Almost all of us have taken out loans at some point in our lives, for a variety of reasons and at various times. A loan can offer a person significant financial help, whether it be for personal or professional needs or concerns about their family. If we consider loans from a commercial perspective, they are essential. It functions as sizeable capital to maintain and expand a business. This is where a business loan or an MSME loan can be useful. Do you know how to apply online for a company loan or an MSME loan?
If you are unfamiliar with financial instruments, you have come to the right spot. Today, we’ll discuss the ideal loan for your company: a business or MSME loan.
What is business loan & MSME loan?
Every business needs money to run and expand. You will need money whether you are just starting out or hoping to grow your firm. This is the point at which a loan becomes necessary. Before applying, you must be qualified for a business loan.
An MSME loan is given to Micro, Small, or Medium Enterprises (MSMEs), as well as start-up businesses, whereas a business loan is given to assist your existing business in growing. These loans provide flexible payback terms and reasonable interest rates.
Difference between a business loan and an MSME loan
Although there are many parallels between the two, there are also many differences that one should be aware of:
Documentation
Here are some of the documentation you will require if you want to apply for a business loan:
- Identity proof: Aadhaar card, PAN card, driver’s license, Voter ID, etc.
- Financial Proof: bank account statement, balance sheet, and profit and loss statement
- Ownership Proof for a self-employed and non-self-employed professional
On the other hand, while asking for an MSME loan, you must submit the following paperwork:
- Identity proof: Aadhaar card, PAN card, driver’s license, Voter ID, etc.
- Your business GST proof
- IT returns
- Last six months’ transaction history along with bank details
Eligibility criteria
When requesting a business loan in India, you must to:
- be an Indian citizen between the ages of 18 and 70, have a successful business that has been operating for at least a year, and have a business credit score of at least 750 points.
- be an Indian citizen and have never failed on a loan before.
- possess at least one year of business experience in the specific location.
The eligibility requirements for MSME loans are a little lenient. When requesting an MSME loan, you should:
- Have a registered business in India
- Have a business that is involved in manufacturing or providing a service
- Have a business in corporate for at least six months to qualify for an expansion loan
Processing time
Due to the substantial paperwork and pledged collateral, business loans may take some time to process. It is impossible to ignore this procedure because it is essential. On the other hand, MSME loans typically disburse the funds within a few days of the loan being approved.
Loan amount
Business loans frequently have longer repayment terms since they involve greater sums of money. It should be mentioned that business loans can easily range from 20 lakhs to 1 to 5 crore.
The maximum amount for an MSME loan is $1 crore, and it has fewer repayment choices than a company loan. To provide borrowers with more convenience, prominent financial institutions have begun offering greater repayment flexibility.
Interest rate
Business loans typically have lower interest rates. The nature of the product and the sector in which your business works, however, affect the interest rates for business loans. The interest rate for business loans typically starts at 14.99% and may go up based on your needs. On the other hand, MSME loan interest rates typically begin at 7.65% per annum.
We hope that this information will assist you in finding the best financing for your business, whether it is starting off or growing. Of course, you must do extensive study to choose the type of loan from which you may gain the most. Before choosing the finest alternative to fund your business, don’t forget to examine all the services of some of the top and leading financial institutions.
