Ways to Secure MSME Loan Without Collateral

India is a stunning mosaic of different cultures, languages, cuisines, and a number of small businesses uplifting these other factors. It is these that add colour and vibrancy to our motherland and her economy. It is only fair that you, too, want to add your unique colour to this mosaic to make it even more beautiful and prosperous.

Everyone, right from the Government to banks and other financial organisations, is recognising the potential that comes from small business. So, now is a better time than any to kick off a small business of your own.

With so much already on your plate regarding your business, finance options are the last thing you need to worry about. So, read on to discover all about how you can get your hands on MSME loans without collateral.

What is an MSME loan?

An MSME loan, which stands for Micro, Small, and Medium Enterprises loan, is a specialized financial product tailored to meet the funding requirements of businesses falling within the MSME sector. This sector includes micro-enterprises, small businesses, and medium-sized enterprises, which often face challenges in accessing traditional financing due to their size and limited collateral.

Ways to get MSME loan without collateral:

MSMEs have unique needs for finances. If you have registered your business, MSME registration benefits your business in several ways. Including giving you access to funding that fits your need for collateral-free finance.

Here are some ways you can get unsecured MSME loans.

Government MSME schemes:

Your very first step to accessing MSME finance is registering your business as an MSME with the Ministry of Micro, Small, and Medium Enterprises. Doing so will give you access to several funding options; the first being government MSME schemes.

We weren’t kidding about the government showing full support for MSMEs! They have launched several schemes focused on promoting the growth of MSMEs such as:

• Credit Linked Capital Subsidy Scheme (CLCSS): Under this MSME scheme, MSMEs are provided with a subsidy for upgrading and modernizing their technology by availing of credit. It encourages technology upgradation in the sector.
• Pradhan Mantri Mudra Yojana (PMMY): PMMY provides financial support to micro-enterprises by offering collateral-free loans through three categories: Shishu, Kishor, and Tarun. It aims to promote entrepreneurship and self-employment.
• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): CGTMSE provides credit guarantees to banks and financial institutions to encourage them to offer collateral-free business loans to MSMEs.

There are many more such schemes to fit your unique needs. You can learn all about them here or on the official MSME website.

Non-Banking Financial Companies:

NBFCs or Non-Banking Financial Companies are complementary financial institutions to traditional banks. These institutions reach places the traditional banks find it hard to; such as areas with low population density. They also offer finances that fit the needs of such areas better, like unsecured MSME loans and small business loans.

Unsecured MSME loans from NBFCs also offer several benefits such as relatively lower interest rates, flexible repayment schedules, and online application. They have quicker disbursal rates, making them a preference for MSME owners. For all these benefits, check out FlexiLoans’ range of business loans. We can help you take your business to the next level with MSME loans for various purposes, from term loans to machinery loans to even lines of credit. We have it all!

Crowdfunding:

The recent years have seen the rise of business financing options like crowdfunding platforms. Crowdfunding is a fundraising method where individuals, businesses, or startups raise small amounts of money from a large number of people, typically through online platforms. It leverages the collective contributions of many to finance projects, products, or causes.

It’s used for diverse purposes, from launching new products to supporting charitable initiatives and creative endeavors. Crowdfunding platforms are online websites or apps that facilitate the collection of funds from a broad audience for various projects, businesses, or personal needs. Examples include Kickstarter, Indiegogo, and GoFundMe.

Traditional loan options:

The implementation of government schemes has made it possible to access MSME loans through traditional banks and financial institutions. These loans include all the features necessary to serve MSMEs but could have slightly stricter conditions. Several banks also offer unsecured MSME loans to fill the need for MSME finance.

These loans have easier application processes and cater to the need for small business loans with options starting as low as Rs. 50,000. It would be beneficial to look into these options as they also help raise your credit score through timely repayments.

To Conclude:

MSMEs or Micro, Small, and Medium enterprises are businesses with specific financing needs. MSME finance or MSME loans are debt instruments specifically made to cater to these special needs. You can access these unsecured MSME loans by, first and foremost, registering your business as an MSME. As an MSME, you can get funding through government MSME schemes, crowdfunding platforms, NBFCs, and some traditional financial institutions. It is important to research all options thoroughly to gauge which fits your situation best.

No matter your situation or needs, FlexiLoans’ range of business loans has you covered. With a simple online application process and minimal documentation needs, we can assure you stress-free “loans at a click”! FlexiLoans has options for you ranging from MSME loans, to unsecured loans to term loans, working capital loans, small business loans, and much more. Apply now, and take advantage of our quick business loans.

Frequently Asked Questions:

Q1. How can I register my business as an MSME?

Ans: You can do your MSME registration by registering to Udyog Aadhaar. Visit the Udyam Registration portal and register your MSME online by filling in your Aadhaar number, PAN number, and basic details about your business. Once your registration is complete, you can take advantage of all the MSME benefits.

Q2. What are the MSME eligibility criteria?

Ans: To qualify as an MSME (Micro, Small, and Medium Enterprise) in India, the investment should not exceed ₹1 crore and the turnover should not exceed ₹5 crore for a micro-enterprise. For small enterprises, the investment limit is ₹10 crore, and the turnover limit is ₹50 crore. For medium-sized enterprises, the investment limit is ₹50 crore, and the turnover limit is ₹250 crore.

Q3. Can I get an MSME loan with a low credit score?

Ans: It is possible to get an MSME loan with a low credit score, but it may affect the other terms of the loan. This requirement differs from organisation to organisation. Through FlexiLoans, you can get quick and online access to unsecured MSME loans even with a low credit score.

Q4. What are the documents required to apply for an MSME loan online?

Ans: For an MSME loan online application, you typically need documents like your business’s KYC documents, bank statements, income tax returns, GST registration, business plan, and financial statements, including balance sheets and profit and loss statements. The specific requirements can vary by lender, so it’s advisable to check with your chosen financial institution for their exact documentation needs.

Q5. What is the MSME loan interest rate?

Ans: The specific rate varies from institution to institution, but it can start as low as 1.5%.

Q6. What purposes can I use an unsecured MSME loan for?

Ans: You can use unsecured MSME loans for various business purposes, including working capital needs, expanding operations, purchasing equipment, stocking inventory, marketing and advertising, hiring staff, and even refinancing higher-cost debts. The flexibility of these loans makes them valuable for addressing a wide range of business requirements.

Q7. Can I get a startup loan for an MSME?

Ans: Yes, several institutions, including FlexiLoans, offer financing solutions even for businesses that are just starting out. These loans may have longer repayment tenures and more flexible conditions.

Q8. What is PMMY?

Ans: Pradhan Mantri Mudra Yojana (PMMY) is an Indian government initiative aimed at providing financial support to micro and small enterprises. Launched in 2015, PMMY offers collateral-free MSME loans through various banks, non-banking financial companies (NBFCs), and microfinance institutions. These loans are categorized into three segments: Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakh), and Tarun (₹5,00,001 to ₹10 lakh), catering to different business needs. PMMY promotes entrepreneurship and financial inclusion by facilitating access to credit for small businesses, helping them grow and generate employment.