Did you know that micro, small and medium enterprises (MSMEs) in India contribute to 30% of our nation’s GDP? Are you an MSME entrepreneur who wants to expand your business to new heights? Then, availing an MSME loan can be a great option for you to get on the right track. MSME loans are a great way for micro or small business owners and women MSME business owners to grow their businesses. MSME Loans provided to small businesses can be used for various purposes such as purchasing raw materials or stock, hiring more workers, business renovations, adding a new product line, and other business-related expenses.
MSMEs hold an economically dominant position in the growth and development of the Indian economy. The MSME sector in India, which owns more than 63.39 million MSMEs, has consistently contributed to our economy by employing 203.5 million skilled and semi-skilled labour. Despite being the backbone of the Indian economy, MSMEs are hampered by financial constraints due to the lack of access to traditional financing. According to the latest reports, MSMEs in India have a significant credit gap of around Rs 530 million. A credit gap is the difference between the existing supply of funds in the economy and the addressable demand of funds in the market.
NBFCs have become the engines of growth, minimising the credit gap by enabling MSMEs fast access to capital. Due to their reach, use of technology and lower cost of operations, NBFCs are seeing a higher credit growth than the commercial banking sector. According to the latest report, NBFCs loan portfolios grew by more than 12 percent in the first quarter of 2024. Around 9 million MSMEs have taken collateral-free loans (from NBFCs) worth Rs 6.7 lakh crore till June 30, 2024.
An MSME loan is designed to support Micro, Small, and Medium Enterprises. It helps businesses with funds for expansion, purchasing equipment, or managing operational costs. The MSME loan procedure involves submitting documents like business registration and financial statements. If you’re wondering how to get MSME loans, approach a bank or financial institution, ensure your business meets their criteria, and provide the necessary paperwork. MSME loans are essential for business growth and success.
The latest MSME meaning was revised by the Government of India and implemented from July 1, 2020. This new classification uses both investment in plant and machinery or equipment and turnover to define MSMEs, making it easier for businesses to grow without losing the benefits of being an MSME.
| Enterprise Type | Investment (₹) | Turnover (₹) |
| Micro | Up to 1 crore | Up to 5 crore |
| Small | Up to 10 crore | Up to 50 crore |
| Medium | Up to 20 crore | Up to 100 crore |
Additionally, the exports are not counted as part of the turnover for MSMEs. This change encourages small businesses to focus more on global markets without worrying about crossing the turnover threshold and losing their MSME status.
The revised definition of MSMEs are aimed at providing more opportunities and ease of business, promoting growth and job creation in India. With the combination of turnover and investment criteria, the government ensures a better classification that reflects the current market realities.
This new MSME definition helps businesses expand while maintaining their benefits under the MSME category, ensuring sustained economic growth.
There is no security requirement to get an MSME Loan when you approach an NBFC. With a flexible and digital application process, you can get collateral-free MSME Loans with minimal documentations. Registered MSMEs from the manufacturing, trading, and services sectors can apply for unsecured MSME Loans without worrying about mortgaging any property collateral.
The application process for MSME loans has become much easier and faster due to digital technology. Today, business owners can apply for loans online with just a few clicks. They don’t have to fill out long forms or visit banks multiple times. Instead, they can complete the entire application on a smartphone or computer. Many financial companies use advanced systems to quickly check the information and decide on the loan. This means that once approved, the money can be sent directly to the applicant’s bank account in as little as 24 to 48 hours.
Lenders provide a variety of loan amounts to cater to the specific needs of different businesses. Whether a business needs a small sum for working capital or a larger amount for expansion, MSME loans can be tailored accordingly.
MSME loans often come with flexible repayment options. This means businesses can choose repayment schedules that fit their cash flow needs, making it easier to manage loan repayments without straining finances.
MSME loans provide the necessary funds for businesses to invest in new technologies, expand their operations, or manage daily expenses. This financial support plays a crucial role in helping small businesses innovate and grow in a competitive market.
MSME loans provide vital financial support to small businesses for growth and daily operations. Here’s how you can effectively use them for MSME expansion, especially in key areas like working capital, machinery purchase, and inventory management.
Managing cash flow is key to keeping your business running smoothly. MSME loans can be used to cover short-term operational expenses like salaries, rent, or utility bills, which helps maintain liquidity. With a working capital loan, businesses can avoid cash flow gaps caused by delayed customer payments, ensuring they have enough funds to meet their obligations. Loans like credit lines, overdrafts, or trade credit can help businesses keep operations going without waiting for payments.
When expanding your MSME, investing in machinery is crucial to increase production capacity and improve efficiency. Small business loans designed specifically for purchasing machinery allow businesses to acquire the tools and equipment needed without depleting working capital. This enables the business to take on larger contracts and expand production capabilities. With the help of a machinery loan, businesses can invest in equipment upgrades and stay competitive in their industry.
Efficient stock management directly impacts profitability. MSME loans can also be used to purchase inventory, ensuring businesses can meet customer demand without running out of stock. This is especially useful during high-demand seasons. Inventory loans allow businesses to buy bulk stock or new product samples, keeping operations flexible and ready to meet market changes.
EMIs are a breakdown of your loan amount into financial units payable each month. Each EMI includes a component of the principal amount and the interest incurred. Therefore, flexible EMI schedules can help you repay your loan by breaking it down into small monthly installments.
The EMI calculation of MSME Loans can be done through a simple formula, that is:
E = P x r x (1+r)n/(1+r)n-1
In this,
‘E’ denotes EMI
‘P’ is the loan amount
‘r’ represents the monthly interest rate offered
‘n’ stands for the duration of the loan
This formula is digitally represented in our MSME loan EMI calculator, which allows you to determine your estimated EMI amount online easily.
MSME Loan interest rates can vary depending on the purpose and tenure of the loan, as well as the lender’s policy and the borrower’s credit history. Usually the interest is calculated on a reducing rate basis. That means your outstanding loan amount goes down with repayments and interest. Over the long term, this will reduce your EMI and make the repayment easy and affordable.
Before applying for business loans, make sure you meet the prerequisite requirements listed below:
Traditional lenders like banks have a long and tedious application process and require extensive documentation for issuing an MSME loan. This is mostly because such lenders are risk-averse and consider small businesses to be high-risk borrowers who are more likely to default.
To apply for a business loan, you will need the following documents:
You will have to provide proof of the company’s existence. This may be presented as water or electricity bills, Udyam Registration, Company registration, the PAN card of your business, etc.
You need to provide your proof of identity as well. This can be fulfilled by Aadhar card, PAN card (personal), Driver’s License, Passport, etc.
Finance-related documents include bank statements, profit and loss accounts, balance sheets, passbooks, account statements etc. If you have GST, then you will have to submit your GST filings.
Kinara Capital has a quick MSME Business Loan process. After the initial application process and approval, a loan can be disbursed within just 24-hours. You can get started with an MSME Loan eligibility check on our website or by downloading myKinara App. If you are eligible, a Kinara Loan Officer will contact you for the rest of the process. Our documentation process is flexible and allows for substituting certain documents with others, subject to availability.
MSME Loans are Business Loans that provide growth to the various MSMEs in the country. These loans can be procured for a variety of reasons depending on the needs of the entity. Some of the commonplace needs for MSME loans include business expansion, procuring raw materials or stock, business renovations, machine purchase, etc. Unsecured MSME Loans are loans given without property collateral or personal guarantee. These unencumbers MSME owners to grow their businesses rapidly without waiting to first accumulate security collateral.
A rapidly expanding fintech company in India, Kinara Capital assists MSME owners to take their business to a greater level by providing unsecured loans upto INR 30 lakhs! Registered MSME owners can evaluate their eligibility for a loan in just 1-minute by starting the digital-first application process on the Kinara Capital website or by downloading myKinara App. If you qualify for an MSME Loan from Kinara, the loan amount will be disbursed digitally to your bank account within 24-hours.
Kinara Capital also provides multilingual doorstep customer services to MSMEs interested in learning more and needing assistance to apply. You can give a missed call at +917026290000 to talk to our in-house customer support team, or reach us at our toll-free number 18001032683 Monday to Friday, 9:30 a.m. to 6:00 p.m.
1. Which sectors are covered by MSME loans from Kinara Capital?
300+ sub-sectors in the Manufacturing, Trading, and Services sectors are eligible to apply for an MSME Loan.
2. What are the benefits of MSME loans from Kinara Capital?
We provide collateral-free MSME Loans within 24 hours. You can use the loan amount to meet immediate or planned business needs. We also provide doorstep customer service and support via phone in local languages. With our myKinara App, we have a three-step quick loan application process:
3. What is the difference between MSME loans and SME loans?
MSME Loans and SME loans are basically the same. MSME stands for micro, small and medium enterprises, whereas SME stands for small and medium enterprises. The term MSME is most commonly used in India because the ‘micro’ sector comprises over 95% of all MSMEs, accounting for over 630 lakh micro-enterprises in India.
4. How is the turnaround for MSME loans by Kinara Capital?
Kinara Capital can take you from the start of the application to digital disbursement within 24-hours where the funds are deposited directly into your bank account. However, often, MSMEs prefer to receive doorstep customer service, which can add a couple of extra days to the verification process.
5. How can I utilise an MSME Loan fully?
You must utilise your MSME Loan for the purpose you received it. For example, you may have taken the MSME Loan for Machine Purchase, Buying of Stock or Raw Materials, Business Renovations, or Hiring Workers, etc., and you must utilise the funds for the same purpose to help you grow your business.
6. Is there any subsidy for MSME loans?
Yes, Kinara Capital offers a special program called the HerVikas Program, which provides a 1% interest subsidy for women entrepreneurs. Women entrepreneurs also get a 60-day repayment holiday, 50% reduction in processing fees and a lowered business vintage of 1-month registration for Manufacturing and Trading MSMEs.This program is designed to help women in the manufacturing, trading, and services sectors to grow their businesses. Kinara Capital aims to empower women entrepreneurs by offering a lower interest rate without requiring additional documentation.
7. What is the MSME loan limit?
The loan limit for MSMEs at Kinara Capital ranges from ₹1 lakh to ₹30 lakhs. These loans are collateral-free, making them accessible to small businesses that need funds for expansion, purchasing machinery, or managing working capital. The repayment period for these loans varies from 12 to 60 months, giving businesses flexibility.
