MSME LOANS FOR FACTORIES Rs 20 LAKS CRORE PACKAGE

On May 13, 2020, the Prime Minister of India, Narendra Modi announced Rs 20 lakh crore package to make our country ‘Self-Reliant’ or ‘Aatmanirbhar’ to fight against the battle caused by Coronavirus outbreak.

These 20 Lakh Crore package announced for the small businesses, power companies, shadow banks, and realtors that face a major economic downfall. In the first tranche of relief package, there are many benefits provided to the MSMEs, which covers Rs 3 Lakh Crore collateral-free loans, Rs 50,000 crores to equity infusion, Rs 20,000 Crore subordinate debts, the revised definition of MSME, e-linkage to the market, and global tender disallowed up to Rs 200 Crore.

In the following paragraphs, we will be discussing how the 20 Lakh Crore package will benefit the MSME sector to mitigate the impact of this global pandemic that led to devastating effects throughout the world.

1.     Collateral free Automatic Loans for Business/factory Owners: This is an emergency credit line MSME loan that is provided by banks and MBFCs. All the MSMEs that meet the eligibility criteria are liable to avail MSME loan. However, there are some strict guidelines also like the borrower must have outstanding less than Rs 25 Crore, and the company turnover is less than Rs 100 Crore. You have to pay off the loan in the next 4 years and 12 months moratorium period on principal repayment.

2.     Subordinate debts for MSMEs: The government of India has also announced Rs 20,000 Crores subordinate debts for stressed MSMEs. The assistance is provided to MSME who is struggling with an equity problem. This scheme will help up to 2 Lakh MSMEs, but it will only be offered to the borrowers once they met their previous secured credits.

3.     Equity Infusion for MSMEs: Another benefit offered to the MSME is Rs 50,000 equity infusion, which is done through funds of funds. It is a strategy to invest in different other types of funds. This will help the MSMEs to expand their business and listed in the stock exchange market.

For more information about the MSME, and loan that is offered by the government, get in touch with the experienced professional of Consult Avenue.

BENEFITS OF MSME LOANS

As we all know the situation due to the COVID-19 pandemic led to cash crunch in the businesses, especially MSME, or SME. Recently, the government announced a collateral-free loan of up to 3 Lakh crore to help the businesses that are dealing with the cash crunch problems. The emergency credit line guarantee scheme is announced for the MSMEs so that they can start their operations as soon as possible without any problem.

       

Let’s discuss the benefits of MSME Loans:

1.     Eligibility: Whether your company is into proprietorship, partnership, trust, a registered company, and a limited liability partnership (LLP), all are eligible for the MSME loans. Only business loans are being covered under this scheme, and if the loans is taken by the owner for his/her capacity then it will not be covered.

    

2.     Interest Rate on Loans: The MSME loans provided to the borrowers are beneficial in terms of interest rates. Moreover, the loan announced by the government for MSMEs is helpful for the borrowers because of low-interest rates. Banks and other financial institutions have kept the interest rates to a maximum of 9.25% per annum. Although, the NBFCs cannot even charge more than 14% interest rates on the loans offered to the MSMEs under this scheme.

3.     Pre-Approve Mechanism: The highlighting part about the MSME loan announced by the government is that it has a pre-approve mechanism, which means you don’t have to go to the lender to apply for the loan. If you are fulfilling the eligibility criteria for the loan scheme, then the lender will automatically offer you the loan.

There are a number of financial consultants available in the market to assist and guide you throughout the loan procedures. One such financial advisor is Consult Avenue for all your finance related help.