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Empowering Your Business: Discover Eligibility for MSME Loans in India

By IIFL Home Loans | Published On Aug 07 2023 11:42 AM 1 min read 114 views 710 Likes
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Are you a small or medium-sized business owner looking to expand your operations or meet working capital requirements? If yes, you should know that there are loans for SMEs in India that act as valuable financial resources to help you fuel your business growth. IIFL Home Loans is one such NBFC (a non-banking financial company) that understands the challenges small businesses like yours may face when providing collateral.

But before you dive headfirst into the application process, check out the eligibility criteria for business loans in India.

Understanding MSME Loan Eligibility For New Businesses

MSME eligibility criteria refer to the requirements set by lenders to determine whether your business qualifies for a loan. Here's a look at them:

  • Type of business:

IIFL Home Loans considers various business types as eligible for SME and MSME loans. Further, the multi-purpose financing nature of IIFL Home Loans’ secured business loan for small businesses covers residential properties, industrial builds, as well as commercial and mixed-use spaces. 

  • Age of your business:

Lenders often prefer businesses with operational history. Your business should have been running for at least 2 years to demonstrate stability and sustainability.

  • Your credit score:

A good credit score is crucial for loan eligibility. It reflects not only your but also your business' creditworthiness and its ability to repay.

  • Financial turnover of your enterprise:

The annual turnover, along with profitability, is an important factor that lenders consider. While turnover requirements may vary, a higher turnover generally increases your chances of loan approval.

Who is Eligible For MSME Loans?

Check MSME loan eligibility and enjoy instant approval
  • Anyone who is a resident of India can avail of a loan against their SME or MSME. 

  • Non-government organisations (NGOs), trusts, and other charitable establishments are not eligible.

  • You have to be at least 21 years old or not more than 70 years old at the time of loan application. 

  • If you belong to any of these categories - shopkeepers, retailers, wholesalers, micro as well as small manufacturing businesses, jewellers, or self-employed individuals - you are eligible to apply for an MSME loan.

Eligibility of MSME Loan Amount and Tenure

Amount/Tenure

Minimum

Maximum

Loan Amount (in a metro)

Rs 2 Lakh*

Rs 10 Crore

Loan Amount (in a non-metro)

Rs 2 Lakh*

Rs 10 Crore

Tenure

Up to 10 years*

 

Did you know that you can also avail of loans for micro-enterprises such as salons, grocery stores, vegetable/meat vendors, tea stalls, and tiffin centers, among others? IIFL Shakthi Loan is one such offering by IIFL Home Loans that tries to bridge the gap between low capital and small, unorganised businesses. 

The following are the MSME loan criteria for such businesses:

Nationality

Indian

Age Group

18 - 75 years

Occupation

Salaried or Self-employed

Minimum Loan Amount

Rs 2 Lakhs*

Loan Tenure

Up to 7 years*

 

New Guidelines for MSME Loans

The government has recently introduced new guidelines for MSME loans, which are as follows:

  • Revised Definition of MSMEs:

The definition of MSMEs has been revised to expand their scope and offer additional benefits to small businesses. The classification now considers both investments in plant and machinery or equipment and annual turnover.

Wrapping Up!

SME loans can be a valuable resource for small and medium-sized businesses, and understanding the eligibility criteria is crucial when applying for such loans. Remember to consult with the financial institution directly to obtain precise information. By meeting the eligibility criteria and providing the necessary documentation, you can enhance your chances of securing an SME or MSME loan for your business.

FAQs

1. Are SME loans dependent on business turnovers and profitability?

Yes, business turnovers and profitability are important factors that lenders consider when assessing SME loan eligibility. Lenders want to ensure that your business has the financial capacity to repay the loan.  

2. What is the process to secure business loans for SMEs?

At IIFL Home Loans, you can secure a business loan online from the comfort of your home. Before applying, please check that you meet all the eligibility requirements mentioned on their website.

3. What are the documents required for MSME loans?

  • 12 months' bank statements of the primary business account

  • Proof of business registration

  • PAN Card and Aadhaar Card of all proprietors

  • Partnership deed in case of a partnership

  • Income proof

  • Property-related documents

4. How important is the credit score in determining who is eligible for an MSME loan?

Lenders use the credit score as a primary tool to evaluate the creditworthiness of a business. A higher credit score indicates a more reliable borrower, increasing the chances of loan approval.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Home Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment, etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness, or of the results, etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability, and fitness for a particular purpose. Given the changing nature of laws, rules, and regulations, there may be delays, omissions, or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan product specifications and information that may be stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan.