all entrepreneurs can maximize their benefits under this scheme and reap the offers provided by the government. The benefits are many; from priority lending to cluster financing with encouraging bank loans, and an opportunity to adopt latest quality management standards.
Let’s dive into the further benefits of MSME registration point by point:
- 50% Subsidy on Patent Registration
If you have created something new, a new innovative product or business model and want to patent it, there is a hefty fee applied for patent registration. But with the help of MSME registration, one can avail the patent registration down to a 50% subsidy. This move aims to encourage more entrepreneurs to invent and innovate along with taking their credit for it at a minimal fee. They can avail this 50% subsidy by registering with their respective industry.
- Collateral Free Loans
One of the biggest benefits through the process of MSME registrations is the collateral free loans one can avail through banks and NBFC’s. This essentially means that SME’s and MSME’s can now take various loans such as working capital loan, credit line loan, invoice financing at no collateral at all. MSME’s do not need to use their house or any other asset as collateral or safety while taking a loan, once MSME registration is complete.
- Exemption of interest on Overdraft
Many MSME’s who have a good credit structure and have good relations with their banks can avail the overdraft facility. An overdraft facility lets you spend the money first and then you can pay it back after a certain period of time along with a certain rate of interest. MSME’s have the advantage of a 1% exemption on interest on overdraft facility. This could be extremely beneficial and of course cost savings for quite a few MSME’s. However not all banks and NBFC’s agree to this, so it is on the MSME to check out if this feature is available by their lenders or no.
- Reservation Policy
As mentioned above one of the greatest things about the MSME market is that has hardly been affected by outsiders such as the domestic or the international market. Due to this, the success of the MSME sector has been growing rapidly. A major part of this success is due to the reservation policy by the government. There are some MSME sectors that have been mentioned by the government that have been given exclusive rights to manufacture certain products. Under the Government Stores Purchase Program, the central government has reserved the purchase of more than 300 products exclusively from this sector. This gives a boost to the MSME market and it is not affected by stiff competition.
- Technological Upgradation for MSME’s
Some MSMEs may not be able to use their resources to full potential due to lack of the sophisticated technology required. The government, under the Capital Aid for technological upgradation scheme, helps these enterprises upgrade their equipment through latest technology by helping them get a low-interest loan from banks. With the rise of technology increasing in modes such as AI and data science, the government is encouraging more MSME’s to get into the space of technology through aid and financial support.
- Protection against delayed payments
One of the major advantages of registering under the MSME scheme is the protection received by the government against delayed payments. This protection in delayed payments is against the buyers in the transaction of business. If any micro or small enterprise that has MSME registration, supplies any goods or services, then the buyer is required to make payment on or before the date agreed upon between the buyer and the micro or small enterprise. In case there is no payment date on the agreement, then the buyer is required to make payment within fifteen days of acceptance of goods or services. In case of delayed payment still, the buyer is required to pay a compounded interest fine to the MSME registered company. This helps most MSME’s to ensure they have no outstanding debtors or bad debt.
From the benefits mentioned above, one can understand how truly important and helpful it is for an MSME to ensure they are registered under the MSME Act. Also, with the government making it compulsory for large corporations to have a minimum set transaction with the MSME sector, the growth and the revenue of the sector has been increasing. So all in all, registering yourself as an MSME has various benefits that could uplift your business.