According to International Finance Corporation (IFC), the small scale industry in India faces a credit gap of Rs.16.66 lakh crore. As the MSME sector acts as the industry fuelling growth in the economy by employing around 40% of the unorganised sector worker, such lack of capital can be a severe hindrance in its development.
As a result, the central government has taken various steps to overcome such limitations in collaboration with major financial institutions in the country, by facilitating readily available credit through high-value loans at affordable interest rates.
Various types of government-mandated small scale industry loans are available in the market at attractive interest rates and flexible eligibility criteria respectively, to ensure higher credits disbursed in the market.
Types of MSME Loan Scheme –
MUDRA LoansSuch credits involve no collateral requirement or processing fees levied, as well as no end-use restrictions. Individuals looking to acquire funds to launch their small scale firm or micro-unit can avail a MUDRA loan under the ‘Shishu’ category for up to Rs.50,000.
Expansion of existent businesses can be financed through a ‘Kishor’ SME loan, under which credits ranging from Rs.50,000 – Rs.5 lakh are extended.
For the approval of such loans, relevant documents presenting the financial condition of a business have to be submitted with the respective institution.
Funds for capital appreciation through equipment purchases can be gained through ‘Tarun’ MUDRA loans ranging from Rs.5 lakh to Rs.10 lakh by entrepreneurs operating a micro-business unit.
Such an MSME loan under the MUDRA scheme is an efficient financing solution for MSMEs around the country.
CGTMSECredit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) is another government-backed policy aiming to increase total funds available with the backward sections of the society.
Non-banking financial institutions sanction loans of up to Rs.2 crore without any collateral or third-party guarantee. Before availing such loans, individuals need to submit documents such as the establishment of the entity and the latest business plans for speedy approval. It is one of the easy ways to finance your growing business.
The primary benefit of credits against CGTMSE is that the liability is assumed by the government in case of defaults, thereby eliminating any additional burden on borrowers.
Several guidelines for maximisation of profits are also given under this small scale industry loan scheme to ensure optimal operation of organisations respectively.
Business LoansDespite numerous benefits extended by government-backed schemes, such loans come with complex and time-consuming approval and disbursement.
Alternatively, Business Loans offered by financial institutions such as Bajaj Finserv come with speedy sanctions and pre-approved offers. Pre-approved offers make the process of availing loans quick and time-saving.
Such instant approval facility of high-value unsecured loans can be utilised by an entrepreneur to meet any requirement - from meeting working capital needs to undertaking expansion projects.
Companies in the small scale industry segment can also opt for flexible tenor and thereby EMI payments as per the annual turnover of the business, ensuring no excessive financial burden.
As the small scale industry operates as the backbone of the industrial sector of the country, proper financing techniques will ensure adequate growth rate of the same.
Robust development of the small, micro and medium businesses ensure a rise in the aggregate GDP along with a boost in the employment rate of the country.
Thus, extensive financing options provided by both government-mandated schemes and non-banking financial corporations can be utilised to reach such rapid growth rates.
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