SME Loans in India
The Small and Medium Enterprises (SME) sector is one the emerging sectors in India which has emerged like a boom over the last decades. SME sector by bringing several industries to the rural areas helps the economy in providing numerous employment opportunities to millions of unemployed people. The SME also function as sister concerns to large industries in the country. The sector also been a good contributor to country's exports. To Grow the SME sector at face pace growth rate funding is always required at required time and in efficient manner.
Small and medium enterprises (SME) sector plays a very important and crucial role in the country’s economic and social development. After agriculture the SME sector is one of the biggest employment providers. The SME helps to remove employment by creating jobs and generating income for the low income group.
Objective of SME Loan Policy
There are following objectives which have been kept in mind for SME Loan policy:
- SME loan policy aims to provide sufficient credit flows to SME’s for meeting their capital requirements.
- By bringing SME Loan Policy it has been ensured that adequate credit is available on timely basis.
- SME loan policy also provides guidelines to the branches for offering credit to the SME sector.
SME Segment includes the following:
A manufacturing enterprise which have investment of not more than Rs.25 lakh in plants and machineries then it is covered under micro enterprises and a service sector enterprise which have investment of not more than up to Rs. 10 lakh in equipment then It is a micro enterprise.
A manufacturing enterprise which have investment of more than Rs. 25 lakh but not exceeding Rs 500 lakh in plants and machineries then it is covered under small enterprises and a service sector enterprise which have investment of more than Rs. 10 lakh but not exceeding Rs. 200 lakh in equipment then It is a small enterprise.
A manufacturing enterprise which have investment of more than Rs. 500 lakh but not exceeding Rs. 1000 lakh in plants and machineries then it is covered under medium enterprises and a service sector enterprise which have investment of more than Rs. 200 lakh but not exceeding Rs. 500 lakh in equipment then It is a medium enterprise.
SME Finance also for New Business
SME loans are also offered by lender for financing of new businesses because the main reason behind the early closure of most small and medium enterprises are shortage of funds which results in lack of working capital or shortage of funds for buying plants and machinery.
Eligible person’s for SME Loan
The following are eligible to avail SME loan:
- Sole proprietorships
- Partnership firms
- Private limited companies
- Public limited companies
- Manufacturing, trading and service units
- There should be profits in financials for the last two years.
- The firms must be defined under MSMED Act and by Reserve Bank of India.
Procedure for SME loan
The following procedure must be followed by the borrower:
- Applicant is required to fill up the application form and then submit the form with the bank.
- Arrange all the necessary documents and submit the same to the bank as well.
- Get your loan sanctioned and serviced it on time.
Documents required for SME Loan
Following documents are required:
- Certified copy of MOA (Memorandum of Association) and AOA (Articles of Association) or COI (Certificate of Incorporation) or certificate of commencement of the business as the case may be.
- Last 3 years audited financial statement, if any.
- Latest shareholder’s list
- List of directors / partners (as the case may be)
- IT or wealth tax assessment order or returns for the last 3 years.
- Sales tax return and assessment order for last three years.
- Copy of passport, voter ID of promoters, ration card, directors or guarantors.
- Photographs of Promoters, directors or guarantors.
- Net worth statement of promoters, directors or guarantors.
- Title documents of land and building where unit is running.
- Site map of the land and the building plan.
- Copies of sanction letter for present credit facilities must be provided
- SSI registration certificate.
- NOC from pollution department.
- Project report in detail.
- List of plant and machinery.
- Manufacturing process and its flow chart.
- Power sanctioned and installed.
- Sale or lease deed copy of collateral securities.
- Agreement with technical consultants, if any. Factors the banks must consider while lending to SME Sector
HDFC Bank SME loan
HDFC Bank offers following credit facilities for SME’s:
- Cash Credit / Overdraft
- Bank Guarantee
- Buyers Credit
- Packing Credit
- Bill Discounting
- Letter of Credit
- Short Term Finance
- Post Shipment Limits
- Structured Cash Flow Financing
ICICI Bank offers following credit facilities for SME’s:
- Cash Credit / Overdraft for meeting working capital finance requirement.
- Pre-Shipment & Post Shipment finance in the form of Export credit.
- To facilitate trade, there is facility of Letter of Credit.
- Bank Guarantees for and meeting business performance & financial obligations
- Term Loan for business expansion needs and for purchase of commercial assets.
AXIS Bank includes following credit solutions for SMEs:
- Working capital finance (CC/OD)
Axis bank provides the funds to the SMEs in the form of working capital So that they can meet the daily operations needs on timely basis. It includes the overdraft facilities / cash credit
- Trade finance (LC/BG/Bill discounting)
Axis Bank Provides trade finance solutions to SMEs with customization features according to the SMEs needs.
- Export finance
Axis bank provides the export finance to help the SMEs in their export requirements in both local and foreign currencies.
- Lease rental discounting
Lease rental discounting is a term loan which is provided to lesser. This is based on discounted values of rentals and the underlying property value. It is offered against future expected rental receipts derived from lease contracts.
- Term loans
Term loan facility is also provided by axis bank to SMEs for business expansion, capital expenditure, technology up-gradation, acquisition of fixed assets like purchase of machinery/equipment etc.
- Construction finance
Construction finance provides required funding to SMEs for construction and development of real estate projects.
- Project finance
We provide project finance solutions for new projects as well as expansion, diversification and modernization of existing projects.