The journey of starting and growing a small business can be filled with challenges, one of which usually includes obtaining financial support. For micro, small and medium enterprises (MSMEs), getting approved for an MSME loan can be arduous, but not out of grasp. Below are five important tips for getting approved for an MSME loan in 2024.
1. Have a well-structured business plan
Financial institutions are keen to know how you plan to use the loan money. Therefore, having a detailed, well-thought-out business plan can work in your favor. This plan should contain information about your business concept, organisational structure, type of products or services you offer, detailed financial data, and marketing strategy. This gives the lenders insight into your level of commitment, ability to plan, knowledge of the market, and the potential profitability of your business.
2. Maintain accurate financial records
To secure an MSME loan, lenders typically require your financial records. These records may include your business’s financial statements, bank statements, income tax returns, balance sheets, and cash flow projections. Accurate, up-to-date records show your ability to manage finances and pay back the loan. It’s essential to have a capable accounting system for tracking revenue, expenses, and profitability, consequently showing a clear picture of your business’s finances.
3. Possess the MSME certificate
The MSME certificate acts as legal proof of a business’s status and aids in availing of various schemes formulated for the growth of MSMEs, including collateral-free loans. Hence, it’s necessary to register your business as an MSME. The MSME certificate download can be executed easily online through the government’s official portal, and it’s completely free. All the banks accept the certificate, making a strong case for your loan application.
4. Demonstrate a good credit score
A strong personal and business credit score helps assure your lender about your ability to repay the loan. Lenders often review the business owner’s credit history, even if the loan is for the business. Paying your bills on time, not defaulting on any loans, and ensuring you have a low level of debt, can positively impact your credit score.
5. Collateral or Collateral-free Loans?
Collateral is an asset that a borrower offers as security for a loan. It guarantees that the lender can repossess should the borrower default on their loan payments. One of the specificities of the MSME loan is the availability of collateral-free loans. On this line, the Government has introduced the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme which makes it possible for MSMEs to avail loans without collateral. Ensure to investigate these possibilities to increase your prospects of getting the loan.
Apart from these five tips, be sure to have a clear line of communication with your prospective lender. This includes clearly stating the need for the loan, the exact amount you need, and your plan for repayment. Remember that lenders want to lend to businesses that exhibit a high likelihood of repayment. The more you can demonstrate this, the better your chances of securing the loan.
In this digital age, the process of applying for an MSME loan has become more streamlined, resulting in quicker loan approval times. Take advantage of online platforms to compare interest rates offered by different banks, check if you are eligible, calculate your loan amount, and apply online.
The year 2024 could present new opportunities and challenges pertaining to MSME loans. Therefore, keeping updated about new loan schemes introduced by the government or new norms brought by financial institutions can help you find the best funding option for your MSME. Also keep in mind that while getting a loan is crucial for business growth, it should align with your business goals and not strain your finances unduly.
The Bajaj Finserv App makes it easy for businesses to apply for MSME loans. It streamlines the process, helping you quickly access the funds you need.
Remember, getting an MSME loan approved demands time, effort, good financial health, and a strong business proposal. So, ensure your business ticks all these boxes before applying for an MSME loan. Implementing these strategies can help your business draw the attention of lenders and may facilitate the approval of your MSME loan application. Good luck.