The Process of Obtaining an MSME Loan in India

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MSMEs are loans that are taken up by numerous entrepreneurs of micro, small and medium enterprises. The requirements for a loan could range from the setting up of a new enterprise to stepping up and upgrading the existing services and features – the latter can be done by means of upgrading technology, modernising, diversifying and expanding.

Applying for an MSME loan at a physical location would require the entrepreneur to approach a lender with a prior appointment fixed and wait in a queue falling travelling to the premises before the loan is processed. 

The need for a loan for a small business can range from the acquisition of land and factory and construction of various building spaces to the purchase of different kinds of equipment such as lab and testing equipment, electronic fittings and furniture. Loans can also be required to pay off creditors while awaiting the payments from debtors. Expansion of business, finances for advertising and marketing, launching of a new range of products and warehousing needs are other aspects that would require loans. 

MSME’s full form stands for Micro, Small & Medium Enterprises. These are inclusive of manufacturing enterprises that are also engaged in the manufacture and production of various industrial goods. Enterprises that are involved in rendering or providing different services is another classification. 

The classification that has been revised and is in effect since the 1st of July, 2020, different MSMEs are defined by the investment of the business in plant, equipment or machinery and the annual turnover. The specified criteria are as described below: 

Micro Enterprises 

Micro enterprises are defined as those businesses that do not have more than INR 1 crore invested in machinery, plant tools, and the annual turnover is specified as being not more than INR 5 crore. 


Small Enterprises 

An investment of INR 10 crore and less in machinery, plant and equipment, and an annual turnover of INR 50 crore and less classified the business as a small enterprise. 


Medium Enterprises 

Medium enterprises invest around INR 50 crore and less in various equipment, machinery and plant tool requirements and the annual turnover is not more than INR 250 crore. 

The Udyam MSME registration portal can be found on the Government’s Single Window Systems and Government of India webpages. No other online or offline, private systems, services, persons or agency can authorise an MSME registration or participate in any activity related to the official process. 

Udyam Registration is the registration process undertaken by an enterprise for the purpose of obtaining an MSME loan. A registration number is generated after the process is complete, and this number is permanent. Following the completion of the registration process, a certificate is issued in the name of the enterprise. The certificate contains a QR code that can be used to access the portal’s web page and details about the concerned enterprise. There is no requirement for the renewal of the registration on a periodic basis. The single window systems at DICs and Champions Control Rooms are equipped to assist entrepreneurs in their registration process. Finally, this is a free process and there are no costs or fees associated with the same.

The registration process for MSMEs is entirely online and devoid of the use of paper. It is also facilitated by a self-declaration, and there are no requirements for the uploading of proofs or any documents. For Udyam, Aadhar number is the only required official information of the entrepreneur. The GST and Pan details linked to the turnover and investment details of the enterprises will be sourced automatically from the database of the Indian government. The online system is fully integrated with the GSTIN system and Income Tax. From the 1st of April, 2021, having a Pan and GST number of the enterprise is mandatory. 

For enterprises that already have a UAM or EM-II registration will be required to re-register themselves. The same applies to enterprises with registrations issued by any authority that is under the MSME ministry. 

Lastly, enterprises cannot file for more than one registration. However, if there are different manufacturing activities or services associated with the enterprise, these can be added or specified in one registration itself. 

If you are an entrepreneur who is looking to establish a medium, small or micro-enterprise, you can file for an Udyam registration online on the Udyam registration portal. Based on self-declaration and Aadhar number, the registration will be approved. There is no requirement for the uploading of any proof, documents, paper or certificates. 

The Aadhar number that is used in this Udyam Registration should be of the proprietor if the enterprise is a proprietorship firm. Similarly, the Aadhar number should be of the managing partner in cases of partnership firms. Finally, in the cases of Hindu Undivided Family (HUF), a Karta’s Aadhar number is used in the registration process. 

In cases of a Trust, or a Society, or a Cooperative Society, or a Limited Liability Partnership or a Company, the authorised signatory and organisation will be required to provide Pan and GSTIN details along with the Aadhar number.

If the enterprise is registered as Udyam with Pan, the information for prior years when Pan was not created is required to be provided on a self-declaration basis. 

After registration, the enterprise is assigned a permanent identification number that is referred to as Udyam Registration Number. The enterprise itself is named Udyam on the registration portal. Lastly, Udyam Registration Certificate – an e-certificate, is issued on the completion of registration. 

For enterprises that are already existing and registered under either USM or Em-Part II are required to register again on the portal on or after the 1st of July, 2020. Therefore, any enterprises registered until the 30th of June 2020 will be classified accordingly. An existing enterprise registered before June 30th, 2020, is valid only until the period of 31st March 2021. Finally, an enterprise that is registered with a different organisation under the Micro, Small and Medium enterprises ministry is required to register itself on the official Udyam Registration portal. 

Following the above process properly and ensuring that all relevant details are included can allow the Udyam registration to be sanctioned and approved – allowing further processing of an MSME loan.