5 Ways To Secure A MSME Loan Without Collateral

Starting or expanding a business requires access to capital, and for many micro, small, and medium enterprises (MSMEs), securing funds can be challenging, especially if they do not have collateral to offer. However, with the support of the Indian government, there are now various options to secure a business loan without collateral. In this guide, we will explore five ways to secure a MSME loan for business without security. Read on to discover how to get MSME loan:

1. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme:

Under the CGTMSE scheme, MSMEs can obtain collateral-free term loans and working capital loans up to Rs 10 lakh. This scheme provides a guarantee cover of up to 75% of the sanctioned loan amount, which increases up to 80% for women entrepreneurs and businesses in the North-East region of India. The interest rates start from 7.5%, and the repayment tenure can go up to 10 years.

2. Pradhan Mantri MUDRA Yojana:

The Pradhan Mantri MUDRA Yojana offers unsecured business loans to MSMEs, individuals, and professionals up to Rs 10 lakh. This scheme categorizes loans into three segments based on the loan amount required: Shishu for loans up to Rs 50,000, Kishor for loans ranging from Rs 50,001 to Rs 5 lakh, and Tarun for loans starting from Rs 5,00,001 up to Rs 10 lakh. The interest rates vary depending on your profile and business requirements, and the repayment tenure ranges from one to five years.

3. Stand-Up India Scheme:

The Stand-Up India Scheme aims to promote entrepreneurship among women and individuals belonging to Scheduled Castes (SC) or Scheduled Tribes (ST). Under this scheme, banks provide loans between Rs 10 lakh and Rs 1 crore to at least one woman borrower and one SC/ST borrower per bank branch for setting up greenfield enterprises in manufacturing, services, trading, or agri-allied activities.

4. MSME loans in 59 minutes:

MSME Loans in 59 minutes is an online portal that allows MSMEs to apply for unsecured business loans up to Rs 5 crore through a streamlined process. This scheme uses automated algorithms and data analytics to assess loan applications and provide in-principle approvals within 59 minutes. The interest rates start from 8.5%, and the repayment tenure can range from one to fifteen years.

5. Non-banking Financial Companies (NBFCs):

Non-banking Financial Companies (NBFCs) offer loans for MSMEs without collateral at competitive terms and conditions. NBFCs have lenient eligibility requirements, minimal documentation, and quick processing times, making them an attractive option for MSMEs in need of funds. Additionally, NBFCs allow borrowers to structure their repayment plans based on their business's cash flow.

Conclusion:

Securing a business loan without collateral is crucial for the growth of MSMEs in India. Whether you choose to apply under the CGTMSE scheme, Pradhan Mantri MUDRA Yojana, Stand-Up India Scheme, MSME Loans in 59 minutes, or approach NBFCs, these options provide accessible funding opportunities without the need for security or collateral. By exploring these five ways to secure an MSME loan without collateral, you can find the right financing solution that aligns with your business goals.

In this journey of securing a collateral-free MSME loan, Mahindra Finance can be your trusted partner. With their range of financial solutions tailored for MSMEs, they offer personalised support to help you navigate the loan application process and find the right funding solution for your business. Visit the Mahindra Finance website or speak to a representative today to explore how you can empower your MSME dreams.

FAQs:

Q: How to get MSME loan without collateral?

A: Several schemes and financial institutions provide collateral free business loans for MSMEs, such as the CGTMSE scheme, Pradhan Mantri MUDRA Yojana, Stand-Up India Scheme, and MSME Loans in 59 minutes.

Q: What are the benefits of a business loan without collateral?

A: A business loan without collateral allows MSMEs to obtain funds without pledging assets. These loans come with easy eligibility requirements, minimal documentation, quick disbursement, flexible repayment tenures, and help in building a credit history.

Q: How can I apply for an MSME loan without collateral?

A: To apply for an MSME loan without collateral, you can approach banks under various government schemes or seek assistance from NBFCs. Each option for collateral free business loan has its own eligibility criteria and application process.