Different Ways to Avail Collateral-Free MSME Funding

In the past few years, India’s Micro, Small and Medium Enterprises have witnessed unprecedented growth. According to a survey conducted throughout the industry, there were more than 36 million MSMEs in the country in 2017. 

To further facilitate the development of this sector, the government, alongside other financial institutions, has introduced various MSME or SME loans to boost the small and medium enterprise’s financial standing. 

These advances are mostly unsecured and do not require the organisation to pledge any collateral against it. 

Following are the different avenues from which MSMEs can avail a collateral-free advance for their businesses. 

How to Apply for MSME Loan without Collateral?

Government-backed schemes – 

There are schemes under Pradhan Mantri MUDRA Yojana that provide small-ticket loans to MSMEs without collateral. 

There are three products under this scheme – 

  • Sishu – For loans up to Rs. 50,000
  • Kishor – For loans up to Rs. 5 Lakh
  • Tarun – For loans up to Rs. 10 Lakh

As the MSME full form suggests, if any Micro, Small or Medium-scale organisation requires an advance of a higher corpus, they can opt for loans under Credit Guarantee Fund Trust for Micro and Small Enterprises. The CGTMSE offers advances of up to Rs. 2 Crore to MSMEs under their schemes.

NBFCs – 

Alternatively, MSMEs can also opt for collateral-free advances from various financial institutions like Bajaj Finserv. Under this category of Business Loan, organisations can avail a high amount value of up to Rs. 30 Lakh to fund various aspects of their organisation. Further, these loans offer benefits like flexible tenor, easy approval and disbursal, minimal documentation, etc. to make them even more advantageous.

These business loans also come with minimal eligibility criteria, satisfying which prove to be efficient financing solutions for MSMEs.

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