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If you are a business owner, and have applied for MSME loans through banks and NBFCs, then you know that there are general and specific documents required for MSME loans application. MSME loans are designed to provide short term business loans to MSMEs for growth. Any business applying for these loans must meet some basic eligibility criteria and submit MSME loan documents for the lender to verify and process the application.
On that note, let us learn about MSME loans in India and take a look at some of the required documents for MSME loans online and offline application.
Documents required for MSME loan application in India
Document submission is an important aspect of the loan approval process. Most MSMEs often lack assets and long-term credibility, which makes it risky for lenders to offer loans, fearing default. Having the right MSME loan documents builds confidence in the borrower, accelerating the loan approval process.
An important thing to remember is that whether you are starting a new business or want to grow your existing business, you can avail a MSME loan with the right documents in place.
The list of documents for MSME loan can vary based on the type of loan you are availing and the bank/NBFC you are availing it from. For instance, the documents required for a MUDRA loan is different from PSB loans in 59 minutes.
We have listed some of the common documents required for MSME loan application. This list can be used as a checklist to help you stay prepared and is not an exclusive list. The respective lending entities may request for additional documents to support your loan application.
General documents required for MSME/SME loans in 2022-2023
These refer to the standard documents that are required in loan application. These include documents on personal identification proof, address proof, business entity proof, financial statements, basic KYC details, and other relevant certificates.
|Personal identification proof
(usually, photo-based ID proof is required)
(any 1-2 document as requested)
|Financial and tax documents
(Bank/NBFC to determine which documents to accept)
|Business existence proof
(for MSME loans, unsecured business loans etc.)
|MSME registration certificate
Other documents required:
In addition to the documents mentioned above, there are other documents that may be requested, such as:
- Business plan: To evaluate the business’s financial health, ability to repay on time, funds allocation plan, growth forecast, product portfolio etc. to reduce the lender’s risks
- Ongoing loans declaration: To understand if there are loans outstanding or fully paid and determine the current loan amount to be disbursed
Most banks and NBFCs in India offer loans for start-ups and small businesses to enable their growth. These are usually hassle-free loans with less paperwork, flexible repayment terms, and approved and disbursed in less time. There are also government loan schemes for small businesses that can be availed.
MSME loan application: Documentation and things to keep in mind
- There are some basic documents that all lenders require, and others that are specific to loan type and amount. As a borrower, before you apply for a business loan, read the list of documents required carefully and plan.
- Considering the general shift towards online loan application and disbursement, it is recommended to have loan documents pdf and image softcopy (.jpeg or .png) for easy upload.
- A secret to getting your loan application sanctioned is to have your documents in one place.
- There are different types of MSME loans, with varying degrees of documentation. Try to apply for loans that require minimal documentation for quick loan approval and disbursal.
- The online loan application has made it easier for borrowers to learn about different types of MSME loans, compare loan interest rates, loan tenure, security required, and other details before applying.
- The loan application system has also made it easer for lenders to verify documents online, check borrower’s creditworthiness, and make a faster, safer decision on loan approval/denial and disbursal.
- The eligibility for business loans also should be considered. Considering that banks offer different types of loans (e.g., working capital loans, equipment finance, etc.) the eligibility may differ from time to time.
For instance, if you apply for unsecured business loans through Tata nexarc, you can get offers (of up to ₹50 lakhs) with minimum documentation. These are collateral free loans, offered on the basis of the borrower’s creditworthiness and the business’s financial health, and require basic documentation such as 12 months bank statement, proprietor’s PAN and Aadhaar card, business proof, and ownership proof among others.
The key thing to remember is that when you apply for a loan, your documents will be thoroughly verified and checked. The more organised and authentic your documents are, the greater your chances of having your application approved.
An important thing to keep in mind is that the approval or rejection of a loan is not based on a single document. It is based on the sum of all documents provided to establish your creditworthiness and your business’s ability to repay the loan in time.
As such, if you are looking at expanding your business and require funds for it, keep your MSME loan documents up-to-date and accurate, to ensure that your application is processed with ease.
FAQs on MSME loan documents requirements
While application to government loans and MSME schemes are straightforward, we look at some commonly asked questions on loan documentation.
Where can one get a MSME/SME loan?
Are collaterals required for getting MSME loans?
Is ITR document required for MSME loans?
What is the minimum CIBIL score for getting MSME loan?
Is GST compulsory for MSME loans?
What are the basic 5 documents required for MSME loans?