msme loan for business – Bada Business

Emergency Credit Line Guarantee Scheme: What is ECLGS? Are You Eligible? Know All About It

MSMEs have emerged as the backbone of our economy and no one can deny this. This sector contributes heavily to the GDP and has been actively providing livelihood to many. Due to the ongoing pandemic, this backbone has been hurt quite badly. Considering the current misery of the MSMEs, the government came into action and introduced new schemes and policies that could help these businesses stay afloat.

One such Scheme is ECLGS which stands for Emergency Credit Line Guarantee Schemes which has been introduced by the government to ensure the reinforcement of the financial structure of the micro, small, and medium enterprises across the nation.

What Exactly Is ECLGS?

On the 15th of May,2020, our ministry of finance announced a scheme with a vision to help the MSMEs of India get back on their feet. This scheme was a part of the Rs 20 lakh crore package that was brought forward and executed by our finance minister Nirmala Sitharaman to repair the damage that has been done to this sector in the light of COVID-19.

Are You Eligible?

To avail the said scheme, a Business should have total outstanding credit adding up to Rs.25 crore as of 29th February 2020. Also, the borrower should be able to prove that their business has produced a turnover of Rs 100 crore for the financial year 2019-2020.

To reap the benefits of the said scheme, a business must be recognized as a trust, partnership, proprietorship, registered company, or limited liability partnership.
The Scheme will be available only for existing customers on the books of the MLI.
For a seamless execution, enterprises are supposed to be ready with all the GST registration paperwork as well as other business-related documents. However, businesses that do not require GST registration, can also go forward applying for the same.

What About The Rate Of Interest?

Based on the body that is providing you the loan, the rate of interest would vary. We have mentioned below a bifurcation of the various rates of interests at which the loan will be sanctioned to the eligible MSMEs and enterprises.

Non-Bank Financial Company: NBFCs have decided to give out loans under ECLGS scheme at an interest rate of 14% per annum and are very strict about not passing the threshold.
Banks And Financial Institutions: The interest rate under the scheme is capped at 9.25% per annum for banks and financial institutions.
MLI (multilateral Institutions): A sigh of relief for the existing customers of MLIs as no fee is to be charged to them.

Don’t Miss Out On These Details

All the businesses/borrowers that are thinking to apply for loans under the respective scheme must know that there is a 1-year moratorium on the principal amount that you will have to repay.
If you don’t repay the entire principal amount within the moratorium period, the rest of the amount will have to be repaid in the overall tenure of 3 years dividing it into 36 monthly installments.
Please be wary of the fact that the borrower will have to open a separate account for this loan altogether. The borrower will not be allowed to use any account that has been opened and already used to serve other purposes.

This scheme has the right potential to help out the MSME sector put an end to their misery and regain financial stability. All in all, the government has taken the necessary step to fill the gaps, now it’s up to the MSMEs if they want to grab the opportunity to strengthen and solidify their position in the market.

MSME Loans: A Basic Guide To Know It all

As daunting as it sounds, the process of arranging an MSME loan for your new business is not as complicated as it is generally perceived to be. All it requires is well-conducted research. Once you decide on a new business idea that you want to invest your hard work in, it becomes a primary concern to think about how you will raise or gather funds for the same.

For an entrepreneur, we think it’s the best idea to stay aware of all the loans, schemes, and policies that the government and other bodies actively introduce to the common people to ease off the financial burden that tags along with establishing a new business.

Now that the government is marching ahead to the future to make India stronger than ever, the timings could not have been better for the entrepreneurs to start their business and make the most of these schemes. This article is the perfect read for all who are trying to apply for an MSME loan for their dream businesses.

You Are Just A Few Steps Away From That Much Needed Loan

Firstly, register yourself as an MSME by visiting udyogaadhaar.gov.in which is a national portal.
You will be asked to provide basic details like your name and the aadhaar number. Submit them and validate them with the help of an OTP.
Now you will see on your screens an application form which you will have to fill. Upon submitting, just to make sure that you have entered all the details correctly, the system asks you to recheck everything. Once rechecked, click “OK” to confirm.
The system will finally ask you to fill in the OTP that you will receive on the number that is linked to your aadhaar card.
Note down the registration number somewhere safe.

Always Be Ready With Those Documents

As basic as it may sound, it really comes in handy to keep the documents mentioned below ready with you just in case. These documents are

Your application form
Identity proof for which you can use your PAN card, aadhaar card, driver’s license, voter ID, etc.
An address/residence proof for which you can use your electricity bill, rent agreement, trade agreement, etc.
Some financial documents such as your ITR papers, bank statements, balance sheets, business turnover, etc.
Business proof which could be supported by Business Registration, Memorandum, and articles of association, etc.

Business Specific Documents

Apart from all of the above-mentioned documents, there are some other things that are still left to be taken care of. To avoid the last-minute chaos, we are sharing with you these important documents that are specific to the type of business you have.

Companies will need to gather the Certificate of incorporation, memorandum of association, articles of association.
Partnership firms will have to arrange the Registration certificate, partnership deed.
Private limited companies are supposed to be ready with a Registration certificate, articles, and memorandum of association.
Sole proprietorships will have to check for a Registration certificate, ITR, or another proof of business identity.
Self-Employed Professional (SEP), be ready with proof of your qualifications. For self-Employed Non-Professionals (SENP), proof of business will be more than enough.

Which Banks Are To Be Approached?

State Bank of India, HDFC Bank, Allahabad Bank, Central Bank of India, ICICI Bank, Bajaj Finserv, Oriental Bank of Commerce, Union Bank of India, and Indian Bank are some of the banks who are providing MSMEs business loans to fulfill their dreams. Always keep in mind that every bank has its own ways to figure out the rate of interest on which a business is supposed to repay the loan. Hence, we would advise you to do your research and see for yourself which bank is meeting your financial needs.