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November 28, 2022

What are MSME Loans and How to get them?

    • November 28, 2022
    • By Team Kinara
    • < 1 mins read

    MSME Loan

    Introduction

    Did you know that micro-small-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, women MSME business owners, or startup entrepreneurs 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 million MSMEs, has consistently contributed to our economy by employing 111 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 an article published on swarajyamag.com, MSMEs in India confront a significant credit gap, which is around Rs 20–25 trillion. A credit gap is defined as 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 an article on Financial Express, NBFCs loan portfolios grew by more than 10 per cent in the last financial year (2021), whereas bank loans rose by just 5 per cent. Around 11.3 million MSMEs have taken collateral-free loans (from NBFCs) worth Rs 2.32 lakh crore till June 2022.

    Fintech NBFC Kinara Capital has been driving the financial inclusion of MSMEs for over a decade by providing collateral-free MSME Loans in 100+ cities in India. Small businesses can avail fast and flexible Business Loans in a digital-first application process. To understand more about MSME Loans from Kinara, let’s take a look at the 5 features of MSME Loans.

    5 Features of MSME Loans

    1. Collateral-Free MSME Loans

    There is no requirement for security to get an MSME Loan from Kinara. With a flexible and digital application process, Kinara provides collateral-free MSME Loans with minimal documentation. So, all registered MSMEs from the manufacturing, trading, and services sectors can apply for unsecured MSME Loans without worrying about mortgaging any property collateral.

    2. Easy Application Process & Fast Digital Disbursement

    Business owners can apply for MSME Loans starting with a quick 1-minute eligibility check through the myKinara App, which is available in 7 vernacular languages, including English, Hindi, Tamil, Telugu, Kannada, Gujarati, and Marathi. Kinara supports its customers in all possible ways and removes all the processes that slow down the loan approval. Through online document submission and a quick verification process, there are no tiring waiting times between sending and receiving documents. The loan amount will get disbursed to the borrower's bank account digitally within 24-hours.

    3. Ticket Value up to ₹ 30 Lakhs

    We provide flexible ticket sizes for MSME Loans that start from ₹ 1 lakh and go all the way up to ₹ 30 lakhs. This makes Kinara Capital Business Loans an excellent option for registered MSMEs when they need immediate funding.

    4. Flexible EMI Payment Options

    Kinara provides flexible EMI payment options to its customers. Borrowers can use different options to repay the loan amount, including Digital Wallets such as Googlepay, Phonepay, and Airtel.

    Doorstep Customer Service

    Kinara provides multi-lingual support to all customers with doorstep customer services in their preferred vernacular language to make the loan application process easier. Registered customers from 300+ sub-sectors across 100+ cities can apply for MSME loans from Kinara Capital after checking the 1-minute eligibility test on myKinara App.

    Eligibility Criteria

    MSMEs

    Before applying for Business Loans from Kinara Capital, make sure you meet the prerequisite requirements listed below:

    • The business should be registered as an MSME and from manufacturing, trading or services MSME sectors.
    • You must be in one of the serviceable pin codes in one of these locations: Andhra Pradesh, Telangana, Karnataka, Gujarat, Maharashtra, Tamil Nadu or UT Puducherry.
    • Total monthly turnover should be greater than Rs. 50,000 and less than Rs. 2 crores.
    • The business should fall under the list of sectors and sub-sectors serviced by Kinara.

    MSME Loan Interest Rates

    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. Kinara Capital’s interest rates start at 21% per annum, and 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.

    Documents Required for MSME Loan

    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. On the other hand, Kinara Capital has proprietary data-led processes to determine creditworthiness and can therefore offer a quick and flexible loan process requiring minimal documentation. To apply for a Business Loan from Kinara Capital, you will need the following documents:

    1. Proof Of Business Registration

    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.

    2. Proof Of Individual Identity

    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. While Kinara recommends PAN or Aadhaar, your co-applicant can instead provide Voter ID, Driver’s License, or Passport.

    3. Financial Documents

    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.

    How to Apply for Kinara Capital MSME Loan?

    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.

    How to Effectively Use MSME Loans

    The MSME sector contributes largely to the nation's industrial output and employment. Therefore, there is a larger need for business financing in this industry. One of the main barriers to MSME expansion in India is a lack of timely financing. However, due to the emergence of non-banking financial companies like Kinara Capital, MSMEs can access capital faster. This Business Loan can be used in three effective ways.

    1. Working Capital Management

    Adequate working capital is essential for every business to function efficiently. A Working Capital Loan allows small business owners to meet all regular business expenses, such as purchasing raw materials, paying wages, renovating premises, etc.

    2. Purchasing Machinery

    Small business owners can use Kinara’s Unsecured MSME Asset Purchase Loans to buy new or second-hand machinery and enhance their business productivity and product quality to increase their turnover. Since the cost of investing in equipment and machinery is high, an MSME Asset Purchase Loan up to Rs. 30 lakhs can be used for growing your business efficiently.

    3. Stock Management

    Inventory management is essential as the profitability of a small firm depends on the volume of sales. Most companies who apply for Small Business Loans utilise the money to buy inventory. So, use the money from your MSME Loan to secure your supply chain for inventories, buy fresh product samples for sale, replenish existing stock, or manage seasonal dips.

    Calculating an MSME Loan EMI

    MSME Loans EMI

    EMIs are a breakdown 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 offered by Kinara Capital can help you repay your loan by breaking it down into small monthly instalments.

    How to Calculate MSME Loans EMI?

    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.

    MSMEs

    Conclusion

    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 business 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 080-68264454 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.

    FAQs

    1. What are the different types of MSME loans offered by Kinara Capital?

    Kinara Capital is focused on supporting the MSME sector and primarily offers unsecured Business Loans to drive their rapid growth. MSME Loans from Kinara include:

    • Working Capital Loan: Typically, Working Capital is used for financing day-to-day or growth-related business expenses such as purchasing stock or raw materials, machine repairs, hiring workers, business renovations such as new signboards, paying for the storage facilities, adding new product lines, etc. Existing customers can also qualify for a Short-Term Working Capital Loan from Kinara Capital.
    • Asset Purchase (or Machinery Purchase) Loan: MSMEs requiring specialised machinery for their production can avail the Asset Purchase Loan from Kinara Capital to purchase new or secondhand machinery. These can include CNC, lathe, milling, drilling, grinding, shredders, pumps, pulverizers, etc., depending on your type of business.
    • HerVikas Business Loan for Women-owned MSMEs: Applicable to all loans from Kinara Capital and every time a loan is availed, the HerVikas program supports women entrepreneurs by providing an upfront discount without separate documentation required. Women can be full or partial owners of their MSMEs to qualify. Kinara Capital has pledged INR 200 crores in FY23 only for the HerVikas program.

    2. 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.

    3. How can I get an MSME loan online from Kinara Capital?

    To avail an MSME Loan online, registered MSMEs must check the 1-minute eligibility test on the Kinara Capital website or myKinara App. If you can qualify for a Business Loan, continue with the loan application and submit all the required documents. Once the documentation and verification is completed, your loan amount will get disbursed in your mentioned bank account within 24-hours.

    4. What are the documents required for availing MSME Loans?

    We would need some individual and business documents to complete the KYC process for MSME finance. Some documents required are Aadhaar Card, Udyam Registration Number, Business Registration Proof, and Bank Statements (12 months).

    5. Why choose Kinara Capital?

    Our customers choose Kinara Capital for three main reasons. First, we can provide loans in less than 24-hours. Second, we do not require any property collateral, and third, we provide doorstep customer service in vernacular language. Our MSME Loan process is very simple and easy [click here to get started]. Further, it is important to know that Kinara is an RBI Registered Non Banking Financial Company (NBFC) and therefore ensure a fair process for all its applicants in compliance with RBI regulations.

    6. 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:

    • 1-MinuteEligibility Check,
    • Verification Process (KYC & Business Details),
    • Loan Approval & Sanctioning, that will lead to automatic Disbursement of the loan.

    7. 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.

    8. 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.

    9. 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.

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    Written by
    Team Kinara
    • Tags
    • MSME loan
    • Business Loan
    • MSME entrepreneurs
    • Kinara Capital
    • Funding Your Future
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