December 3, 2022
MSME Loan scheme

The Indian economy relies heavily on small businesses and according to statistics – India has over 36 million small companies employing over 80 million people. To further support numerous small businesses that contribute to the Indian economy, our government helps through a range of subsidy programs and initiatives.

In addition to this, new-age non-banking financial companies (NBFCs) like Poonawalla Fincorp offer easy-to-apply for collateral-free Business Loans for MSMEs that can be availed with minimal documentation.

In case you too are considering starting a micro or small enterprise yourself but can’t seem to get your head around the setup, or finances for that matter, this blog will help.

So how does one go about building a microenterprise? How to get some funds to kick off and grow your business Let’s start with what will qualify your operations as a micro or small enterprise, before delving into your options for growing your business.

What is a Micro Enterprise?

A microbusiness or microenterprise is a small business that offers goods or services in a specific location or market, with less than ten employees and a geographically limited scope. Microbusiness can typically be started with microcredit or microfinance, contract employees, freelancers, and small businesses as vendors.

Microenterprises are intrinsically linked to the evolution of economies and nations. Right now, for instance, the formal sector is facing a labor shortage, and micro enterprises are stepping in to bridge the gap between supply and demand.

They boost the economy by not just creating jobs but by lowering production costs and making transactions easier, plugging key gaps in underdeveloped economies.

How to Start a Microbusiness?

Here are some steps to get closer to your microbusiness’s objectives:

  1. Create a vision and purpose statement 

Statements of vision and mission communicate your organization’s clear objectives, values, assurances, and purpose. Without a clear goal and vision, your company’s more diligent strategies would lack a solid foundation to expand. Customers and investors are also drawn to powerful goals and objectives as they invest in organizations that have strong values.

  1. Create precise business operations plans 

A corporation has many moving pieces. Setting objectives and goals with dates will structure each function. With the help of technology, you can create a conceptual framework for the business to follow. Here are some things to consider:

  • Who are my most important partners and distributors?
  • Where is my micro business located?
  • What resources will I require, and how much will they cost?
  • What is the structure of my company?
  • What are my target clients’ needs, and how should I meet them?
  • What are my revenue and cost structures?

3. Examine your financial situation

You must examine your existing and projected breakdown of the profit and loss account, balance sheet, and cash flow statement. A well-researched and developed financial strategy will help when presenting to other stakeholders.

4. Create a marketing strategy

A good marketing strategy is essential for micro businesses, especially if your staff is small or you work alone. Through sufficient research, you should learn about your customers. You should know how to approach them to deliver much more value. With this knowledge, you can begin online marketing activities such as social media advertising and content marketing.

5. Investigate and analyze your product.

Development, testing, and prototyping are ways of understanding how to improve your business from your customer’s perspective. Smaller business research examples include:

  • Surveying
  • Growing your email list
  • Making cold calls to suppliers and potential clients

Whatever interactions your consumers have with your product or service, use them as an opportunity to enhance their experience.

6. Register your business and get started

You now have a grasp of your company’s finances, operations, and design. The final step is to register your company and start operations.

How do MSMEs obtain loans for their growth?

Each lending institution has its own set of policies when it comes to issuing MSME Loan scheme for Micro Small Enterprises.

  • Check the institution’s website and criteria to see whether your company is eligible for a loan.
  • For assistance, contact the institution’s nearest branch.

So, how do I get started?

Filling out a form is the first step! When you apply for an MSME Loan for your company, you’ll be handed a list of documents and an easy-to-understand application form. In addition, you will be provided assistance to ensure your documents are complete.

How to find out the MSME Loan interest rate? 

Every financial institution is obligated to give you the following information throughout the application process: 

a) Current MSME Loan interest rates

b) Any policies and terms which will or may have an impact on MSME Loan interest rates.

How soon after you submit the application form will you receive the loan? 

After receiving your application, whether offline or online, you will be given an acknowledgment number that allows you to trace your application’s progress. You will also be given a deadline for the loan’s processing, which varies based on the MSME Loan scheme. The time frame will only apply if the application has been completed. According to their code of conduct, the lending institutions will: 

a) Confirm a credit of up to ₹5 Lakh in 2 weeks 

b) More than ₹5 Lakh up to ₹25 Lakh in 4 weeks

c) More than ₹25 Lakh in 8 weeks 

These time frames may also vary depending on the policies of the lending institutions.

The loan’s security

Some institutions make out loans of up to ₹10 Lakh to micro-enterprises without requiring any security. The Indian government offers credit guarantee coverage for collateral-free loans to micro and small businesses. The Credit Guarantee Trust Fund provides such protection for collateral-free loans up to ₹1 Crore.

However, you will be required to pay a guaranteed charge; in some situations, it is paid or shared by lending institutions. You can inquire with your preferred institutions about this service.

Other advantages of requesting financial assistance from a bank, other than the loan

Another advantage of requesting assistance from a financial institution is that it becomes your business associate when you get your loan. It will also provide various specialized services to assist you in achieving your objectives by: 

a) Running programs to improve your financial management expertise. 

b) Informing you about any incentives, Government Schemes, etc., and explaining the terms in full 

c) Providing you with access to lending institutions and services such as transference, insurance, and money settlement systems.

Conclusion

India’s MSME Ministry oversees small enterprises, startups, and online businesses. The licensing, regulations, and rules of the ministry govern MSMEs. It creates and implements several programs and initiatives to promote entrepreneurship.

Now that you have become aware of the most critical concerns, you can move forward with a set plan. You can turn your entrepreneurial aspirations into a profitable business with the help of a little initial finance.

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