MSME Loans for Women Entrepreneurs: Benefits & Eligibility

• MSME stands for Micro, Small and Medium Enterprises.
• A business is classified as micro, small, or medium based on its investments and annual turnover.
• A strong credit score is one of the prerequisites for a business loan for women.
• You can choose from a line of credit (LOC), secured business loan, unsecured business loan, etc. to meet your business needs.

The entrepreneurial landscape is home to passionate individuals who display their talent and skills to drive innovation. This group of talented entrepreneurs also includes women who, with their unique capabilities, make invaluable contributions to the business ecosystem.If you are an enthusiastic woman keen to live your entrepreneurial dream, read this blog where we share relevant details about business loans for women.

Let’s begin by understanding the meaning of MSME and its classification.
MSME stands for Micro, Small and Medium Enterprises. A business is classified as micro, small, or medium based on its investments and annual turnover. Here's a tabulation for better understanding:

*Manufacturing Enterprises and Enterprises Rendering Services Source: Ministry of Micro, Small & Medium Enterprises

Small businesses like beauty salons, catering, designing, etc. create a pathway for women to achieve personal and professional growth. A business loan for women provides the needed financial resources to help them achieve their business goals.A small business loan for women supports you in not only setting up a new venture but also expanding your existing set-up. It helps you meet daily business needs and scale up for future needs.

There are different types of loans that you can choose from based on your business needs and current financial situation. Let’s explore some of these one by one.

Small Business Loan

If you own a micro, small, or medium enterprise, you can avail of a small business loan for women to support business needs and growth. Such loans typically include a line of credit (LOC), secured business loan , unsecured business loan , etc.

To be eligible for this loan:

• You should have the necessary personal and business documents.
• Your credit history should be strong without defaults.

Some of the benefits of this business loan for women include:

• You have the option to choose from secured and unsecured lending.
• You can select a loan product that matches your specific needs.

Loan Against Securities

You can easily access funds for your business by offering your securities as collateral. The best part is while you enjoy external funding, your investments continue to grow. A few examples include a loan against shares, a loan against mutual funds, IPO financing, etc.

The eligibility criteria are straightforward and include:

• The value of your securities should be sufficient to cover the loan amount.
• You should have a strong creditworthiness.

Loan against securities offers several benefits like:

• You enjoy access to capital without selling your investments.
• Your investments continue to grow and generate returns.

Government Schemes

Several government schemes like Pradhan Mantri MUDRA Yojana help entrepreneurs, including women to nurture their small businesses.Regardless of the loan type you choose, you must verify the details with your financial institution if your intended end use falls under their list of permitted lending purposes.MUDRA loans are available under four categories - namely, ‘ Shishu ’, ‘ Kishore ’, ‘ Tarun ’, and ‘ Tarun Plus’. Each category signifies the development stage of businesses and offers the loan amount covered as below:

• Shishu : Up to ₹50,000
• Kishore : Above ₹50,000 and up to ₹5 lakh
• Tarun : Above ₹5 lakh and up to ₹10 lakh
• Plus Tarun : Above ₹10 lakh and up to ₹20 lakh

Trade Related Entrepreneurship Assistance and Development Scheme

The government also contributes to the economic empowerment of women through its TREAD scheme. TREAD stands for Trade Related Entrepreneurship Assistance and Development. It provides financial assistance for self-employment ventures by women pursuing non-farm activities.This assistance is provided through NGOs capable of handling funds appropriately. Besides, these NGOs provide counselling and training support to women.Under this scheme, the government grants up to 30% of the loan (maximum up to ₹30 lakh, as appraised by the lending institution.

While the eligibility criteria differ from lender to lender, these are some common guidelines:

Age

You need to be above a certain age to be eligible to apply for an MSME loan for women. It is observed that financial institutions typically have a minimum age limit of 18 or 21 years.

Citizenship

The eligibility criteria also include citizenship. You should be an Indian citizen to apply for an MSME loan.

Credit History

A strong credit history typically increases the probability of getting a loan on favourable terms, such as lower rate of interest.

Business Existence

As a loan applicant, you should be running a registered business. Also, your business should have been operational for a certain period. Financial institutions consider the operational history of your business while evaluating your loan application.

The loan application process is more or less the same across financial institutions. It typically comprises of the following steps:

• Step 1: Collect and keep all necessary documents ready. A complete set of documents makes the application process smoother and faster.
• Step 2: Explore the various lending options and select the financial institution offering suitable loan features and customer service.
• Step 3: Apply for a loan by submitting the relevant application and documents. You can apply online or offline at the nearest branch of the financial institution.
• Step 4: Wait for the financial institution to review and approve your application.
• Step 5: Receivethe approved loan amount in your bank account.

The list of documents required may vary on case to case basis, however here is an indicative list of documents that you will need while applying for an MSME loan for women:

• Application Form
• Photographs
• Identity Proof
• Address Proof (residence and business)
• Proof of Business Registration
• Business Plan
• Bank Statements

You can open the doors to new possibilities and establish an independent identity with a small business loan for women. This financial support helps you turn your professional dreams into reality.It is always a good idea to compare the available loan options to choose the one that best suits your needs. Alternatively, you can leave it to an expert like Aditya Birla Capital to get a loan tailored to your unique needs. Also Read: How to get MSME Loans in 59 Minutes?