SIDBI AND GOOGLE PARTNERSHIP FOR ASSISTANCE TO MICRO ENTERPRISES (SANGAM)
Objective :
Financial assistance shall be provided in the form of term loans to micro enterprises for Capex or meeting working capital requirement.
Key Features :
Up to 100% finance
Funding of both Capex and working capital requirement.
Nil processing fee.
Interest rate of 6% p.a. (5.50% p.a. for women run / owned enterprises).
Repayment upto 5 years (3 years for WCTL).
Availability of CGTMSE cover.
Eligibility
Term loans to Micro enterprises.
Minimum 2 years operations of the unit required.
WCTL shall be provided to only those enterprises not availing WCL / OD facility from any Banks / FIs.
Operating profit during past 2 years.
Cash profit during past one year.
No default / delinquency to any bank /FI, etc., during past 24 months.
Standard Norms apply (CIBIL / CMR, due diligence checks etc.)
Target Group
Preference to women run / owned enterprises and entrepreneurs from smaller cities (beyond Metros).
Loan Amount
TL upto 100 Lakh, subject to maximum 40% of the Net Sales for manufacturing units and 75% of Job work income / gross receipts for job work / service sector enterprises.
Upto March 31, 2022 for sanctions.
Interest Rate
Interest Rate- Interest rate of 6% p.a. (5.50% p.a. for women run / owned enterprises).
Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) is a trust established by the Government of India, under the Ministry of Micro, Small and Medium Enterprise (MoMSME) and Small Industries Development Bank of India (SIDBI). Launched in 2000, the CGTMSE scheme offers credit guarantees to financial institutions that offer loans to Micro and Small Enterprises (MSEs). CGTMSE scheme provides credit guarantees from 75% to 85% to medium and small enterprises.
Credit Guarantee under CGTMSE Scheme
Credit Guarantee refers to a situation where the loan to the applicant is backed by a party without the need for any external collateral or third-party guarantee. Here, the loan sanctioned by the member lending institution is backed by the scheme which provides the guarantee cover for a large portion of the loan amount. Under the CGTMSE scheme, both new and existing micro and small enterprises, including manufacturing and service enterprises are eligible for a credit facility up to Rs. 2 crores.
Features of CGTMSE
Interest Rates
As per RBI’s Guidelines is eligible for coverage under CGTMSE
Eligible Activities
· Manufacturing and Services including Retail trade is allowed· Educational and Training institutions, Self Help Groups (SHGs), and agriculture-related activities are not eligible
Loan Amount
· For Micro and Small Enterprises (MSEs)– Credit facility up to Rs. 200 lakh can be covered on an outstanding basis· For Regional Rural Banks (RRBs) and Select Financial Institutions credit facility up to Rs. 50 lakh is allowed
Guarantee Coverage
From 75% – 85% (50% Coverage for retail activity)
Collateral / Third Party Guarantee
Not required
Eligibility Criteria
Lending institutions that provide funding support to specific sectors are in agreement with the CGTMSE scheme. The entities and institutions that are eligible to avail business loans under the CGTMSE scheme are as follows:
Borrowers
All Existing and New Micro and Small Enterprises (MSEs)
Lending Institutions
Scheduled Commercial Banks (SCBs)
Regional Rural Banks (RRBs)
Small Finance Banks (SFBs)
Non-banking Financial Companies (NBFCs)
Small Industrial Development Bank of India (SIDBI)
National Small Industries Corporation (NSIC)
North Eastern Development Finance Corporation Ltd. (NEDFi)
Small and Micro-Enterprises owned and/or operated by Women Entrepreneurs are eligible for a Guarantee Cover of 80%, whereas all the credit/loans in the North East Region (NER) for credit facilities are eligible for a guarantee of Rs. 50 lakh.
Educational institutions, agriculture, training institutions, and Self-Help Groups (SHGs) are not eligible for guarantee cover under CGTMSE.
The CGTMSE loan limit solely depends on the applicant’s profile and business requirements.
CGTMSE Guarantee
Any collateral / third party guarantee free credit facility in form of both fund-based and non-fund based) offered by eligible institutions to new and existing Micro and Small enterprises, including Service Enterprises, with a maximum credit cap of Rs. 2 crores are eligible to be covered.
CGTMSE coverage includes the below-mentioned criteria:
a) The trust guarantees up to 75% of the defaulted principal amount (up to 85% of the defaulted principal amount for a select category of borrowers). The cover comes with a maximum guarantee cap of Rs. 37.50 lakh for the credit facilities up to Rs. 50 lakh.
b) The term credit including interest on the principal is covered for a period of one-quarter and/or outstanding capital advances including the interest, as on the date of the account becoming a Non-Performing Asset (NPA) or as on the date of filing the suit (whichever is lower).
c) Other charges, such as penal interest, commitment charge, service charge, or any other levy/ expenses do not qualify for the guarantee cover.
Below mentioned is the detailed information on the coverage limit under CGTMSE:
Source: www.cgtmse.in
Modified AGF Structure – Standard rate (SR)
Annual Guarantee Fee (AGF) [% p.a.]*
Credit Facility
Women, Micro Enterprises and Units covered in North East Region
Others
Up to Rs. 5 Lakh
1.00 + Risk Premium as per extant guidelines of the Trust
Above Rs. 5 Lakh and up to Rs. 50 Lakh
1.35 + Risk Premium as per extant guidelines of the Trust
1.50 + Risk Premium as per extant guidelines of the Trust
Above Rs. 50 Lakh and up to Rs. 200 Lakh
1.80 + Risk Premium as per extant guidelines of the Trust
*AGF will be charged on the guaranteed amount for the first year and on the outstanding amount for the remaining tenure of the credit facility.
Documents required for loan application
Below stated are the documents required for a Loan under the CGTMSE scheme and its coverage:
Duly filled CGTMSE loan application form with passport-sized photographs
Business Incorporation or Company Registration Certificate
Business Project Report
CGTMSE Loan Coverage Letter
Copy of loan approval from the Bank
Any other document required by the Bank
CGTMSE also provides rehabilitation assistance to the business units. If a business unit is in a bad condition due to factors that are beyond the control of the management, then CGTMSE covers the loan for rehabilitation extended by the lender within the credit cap of Rs. 1 crore.
How to get Loan under the CGTMSE Scheme
The objective of the CGTMSE is to enable the banks to look at small and micro businesses with objectivity and give more importance to the project viability and business model validation. To cover the loan under the credit guarantee fund scheme, the borrower has to pay an additional guarantee fee and service charge in addition to the interest charged by the bank. The current CGTMSE fee is payable at the rate of 1.5%. It is payable at 0.75% for the North-Eastern region including the state of Sikkim.
The procedure for getting a loan under CGTMSE is as follows:
Step 1. Formation of the Business Entity
Before even starting the procedure for loan approval under the CGTMSE, the borrower has to incorporate a private limited company, limited liability partnership, one-person company, or a proprietorship according to the nature of the business and obtain necessary approvals and tax registrations for executing the project.
Step 2. Preparing a Business Report
Borrowers need to conduct a market analysis and prepare a business plan containing relevant information, such as business model, promoter profile, projected financials, etc. The report is then presented to the credit facility and an application is filed for getting the loan under the CGTMSE scheme. However, businesses should consider that such project reports be prepared by experienced professionals. This shall increase the chances of approval.
Step 3. Sanctioning of Loan from the Bank
The request for a bank loan usually contains credit terms and working capital facilities. After the application and business plan are under process, banks carefully analyze the viability of the business model and process the loan application, and accord sanction, as per the bank’s policy.
Step 4. Obtaining the Guarantee Cover
After the loan is sanctioned the bank applies to CGTMSE authority and obtains the guarantee cover. If the loan is approved by CGTMSE, the borrower will have to pay the guarantee fee and service charges. The CGTMSE loan application form can be downloaded from its official website.
The extended list of MLIs under the CGTMSE scheme contains 141 banks including all the major rural, urban, public sector, and private sector banks of India. The list contains some of the larger banks, such as the State Bank of India, United Bank of India, Punjab National Bank, etc.
Note: CGTMSE does not grant any loan, credit facilities, subsidies and nor does it have any Loan Agents, Agencies for arranging loans, or credit guarantees offered via its MLIs.
Mudra Yojana is a loan scheme initiated by the Government of India to offer business loans of amount up to Rs. 10 lakh at competitive interest rates to individuals, MSMEs and self-employed professionals. No collateral or security is required by any financial institution from the borrowers applying for Mudra loan. The maximum repayment tenure offered under Mudra Yojana is up to 5 years with Nil to nominal processing fees.
Micro Units Development and Refinance Agency (MUDRA) Loan scheme under Pradhan Mantri Mudra Yojana (PMMY) is an initiative by the Government of India that offers loans to individuals and MSMEs with the help of banks and NBFCs. Collateral-free business loans offered under MUDRA Yojana come in three loan categories, named Shishu, Kishor, and Tarun.
Features of Mudra Loan
Nature of Loan
Term Loan, Working Capital and Overdraft
Types of Mudra Schemes
Shishu, Kishor, and Tarun
Loan Amount
Under Shishu Scheme: Up to Rs. 50,000Under Kishor Scheme: Rs. 50,001 – Rs. 5,00,000Under Tarun Scheme: Rs. 5,00,001 – Rs. 10,00,000
Interest Rates
As per the applicant’s profile and business requirements
Processing Charges
Nil, or 0.50% of the sanctioned loan amount
Collateral/Security
Not required by Banks/NBFCs
Repayment Tenure
From 12 months to 5 years
Foreclosure Charges
Nil
Eligible Entities
Loans under Mudra scheme can be availed by individuals, startups, shopkeepers, street vendors, retailers, traders, small manufacturers, artisans, and MSMEs. Mudra Loan can also be availed by Sole Proprietorships, Partnership firms, and Limited Liability Partnerships (LLPs) engaged only in the services, manufacturing, and trading sectors.
Benefits of Mudra Loan
Collateral-free loans – No collateral or security is required by the banks/NBFCs form the borrower
Low-interest rates with even Nil to nominal processing fees
Concessional interest rates for women entrepreneurs
Loans covered under Credit Guarantee Schemes from Govt. of India
Can be used as Term loans, Working capital loans, and Overdraft facilities
All Non-farm enterprises, i.e. Small or Micro firms engaged in income-generating activities can avail Mudra loans
Mudra loans can also be availed by people belonging to SC/ ST/ Minority category at special interest rates
How to Apply
The application form is available at mudra.org.in, so you can download the form and fill in all the required details. Different banks may have slightly different application procedures. You must visit the nearest branch of the desired bank from where you want to get the Mudra loan and submit the duly filled application form and complete the bank formalities.
Secondly, you can also apply online on the bank’s official website by submitting the duly filled application form along with the required documents as specified by the lender. Once the lender is satisfied with the submitted documents, then shall approve the loan and you may receive the loan amount in your mentioned bank account within a few working days.
Documents required
Duly filled application with passport-sized photographs
KYC documents of Applicant and Co-applicants: Passport, Voter’s ID card, Aadhar Card, Driving License, PAN card, Utility Bills (Water/Electricity Bills)
Proof of belonging to a special category, such as SC/ ST/ OBC/ Minority, etc. (if applicable)
Last 6 months’ bank statement
Business address and tenure proof, if applicable
Any other documents required by the bank or NBFC
Note: The Mudra loan application form to be filled and submitted is separate in the case of Shishu, whereas similar in the case of Kishor and Tarun loan schemes.
List of Businesses covered under Mudra Scheme
List of businesses that are covered under the Mudra scheme to perform income-generating activities is mentioned below:
Commercial Vehicle: Mudra finance for machinery and equipment can be used to purchase commercial transport vehicles like tractors, auto-rickshaws, taxis, trollies, tillers, goods transports vehicles, 3-wheelers, e-rickshaws, etc.
Service Sector Activities: Starting businesses of salons, gyms, tailoring shops, medical shops, repair shops, and dry cleaning and photocopying shops, etc.
Food and Textile Product Sector Activities: Various activities involved in the respective sector, such as papad, achaar, ice cream, biscuits, jam, jelly, and sweets making, as well as for agriculture produce preservation at rural level
Business activities for Traders and Shopkeepers: Setting up shops, service enterprises, trading and business activities, and non-farm income-generating activities
Equipment Finance Scheme for Micro Units: Maximum loan up to Rs. 10 lakh
Agri-allied Activities: Activities related to businesses in agri-clinics and agribusiness centers, food & agro-processing units, poultry farming, pisciculture, beekeeping, sorting, livestock-rearing, grading, aggregation agro-industries, dairy, fishery, etc.
Mudra Loans for Women Entrepreneurs
Mudra Yojana under PMMY encourages women entrepreneurship and for that private and public sector banks, NBFCs & Micro Finance Institutions (MFIs) offer collateral-free business loans at reduced or concessional interest rates for women entrepreneurs. The maximum loan amount offered under Mudra Yojana for women entrepreneurs is up to Rs. 10 lakh with repayment tenure of up to 5 years. The Mudra loan eligibility for women remains the same, as stated for individuals and enterprises. Nil to nominal processing fee is charged on the sanctioned loan amount for women entrepreneurs.
MUDRA Card
Mudra card is a type of debit card that is issued to the borrowers of Mudra loans to meet their business and working capital requirements. After Mudra loan approval, the lender opens a Mudra loan account for the borrower and issues a debit card along with it. The loan amount is disbursed in the bank account and further can be withdrawn from the total sanctioned amount in portions by borrowers, as per their business requirements.
Business, be it big or small, is most of the times in need of additional funds to meet day-to-day business requirements. The required funding also depends upon the nature of the business – is it capital-intensive and what is its stage of development, in terms of inception, growth or maturity? Usually businesses need funds the most in the initial stages and for growth perspectives. In this piece of article, we shall discuss almost all the types of business loans that are sanctioned by financial institutions in India.
Broadly there are 8 Types of Business Loans in India:
Working Capital Loan
Term Loan (Short & Long-term Loan)
Letter of Credit
Bill/Invoice Discounting
Overdraft Facility
Equipment Finance or Machinery Loan
Loans under Govt. schemes
POS Loans or Merchant Cash Advance
1) Working Capital Loan
Working capital loans are used by enterprises to meet their daily business requirements, such as buying machinery/equipment, managing business cash flow, purchasing raw materials, enhancing inventory, paying salaries, etc. Working capital loans are majorly short-term loans in which the repayment tenure is up to 12 months. This loan is also termed a collateral-free loan in which the borrower is not required to submit any collateral or security with the bank. The interest rate offered is bit higher as compared to long-term loans or general business loans. In this type of loan, the bank sets a limit for the business to take a loan and the amount can be utilized for specific business purposes, only.
2) Term Loan
Term loan is a loan that is required to be repaid in regular payments over a set period of time. The term loan is categorized into short-term and long-term loans. The repayment tenure of these two types ranges between 12 months to 5 years. Term loans that are of a shorter duration which is of 12 months are called short-term loans and loans up to 10 years are long-term loans. The loan amount offered by the bank ranges from Rs. 30,000 to Rs. 1 crore, can even exceed depending upon business requirements. The repayment tenure for a term loan is finalized by the lender at the time of loan application.
3) Letter of Credit
Letter of credit is a type of credit limit used majorly in trading businesses in which the bank or lender provides funding guarantee to enterprises that deal in international trade. Letter of credit can be utilized for both import and export purposes by entrepreneurs. Enterprises doing businesses overseas tend to deal with some unknown suppliers, so for that they require assurance of payment before performing any transaction. Therefore, letter of credit plays a vital role in providing payment assurance to the suppliers.
4) Bill Discounting
Bill or Invoice Discounting is a funding facility in which the seller gets an amount in advance at discounted rates from the lender. This asks buyers to contribute in the form of interest rate in increasing the revenue of the financial institutions, in form of interest paid and from monthly fee. For example, You have sold goods to Mr. Singh, he has given you letter of credit from the bank of 45 days, if you want to get money from the bank before 45 days, the bank will charge some interest rate from you, which in return will be called a discount for the seller. Further, let’s assume if the amount which you were supposed to get was Rs. 10 lakh on or after 45 days, by bank’s discount or interest rate of Rs. 50,000 you now get Rs. 9,50,000 in return form the bank. The buyer will anyhow deposit Rs. 10 lakh to the respective bank on 45th day only.
5) Overdraft Loan
Overdraft facility is a funding type offered by a bank to its account holder to withdraw cash from his/her account even if the account balance is zero. The interest rate is charged only on the utilized amount from the sanctioned limit and on a daily basis. The credit limit that is sanctioned depends upon the account holder’s relationship with the bank, credit history, cash flows and repayment history, if any. The overdraft limit is revised every year and can be used in any manner, if the interest is paid on time. Overdraft facility is offered against collateral or securities, especially in terms of FDs with the bank.
6) Equipment Finance
The equipment finance or machinery loan is a funding option offered to the borrowers for them to purchase new equipment/machinery or to upgrade the existing. Equipment finance is used mainly by large enterprises and enterprises engaged in the manufacturing sector. Enterprises or business owners availing equipment loans also enjoy tax benefits. The interest rate, loan amount and repayment tenure offered shall vary from lender to lender.
7) Loans under Govt. Schemes
The Government of India has initiated various loan schemes to promote individuals, MSMEs, women entrepreneurs and other entities engaged in trading, services and manufacturing sectors. The loans under government schemes are offered by various financial institutions, such as private and public sector banks, NBFCs, Regional Rural Banks (RRBs), Micro Finance Institutions (MFIs), Small Finance Banks (SFBs), etc. Some of the leading Govt. Loan schemes include Mudra Scheme under PMMY, PMEGP, CGTMSE, Standup India, Startup India, PSB Loans in 59 minutes, etc.
8) Point-of-Sale (POS) Loans
POS Loans or Merchant Cash Advance is a mechanism in which a business owner running an enterprise pays a lump sum amount in advance to suppliers via his/her daily or future credit or debit card transactions. Several times, merchants of SMEs experience a short-term cash crunch. Hence, to reduce the liquidity crunch in the business, merchants opt for POS loans. The interest rate offered under POS loans is comparatively higher, as compared to other business loan types. The repayment facility is linked with debit or credit transactions Point of Sales (POS) machines installed at retail shops, grocery stores, supermarkets, and shopping malls.
As of now, you must have got a rough idea about the types of business loans offered by lending institutions in India. Business loans can be availed at nominal and attractive interest rates with flexible and easy EMIs. The best business loan deal can be picked by comparing various loan deals offered by leading private and public sector banks, NBFCs, Regional Rural Banks, Small Finance Banks, Micro Finance Institutions and various other financial entities.
With the objective to encourage women entrepreneurs and give impetus to their business journey, the Ministry of Social Justice and Empowerment, the Government of India has implemented a strategic policy – Mahila Samridhi Yojana. Under the visionary scheme, the government provides microfinance to women entrepreneurs hailing from marginalized sections of the society – backward classes. Designed considering women’s empowerment, the flagship scheme is being implemented by a wide range of channel partners nationwide. Targeted women beneficiaries are identified and given loans either directly or in the form of Self-Help Groups (SHGs).
The guidelines under the Mahila Samridhi Yojana (MSY) clearly signify that the loan to the tune of 95% will be sanctioned, while the balance 5% will be funded by the State Channelizing Agencies (SCAs) or beneficiary contribution. Guidelines indicate that the utilization period for the loan received is 4 months, starting from the date of disbursement of the loan.
Limit of Loan
Interest Chargeable
Rs. 1,40,000 per beneficiary
SCA
Beneficiary
1% per annum
4% per annum
Loan Repayment Tenure: 3 years and 6 months
Moratorium Period: 3 months
Eligibility
As the MSY scheme is dedicated to bringing about a turnaround in the lives of women belonging to the marginalized sections of the society, stringent eligibility criteria is in place to ensure fair disbursal of the loan. The eligibility criteria comprise:
SHGs and women entrepreneur from backward sections of the society are only eligible to draw the benefit of MSY loan
Woman beneficiary of the minimum age of 18 years
Beneficiary falling under the BPL category
Annual income of the beneficiary should be less Rs. 3 lakh per annum
No criminal past record
Any kind of misrepresentation or fudging of data might lead to the rejection of an application.
Documents Required
The MSY loan has been receiving an overwhelming response from the women hailing from every nook and corner of the country. There are plenty of reasons to corroborate the fact, minimal documentation is one among them. The following documents are required to avail the loan facility intended to empower women and lift their socio-economic status:
Proof of Identity – Voter ID card
Self-group membership ID card
Income certificate issued by the competent authority
Filled in the application form to obtain the Mahila Samridhi Yojna loan
Aadhaar card
Caste certificate issued by the competent authority
Bank account book
Passport size photograph
Proof of residence (Electricity bill or ration card can be furnished)
As the MSY loan is intended for the backward sections, it has come to light, a substantial number of women beneficiaries have lifted their socio-economic status.
Features & Benefits
The flagship scheme of the Ministry of Social Justice and Empowerment, the Government of India has been instrumental in transforming the lives of hundreds of women across India. Some of the benefits include:
Lifts the socio-economic condition of the beneficiary
Plays a role in mainstreaming of the poverty-ridden family
Supports in generating employment opportunities
Cultivates entrepreneurship among women
Empowers the women, make them self-reliant
Minimal documentation
Raises the self-belief in women
Other Significant Information
Self Help Groups (SHGs): Economically aligned group of people who voluntarily develop a group to raise their income by saving and contributing to group activities.
Channel Partners: Channel partners are represented by competent professionals in the field; help the group and its members in economic activities and in availing the MSY loan.
Member Ration: As per the rules and regulations, maximum women members allowed in an SHG are – 20. The 75% of members should be from the backward classes as mandated by the eligibility criteria, while the remaining 25% of women members could be from other weaker sections – Scheduled Caste or physically handicapped.
Loan Disbursal: Loan is disbursed through the State Channelizing Agencies (SCAs), Regional Rural Banks (RRBs) and the nationalized banks to the beneficiaries.
Mahila Udyam Nidhi (MUN) Scheme is a scheme offered under the Small Industrial Development Bank of India (SIDBI) to encourage and empower women entrepreneurs and promote women Entrepreneurship by providing financial assistance at concessional interest rates. The funding provided by Mahila Udyam Nidhi Scheme can be used by MSMEs to undertake service, manufacturing and production-related activities.
Under Mahila Udyam Nidhi Scheme, women entrepreneurs can avail loans up to Rs. 10 lakh to start their own business or small scale enterprise. The interest rates offered under this scheme may vary from bank to bank. The funding support can also be used to upgrade or expand existing projects. The maximum loan repayment period offered under this scheme is up to 10 years with the moratorium pages up to 5 years.
Eligibility Criteria Women entrepreneurs who have initiated existing and new MSMEs, Tiny Units or SSIs Financial holding of women entrepreneurs should not be less than 51%, engaged in manufacturing and production purposes Existing or new MSMEs engaged only in services, trading and manufacturing sectors MSMEs or tiny enterprises with a minimum investment of at least Rs. 5 lakh MSMEs engaged in various activities, such as business expansion, improvement, diversification, and technology upgradation.
Features of Project Profile
Project cost must not exceed Rs. 10 lakh
Loan limit of up to 25% of project cost, subject to a maximum of Rs. 2.5 lakh per project is offered to deserving women entrepreneurs
Repayment tenure of the loan is up to 10 years, including a moratorium period of 5 years
Interest rates fixed by SIDBI and offered by banks may vary from time to time and shall be communicated by SIDBI to women entrepreneurs
Service charge of 1% per annum is charged by the respective bank, as per the sanctioned loan
Service charge waiver depends on the lending office
Benefits of Mahila Udyog Nidhi Yojana
Promotes women entrepreneurs
Increases employment opportunities in the tiny and small scale sectors
Helps to meet the gap in equity
Rehabilitates weak SSI units
Expansion, modernization and technology upgradation of service industries
Activities included in Mahila Udyam Nidhi Scheme are as follows:
Auto-repairing and servicing centre
Beauty parlour
Cable TV Network
Canteen and Restaurant
Computerized Desktop publishing
Crèche
Cyber Café
Daycare centre
ISD / STD Booth
Laundry & Dry Cleaning
Mobile Repairing
Photocopying (Xerox) Centre
Purchase of auto-rickshaws, two-wheelers, cars
TV Repairing
Road transport operator
Salon
Servicing of Agricultural and Farm equipment
Tailoring
Training Institute
Typing Centre
Washing machines and other electronic and electrical gadgets, etc.
Mahila Udyam Nidhi Scheme was first launched by Punjab National Bank to provide funding support to women entrepreneurs who are engaged in SSIs. However, there are several banks that offer Mahila Udyam Nidhi Scheme at affordable and attractive interest rates. Moreover, there is no collateral or security to be submitted by the women entrepreneurs to start their enterprise. This scheme helps women entrepreneurs to start their own businesses and promotes them to grow and expand in their areas of interest and skills.
Like Mahila Udyam Nidhi Scheme, there are various other schemes that promote and help in the development and growth of women entrepreneurship that include Mudra loan scheme, TREAD (Trade-Related Entrepreneurship Assistance and Development) scheme, Cent Kalyani Scheme, Udyogini Scheme, Dena Shakti Scheme, Annapurna Scheme, Stree Shakti Package for Women Entrepreneurs, etc.
Business loan is a credit facility offered by Banks and NBFCs to meet the financial requirements of self-employed customers and enterprises. It can be availed by individuals, MSMEs, business owners, entrepreneurs, professionals (CAs/Doctors), and several other business entities.
Business loans are majorly classified into two types, such as secured loans and unsecured loans. Secured loans are types of loans that require collateral/security, that a borrower needs to deposit with the lender to avail a business loan. However, in the case of unsecured loans, there is no need to submit any collateral/security with the bank, NBFC, or any other lender.
Banks/NBFCs offer both secured and unsecured business loans, including Term Loan (Short-term/Long-term), Working Capital Loans, Cash Credit, Overdraft, Letter of Credit, Bill/Invoice Discounting, Equipment Finance, Machinery Loans, POS loans, Loan under Bank Guarantee, Loan under Govt. schemes, etc.
The minimum loan amount offered starts from as low as Rs. 30,000 that can be availed from Small Finance Banks (SFBs), Regional Rural Banks (RRBs), or Micro Finance Institutions (MFIs). Borrowers can avail collateral-free business loans for up to Rs. 1 crore from leading private and public sector banks. Small business loans are also available for MSMEs and Startups at competitive interest rates.
On our online platform, the business loan interest rates offered by financial institutions start from 16% p.a. onwards and are further determined as per the applicant’s profile, eligibility & business requirements. Below mentioned are the business loan interest rates offered by leading banks and NBFCs.
Credit score plays a significant role in the loan approval process. It represents your credit history along with the repayment timeline of availed funding products. Generally, any credit score of 750 or more is considered good by the financial institutions. However, if your credit score is bit low of 650 or above, there are still chances of loan approval from some NBFCs, Small Finance Banks and Micro Finance Institutions.
The credit score eligibility defined by financial institutions are different for individuals, self-employed professionals, MSMEs, retailers or manufacturers and other business entities.
Different ranges of credit score is required by banks/NBFCs, from borrowers who require various types of business loans, such as term loan, working capital loan, letter of credit, overdraft, POS loans, etc. The credit score range defined by the lender for a specific loan product shall vary from applicant to applicant and loan types.
People with New-to-Credit should also start to build a credit score for loan approvals, as applicants with low credit scores are always at higher risk of loan rejections. Startups require even higher credit scores to avail business loans and they are new to the lending market and are about to set up a new business. Therefore, build and maintain a good credit score to enhance the chance of loan approval.
Eligibility Criteria
Business Tenure: Minimum 1 year or above
Minimum Annual Turnover: Rs. 12 lakh or above for existing enterprises
Credit Score: 750 or above
Applicants with No past loan defaults
Eligible Entities
Individuals, Business Owners, Entrepreneurs, Self-employed professionals, Startups and Micro, Small, and Medium Enterprises (MSMEs)
Private and Public Limited Companies, Sole Proprietorship, Partnership Firms, Limited Liability Partnerships, and Large Enterprises engaged only in Manufacturing, Trading or Services sectors
NGOs, Co-operative Societies, Trusts and professionals, such as CAs, Doctors, Architects, Company Secretaries, Designers, etc.
Documents Required
When applying for a business loan, you will need to submit the following documents:
Duly filled application form along with passport-sized photographs
KYC Documents of the applicant, including PAN card, Passport, Aadhar Card, Driving License, Voter ID card, Utility Bills (Water/Electricity Bills)
Business plan is a formal written document that contains your prospective business goal. Business loan includes the process on how to execute these plans, the time period in which the goals have to be attained or executed. The plan consist a list of details which helps a business to achieve certain goals that helps them grow. Plans for attaining business loans also contain the following details:
Nature of the business
Background and financial flexibility of the enterprise or business
All the strategies, business or company wants to undertake to achieve their target
It works as a road map which provides a direction to the business
Banks often require a documented business plan to sanction business plan or other kind of financial requirements
Components of a Business Plan
The process of making a good business plan requires the company or firm to stick to a particular structure or template used to make or draft business plans. Well written business plan includes the following:
Cover page with complete index
Pitch summary
The motto or vision statement
Brief description of the business
Analysis of the business environment
SWOT analysis
Industry background
Analysis of the competitors
Market analysis
Marketing plans
Operational plans
Management summary
Financial planning
Recent company’s success stories
How to write a Business Plan to Start Your own Business?
How to start a business plan has always been a confusing topic for many firms and organisations. Creating a perfect business plan can prove beneficial for the growth of the firm or business. Creating a business plan involves a lot of research and detailed process which include a lot of stages some of which overlap each other or are inter related. It doesn’t matter if you are drafting a business plan from scratch or a predefined template or working with a business plan writer or consultant, you will find these steps along the way:
Research: Detailed research includes digging out information about customers, competitors, and a detailed report about working capital cost of the business. A variety of methods can be used to find the following data; the data can be extracted from a variety of methods ranging from articles and data bases to even arranging interviews with other entrepreneurs or even potential customers. Research has to be organised and documented carefully with all the information gathered. The source of the information is to be documented along with the information, as the source has to be mentioned within the business plan
Strategizing: The information that has been collected has to be used relevantly to support your business plan. Revise the business strategy you planned according to the information gathered. Your research has to be in-depth and precise so that your strategy can provide support to your decision on appropriate marketing, operations of the business or the firm. The rate at which the company shall hire for five years has to be mentioned. Strategy usually pulls the best out the practises present in the current marketing scenario. The companies use this as a base to build a plan in which different activities are added that gives the business a competitive advantage
Calculation: All the activities and improvement comes at a cost and will generate some revenue from the strategy. The strategy has to be made with the cost of execution and the profits in the long. The strategy has to be on the basis that the profit would cover up the expenses. Start inserting your start-up cost and financial assumptions into a financial model which will provide you with an overview on the flow of cash in the first financial year, this will give an estimate on the funds the business will need on hand to fund the early operations
Draft: With the strategy more or less decided and an estimate of the provided it is time to draft a business plan. With all the research and the calculations done properly the drafting work is the easiest in the creation of a business plan. If there is a problem in putting forward a convincing prose then this might be the right time to consult or seek the help of a business plan writer who can put together the business plan
Revision and proofreading: Revising the entire business plan will ensure that you haven’t missed any idea or strategy that was to be added while drafting the business plan. Check whether the words in the business plans do not lead to any confusion. Repetitive, irrelevant or redundant points should be removed or substituted with better ideas that suits the points in the business plan. Finally go through the business plan to find grammatical errors, spelling mistakes and formatting
Types of Business Plans
There are two types of business plans as mentioned below:
A) Internally focused business plan
B) Externally focused business plan
Let’s discuss about these two types in detail.
1. Internally Focused Business Plan
It is a business plan which focuses on the internally focused business targets, intermediate goals which help an organisation to reach their externally focused business plans. An internally focused business plan may contain details like a new service that has been added in the business, a line of new products that the company is going to launch, the restructures in the financial matters of the company, setting up of a new IT system or even the restructuring or renovation of the business or the company. It usually contains a list of recent success the company has achieved.
2. Externally Focused Business Plan
Externally focused business plans which contain detailed information about the organisation or the company or the efforts made by a team to reach their goals. It also contains various list of profit entities, it includes a list of external stakeholders which include investors and customers of the company.
There are different types of externally focused business plans which have different stakeholders, investors and customers. The various types of externally focused business plan are as follows:
Non-profit based: the external stakeholders are clients and donors
Profit based: external stakeholders are investors and customers
Government agencies: external stakeholders are the higher level government bodies, taxpayers, or the international lending bodies. The international lending bodies include international monetary funds, the World Bank and development banks.
FAQs
Ques. What are the questions that are answered by a perfect business plan?
Ans. The questions are as follows;
What makes you different?
How is your business going to make money?
What are the ways to promote your business?
What is the amount of funds required to get started?
What is the expected time period to cover your investments?
Ques. How long should be a business plan?
Ans. A business plan can be anywhere near 10 to 100 pages; it always depends on the purpose of the business plan.
Ques. Is it mandatory to write a business plan?
Ans. In case you are interested in taking business loan from a financial institution, then it becomes essential to write a business plan as it is required by lenders before sanctioning any loan.
Ques. Who should write my business plan?
Ans. It is your business so the plan also needs to be written by you ‘the entrepreneur’.
Ques. What are the common mistakes in writing a business plan?
Ans. There are some of the common mistakes in writing a business plan that include ignoring the competition in the entering market, copying an exact plan of someone else, being over optimistic, relying on limited customers, applying too many ideas, etc.
For taking a business loan from the bank for a new start-up business, the borrower must represent the project report of their business. All the necessary requirements and official documents have to be submitted with the project report. The project report should be such that it should represent the idea of the whole business and can be easily understood by the reader.
Elements of Project Report
Let’s discuss the standard format for the project report for bank loans of new businesses.
Introductory page
On this page, the introduction of your new business is to be given
The aim of the business and on what purpose you have chosen this business all these points should be mentioned in this introductory part
Summary of the project
Summary of the project should consist of the overall status of the business
Time to be consumed in working or manufacturing something should be there
The budget of the whole business should also be mentioned
Scope of the project
Scope of your business should be clearly described
It should contain the percentage of work that you planned and the percentage of planned work that has already been completed
Quick overview of results and planning of next steps should be included
Details of Promoters
The promoters are the mediator for the business which helps for the promotion of the business
The details of the promoters and their educational qualifications and work experiences etc. should also be given in the report
Details of Employees
The details about the employees working this business should be written
Their educational qualifications should also be mentioned
The work experiences and details about the top management should also be written
Infrastructure Facilities
Information about infrastructure facilities should also be mentioned like whether the tools have been deployed or not
Also, write about the conditions of the operational premises and what all are used
Types of machinery used in the business should also be mentioned
Customer Details
Information about customers should be well written like, what are the types of customers you have targeted for selling your business items
The prospective customer’s details should also be mentioned like is they from the big organization and also what is their capacity of buying goods in this business
Regional Operations
Many times a company opens branches in different areas or regions. The branches may be set up nationally and internationally, as per the requirements
When you make a project report you have to write about the different setups you made in which region and also write about the operation teams
Fiscal Acquisitions and Tie-ups
You have to write it down in the project report with whom you have done tie-up or which stock or acquisition you have taken and all details of it should be mentioned in the report
Means of Financing
The financing in the business can be done by the financial corporation or the business partners or somewhere else
So, it is very important that from where the funding is coming, so this all should be mentioned in the report
Balance Sheets
Balance sheets tell about where the money has been spent
Also in what areas and fields the spending has been done is also noted. Thus all the accounts of the business will be seen in this balance sheet
It is important to show the balance sheets of your company to the bank and it should also be mentioned in the report
Profit and Loss Statements
How much the profit will company make and how much profit is making the business has to be in the report
Whether the business is making any profit or loss the statements should be shown to the bank and also being mentioned in the report
Fund Flow Statement
The funding given by any corporate or government and where it is used and in what fields of business the funding is flowing should be mentioned in the project report
Break-Even Points Evaluations
Give the evaluations of the whole project report in even points and mention everything about your whole business
Project Feasibility Ratio: Deciding on the ratio of cost, discounts, and revenue
Project Feasibility Ratio
Project Feasibility Ratio is basically deciding on the ratio of cost, discounts, and revenue of an enterprise. It can be presented in the form of a graph by mentioning the year-on-year comparison between revenue and expense. The project report should also contain the expense split-up graph.
The components of Project Feasibility Ratio are below mentioned that are required to be displayed as per year-on-year comparison:
Current ratio
Quick ratio
Interest coverage ratio
Debt equity ratio
Gross profit Sales Percentage
Net profit Sales Percentage
Return On Capital Employed
Scope of the project
The scope of the project should have below mentioned details:
Promoter(s) details
Product / services & process
Plant & machinery / equipment
Market potential & Strategy
Manpower requirements
Risks & Mitigation strategy
FAQs
Ques. Is it necessary to make a project report for a bank loan?
Ans. The project report is very much necessary when you’re going to take a business loan for your business.
Ques. What are the necessary contents used in the project report?
Ans. The necessary contents preparing in project reports are:
