India boasts one of the most diverse and dynamic SME sectors amongst her Asian neighbors.
There are approximately 43 million small and medium scale enterprises across the country, contributing to almost 95% of the nation’s total industrial prowess.
Small and medium scale enterprises also account for nearly 6.11% of manufacturing and 24.63% of the service sector GDP, proving their valuable contribution towards India’s economy.
Unfortunately, despite their significant presence in India’s manufacturing and service sectors, SMEs in India suffer from a persistent lack of necessary finance throughout the year.
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These companies hold a collective fixed asset of approximately Rs.1,47,000 crore and account for approximately 16% of the total business lending.
SME full form small and medium scale enterprises somewhat represent the current financial issues that obstruct the necessary growth of this sector.
To mitigate the constant lack of necessary finance witnessed by these financial institutions, the Government of India, as well as various private and public sectors lenders have introduced SME loans.
These are financial products tailor-made for small and medium scale enterprises, providing an efficient financing solution for MSMEs.
Credit for small and medium scale enterprises is offered to organizations that fall within the economic classification issued by the Government of India.
These include enterprises in the manufacturing industry and have an investment between Rs.25 lakh to Rs.5 crore. Organizations in the service industry will be categorized as a small scale industry if they have investment ranging from Rs.10 lakh to Rs.2 crore.
SME full form also includes medium scale enterprises, companies that have a total investment of Rs.5 crore to Rs.10 crore (for the manufacturing sector) and Rs.2 crore to Rs.5 crore (for service-related industries). Advances for SME are offered to both these categories as a form of business loan.
Almost every major financial institutions offer such a form of a credit to eligible applicants. Affordable rates of interest, easy to meet eligibility criteria, and minimum documentation make the entire process streamlined and hassle-free.
Documents required to apply for a credit
Prospective applicants only have to submit some basic documents required for a business loan; let’s take a look at some of the most essential documents that an organization needs to submit.
● KYC documents.
● Proof of business vintage.
● Latest bank account statement.
● Income Tax returns.
However, this list may vary among financial institutions. Borrowers may have to submit additional documents to prove their creditworthiness and annual revenue.
Usually, businesses with a vintage of 3 years or more can apply for this type of credit. Lenders also look for applicants who have a good repayment history; a credit score of 750 or higher is preferred, without any previous record of defaulting.
Both private and public sector financial institutions offer such credits. Bajaj Finserv additionally provides pre-approved offers to existing customers, further simplifying the application process.
How to apply for an SME loan?
Most financial institutions offer the SME loan facility to apply for credit online. Prospective applicants can visit the official website of their preferred lenders and fill up the online application form. After submission, they will have to submit all the necessary documents for verification.
After completion of the verification process, the total loan amount will be disbursed to the applicant’s account.
These credits provide much needed financial support to small and medium scale enterprises, which is included in the SME full form.
India’s MSME industry is likely to benefit significantly from these credits, along with several Government-backed programs and aids created especially for the improvement of micro, small and medium scale industries.