What is an MSME loan? This question is of most businessmen. The answer to this question is very simple. The business loan is given to Micro, Small and Medium Enterprises (MSME) is called MSME loan. 

MSME Industry (MSME Udhyog) 

Let’s take a look at how the Micro, Small & Medium (MSME) industry is determined? The Micro, Small, and Medium Development Policy 2006 was presented by the Central Government in 2006. In this policy, micro, small and medium industries have been determined based on the total turnover of any business. 

According to MSMED 2006, industries have been divided into two categories – the first category is manufacturing and the second category is known as service. In the determination of micro, the small and medium industry also the definition has been fixed according to the cost of equipment, machinery engaged in the industry. 

Amidst all this, in 2018, the then Micro, Small, and Medium Industries Minister Giriraj Singh introduced a bill to change the definition of MSME once again and the bill was also passed. 

According to the bill presented in 2018, the proposal for naming these industries was done based on annual turnover was not passed by the definition according to the cost of machinery and other equipment used in these industries. 

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 The new definition made in 2018 is as follows: 

Micro means the micro–industry 

The industries which have a turnover of up to 5 crores annually will be known as the micro ie micro industry. 

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Small scale industry 

The industries which have a turnover between 5 crores and 75 crores annually will be known as small industries. 

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Medium means the medium industry 

Industries whose annual turnover is 75 to 250 crores will be known as Medium. 

The rationale of the MSME Ministry for adopting this definition was that it would help in taking the business of our country to the global level. Because, in most countries, the definition of industries is determined by annual turnover. 

The second important reason for the change in the definition of MSME is GST. Earlier the process of tax was different, then tax was collected at many levels. But, after the introduction of GST, the tax has been a centralized process. In this sense, the new definition will make it easier to identify industries and organize for tax. 

Industries also benefit from the new definition of MSME

Industries also benefit from the definition based on a turnover created for MSME. While it will be helpful for industries to get a government subsidy, it will also be easy to get a loan from the bank. According to the Reserve Bank of India (RBI), the MSME sector for banks comes under priority. This means that business loans will be given to MSMEs on a priority basis. 

There are many reasons to keep micro, small and medium industries on a priority basis – such as it employs a large number of people, people talented in a particular field get the facility of earning their living in their city & they do not have to migrate for employment. MSME industries also play a very important role in the Indian economy and contribute better to the country’s GDP. 

So far you have learned what MSME is and how many types it has. What is the definition of MSME? Now let’s get to the basic question – what is MSME loan? 

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What is an MSME loan? 

As soon as the word loan comes, it comes to mind that to borrow money from someone. To some extent, this is also fine. There are mainly 2 types of business loans: 

Secured Business Loan – MSME Loan 

When a businessman takes a loan by pledging his property with a bank or a company, it is called a secured business. To get such a loan, you must have some property whose value is equal to the value of the loan you asked for. Only then you can get a loan. 

There is a logic behind getting the property mortgaged, that when the borrower defaults, that is, do not repay the loan, then the property will be auctioned and the value of the loan will be recovered. In this way, banks or loan lending companies get property mortgaged to protect their wealth. 

Unsecured Business Loan – MSME Loan 

As the name itself makes it clear. This is unsecured, that is, no mortgage is to be taken for taking such a loan. This type of loan is mostly offered by non-banking financial companies (NBFCs). Unsecured business loans are also given through banks by the scheme for MSMEs at the government level. 

A credit score (CIBIL score) is important in getting an unsecured business loan. NBFC companies check the CIBIL score in pledging business loans without pledging property and if the credit score is correct, the business loan provides very few paper documents. 

An Unsecured Business Loan is A Boon for Businessmen 

In business, what machinery needed to be bought, when can it be required, it cannot be predicted. But, It has to be fulfilled when the need arises, otherwise, there may be a loss in business. In such a situation, the businessman does not necessarily have enough money. There is money, but sometimes it has to be invested in the market, due to which money is practically not in hand. An unsecured business loan is useful in this situation ie business loan without any mortgage. 

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There are many categories of businessmen in their country. According to this, not all traders have enough property to take a loan by mortgaging it. Some businessmen do not even want to mortgage their property. So the solution to all these things is an unsecured business loan. Let’s know where you get an unsecured business loan. 

MSME loan from ZipLoan in just 3 days

‘ZipLoan‘ is a leading NBFC ie non-banking financial company in the fintech sector. ‘Unsecured business loans ranging from 1 to 7.5 lakhs to Micro, Small Scale Industries (MSMEs) are provided by the company in just 3 days. 

There are very few terms to get a business loan from ZipLoan: 

  • Businesses should be at least 2 years old. 
  • The annual turnover of the business should be at least more than 5 lakhs. 
  • ITR filed last year should be Rs 1.5 lakh or more. 
  • Either one of the houses or places of business should be in its name. 

There are many advantages to taking a business loan from ZipLoan 

  • The amount of business loan is available within 3 days of applying. (This facility is available when necessary paper documents are available) 
  • The loan can be applied online from home. 
  • The amount of business loan is prepayment free after 6 months. 
  • You can repay the loan amount between 12 to 36 months. 

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