What is MSME ?

MSME stands for Micro, Small and Medium Enterprises that are usually involved in the manufacturing of goods or provision of services. These business enterprises are the backbone of country’s development. MSMEs contribute significantly in exports, employment generation, innovation and entrepreneurship thereby serves as catalysts to the socio-economic development in India. 

Business enterprises are classified on the basis of their turnover and investment in plant & machineries as below: -

Source

All such enterprises are required to register online on the Udyam Registration portal and obtain ‘Udyam Registration Certificate’.

What is MSME Loan?

An MSME loan supports micro, small and medium enterprises to get funds that can be used in business expansion, equipment purchases, technological advancement and/or working capital needs. These loans can be taken against collateral (Secured) or without collateral (Unsecured). SK Finance Limited, hereinafter referred as “Company”, provides secured business loans keeping immovable property as collateral, which are at competitive interest rates, with minimal documentation and flexible repayment terms.

Types of Business Loans available for MSME

To assist MSMEs in making informed financial decisions, it is crucial to understand the various types of loans available. Here are the common types of business loans available for MSMEs:

• Working Capital Loans
• Term Loans 
• Overdraft /Cash Credit Facility
• Invoice Financing
• Letter of Credit

What is a Secured Business Loan?

A secured business loan is a financial facility wherein a borrower pledges tangible asset such as property, machinery or fixed deposit as collateral to acquire funds for supporting business expansion, capital investment, technological enhancement and sustainable financial growth.

What is unsecured Business Loan?

An unsecured business loan provides quick financial support without requiring collateral. It offers flexible repayment options and faster approval but usually comes with higher interest rates due to the increased lending risk.

Why Should MSMEs Consider Taking Secured Business Loans for Expansion?

MSMEs should consider secured business loans for expansion due to several key benefits:

• Affordable Expansion: Lower interest rates make them cost-effective for long-term investment.
• Increased Capital Access: Higher funding amounts enable investment in significant infrastructure, technology, or product lines.
• Repayment Flexibility: Longer repayment periods allow businesses to align payments with income cycles to avoid financial strain.
• Government Support: Initiatives like CGTMSE can be used alongside secured loans to secure even better terms and reduce financial risk.

Comparison Secured and Unsecured Loans

Here’s a simple comparison table between secured and unsecured loans:

Popular government schemes for MSMEs 

• PMEGP (Prime Minister’s Employment Generation Programme): Promote entrepreneurship by providing financial support to individuals and small business for setting up new ventures.
• Mudra Loan (Pradhan Mantri Mudra Yojana): Offers collateral-free loans under three categories- Shishu, Kishor and Tarun- to micro and small businesses.
• CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprise): Provide collateral-free credit guarantee to lenders, encouraging financial institutions to support small business.
• PSL (Priority Sector Lending): RBI mandates banks and NBFCs to allocate a portion of their loans to sectors like MSMEs, ensuring small businesses receive adequate and affordable financial support.
• Udhyam Registration: A government registration that gives MSMEs a unique ID and access to benefits like subsidies, low interest rate and easy loans.

Challenges faced by MSMEs in India 

1. Access to Finance & Credit
2. Technology Adoption & Digitalization
3. Market Competition & Global Trade Barriers
4. Lack of Skilled Workforce
5. Compliance and Regulatory Issues

How Loan Providers Like SK Finance Help MSMEs

SK Finance understands the unique needs of small and medium-sized enterprises. Our secured loan for small businesses is crafted to provide:

• Competitive interest rates
• Rapid processing and disbursal
• Less documentation
• Terms of repayment harmonizing with MSME cash cycles

Our digital application process and hassle-free customer service facilitate easier access to loans for new borrowers. Our customers, including local shopkeepers and small-scale producers or service providers, have increased production and gained new markets through secured credit.

Conclusion

MSMEs are crucial to India's economy, and government support is making business loans more accessible. This financing, both secured and unsecured, helps these enterprises grow and modernize. By investing in technology and infrastructure, MSMEs become stronger, contributing to a more self-reliant India. Exploring a secured loan can be a key step for a business ready to scale.

If your MSME is ready to scale, now is the time to look for your financing opportunities. A secured loan can be the step that puts your business in the small-to-strong category.

Visit our nearest branch to discuss the best loan terms and rates for your business financing needs.