Do you know that a whopping 99% of businesses in India fall under the MSME category? But, their contribution to the GDP is as low as 35%!
The SME/MSME sector requires crucial growth enablers to realise its true potential. And, the top contender for the same is access to finance. This is where a business loan comes into play.
To receive external finance, MSMEs face high collateral requirements, along with skyrocketing interest rates. But few moneylenders offer a special SME loan at competitive interest rates to even MSMEs with a low credit score. The idea is to enable easy credit access for MSMEs.
Let us unfold the developments and small-scale business trends 2021 holds.
MSMEs and the Union Budget 2020-2021
The union budget suggests the following for the SME/MSME sector:
- Amendment of Factor Regulation Act, 2011 – It will result in the extension of invoice financing to the SME/MSME sector. They can make use of the SME working capital to cover short-term expenses.
- It recommended invoice financing loan products that are app-based for MSMEs.
- The launch of NIRVIK or Niryat Rin Vikas Yojana scheme introduces the MSME sector to higher export credit disbursement. It also provides reduced premium and increased insurance cover for the SME sector in India for 2021. This will activate substantial growth opportunities.
- It introduces a scheme to give subordinate debt that can act as quasi-equity to support MSME entrepreneurs.
- Also, the setup of an investment clearance cell, revision of turnover limits for availing tax benefits, and knowledge translation cluster setup to disseminate knowledge of processes are projected to change the dynamics of this sector.
Additional reads – Know More about the New Business Loan Schemes for SMEs
The aforementioned developments hold considerable significance, given the MSME sector struggles with the following:
- Lack of income tax norms as GST has a threshold turnover rate that most do not qualify
- Low-to-no financial buffer
- Poor credit history, mostly due to delayed payments to MSMEs
- Low or no formal registration due to their size
Nonetheless, the SME/MSME sectorholds promise with the measures and attempts from the government to accelerate the supply chain finance for the MSME sector in 2021. The concept of supply chain finance relies on the credit history of large firms to offer financing solutions to SME/MSMEs. And, they can avail of easy credit from financial institutions.
Additional Read – Importance of Reviving SME and MSME Sector Post Pandemic
The bottom line
Tata Capital is here to support SME/MSMEs throughout the country with their SME loan. You can rely on us to supplement your requirement of funds with loan amounts ranging from Rs. 5 lakhs to Rs. 75 lakhs.
Our competitive business loan interest rates for SME/MSMEs start from 19%, and the repayment structure is customisable to meet your business cash flow. We value the contribution of the MSME sector in the country, and thus, our offerings are in line with the effort to bolster the small-scale industry in 2021.
Make growth a habit with Tata Capital’s SME/MSME loans and customise the loan to meet your unique business needs. Connect with us today!