A revision in MSME definition was announced in the Atmanirbhar Bharat Package on 13th May 2020 after 14 years since the MSME Development Act came into existence in 2006.
The revised limits for manufacturing as well as service sector under definition of the MSME sector are specified hereunder.
| Category | Investments | Turnover |
|---|---|---|
| Micro Enterprises | Up to Rs. 1,00,00,000 | Less than Rs. 5,00,00,000 |
| Small Enterprises | Up to Rs. 10,00,00,000 | Less than Rs. 50,00,00,000 |
| Medium Enterprises | Up to Rs. 20,00,00,000 | Less than Rs. 100,00,00,000 |
Purpose
- For buying new Plant and Machinery
- For purchase of Factory Land and Building
- Expansion or diversification of the existing unit
- Pay existing debts
- To meet Working capital requirements and ensure smooth functioning of the business
Types of MSME Loan
- Term Loans
- Line of Credit/ Overdraft Facility
- Bill Discounting or Invoice Discounting
- Point of Sale Finance
- Bank Guarantee
- Pradhan Mantri Mudra Yojana
- Asset Backed Loans
- Business Loans specifically targeting Women Entrepreneurs
Documentation of MSME Loans
- Identity proof of the applicant
- Address proof of the applicant
- Bank statements for 6 months at least (proving the financial stability of the applicant)
- Form 16/ ITR for past year at least (providing Income proof)
- Partnership Deed/ Trust Deed or any other similar document as the case may be
- Memorandum and articles of association in case of a company
- Financial statements for the past year at least (Balance Sheet and Profit and Loss Statement)
Key benefits of the MSME loans are:
- Reduced interest rates
- Collateral free loans
- Financial assistance without liquidation of ownership or control
- Flexible repayment options
- Faster approval/ pre-approved offers
- Easy documentation process
- Online access from majority of lenders