FINANCE

MSME Loans: 5 Ways to Get Collateral Free Loan

A major hindrance encountered by many loan-seekers is a lack of assets to pledge. This is especially true for small-business owners who lack sales volume, adequate funds, and collateral to acquire external funding against them. 

Fortunately, several public, as well as private financial organizations, have come up with MSME loan or business loans to support start-ups with collateral-free financing. Following are top 5 options for budding entrepreneurs.

Top 5 collateral-free business loan schemes

Following are some of the most prominent micro business loan types you can avail without any collateral.

  • MUDRA Yojana

The government of India introduced the Micro Units Development and Refinance Agency (MUDRA) loan scheme to aid individuals as well as small, micro and medium enterprises with financial support. Borrowers can benefit from this scheme under 3 categories.

Shishu: Start-ups can avail funds up to Rs.50,000 under this scheme.

Kishore: Businesses in early stages of development can avail from Rs.50,001 up to Rs.5 lakh.

Tarun: The government offers Rs.5 lakh – Rs.10 lakh to enterprises aiming to expand their operations.

  • CGTMSE

Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) is one of the government business loan schemes in India in collaboration with Small Industries Development Bank of India (SIDBI). Both start-ups and existing businesses can avail up to Rs.1 crore under this scheme by submitting a credible business plan. Such an MSME loan is distributed via Member Lending institutions.

  • Stand-up India scheme

This government-aided scheme is specially designed for women entrepreneurs and those belonging to scheduled caste and tribes. Applicants can avail anywhere from Rs.10 lakh to Rs.1 crore to launch start-ups in trading, manufacturing, or service sectors. This scheme also encourages SC/ST women entrepreneurs to establish their own ventures. 

  • Market Development Assistance Scheme for MSMEs

This scheme aims to help small, micro, and medium businesses prosper in national and global markets by introducing them to international trade fairs and study tours. The primary aim is to provide financial assistance with the registration and other expenses of attending such platforms.

  • Collateral-free business loans from NBFCs

Besides the above-mentioned public loan schemes, entrepreneurs can also benefit from similar financial products offered by private lending institutions. NBFCs like Bajaj Finserv offer a business loan of up to Rs.45 lakh to MSMEs, to meet several types of financial requirements as listed below.

  • Funds for women business-owners: These are specially curated to encourage women entrepreneurs. This is to ensure more feasible funds are available to them to support their businesses. 
  • Machinery loan: Companies might lack the liquidity to opt for the latest technology and equipment, essential for production. This means of credit aids in ways to increase business efficiency using technology.
  • Working capital loan: Borrowers can also utilise such MSME loan to facilitate unhindered cash flow.

Additional benefits of this loan type besides extensive end-usage choices include:

  • Online application: Individuals can apply for such funds any time anywhere via their online accounts on the lender’s website. 
  • Speedy disbursal: Borrowers can enjoy credit approved as fast as within 24 hours, which aids in facilitating a quick financial solution.
  • No collateral: The primary advantage of such funds is that borrowers can avail these without having to pledge any asset.
  • Minimal eligibility requirement: The eligibility parameters for such financial products are comparatively relaxed and require minimal documentation.

To benefit from this specific type of business loan, you must know how to apply for MSME loan.

Step 1: Visit the lender’s website and fill in the business loan application form with necessary details.

Step 2: Provide the required documents to support your eligibility claims.

Step 3: Upon successful application and approval, get funds transferred to your account immediately.

In order to speed up this procedure, these NBFCs also extend pre-approved offers against unsecured financial products like personal loan, credit card loan and MSME loan. Therefore, always check your pre-approved loan offer by providing your name and phone number before proceeding with the application process.

Note that other features like interest rates and repayment tenor may vary depending upon the borrower’s eligibility and loan requirements.

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