Stand Up India Scheme for MSMEs – Eligibility, Purpose and Nature of the Loan

Posted by on January 9, 2020 in Stuff with 0 Comments

Stand up India Scheme is one of the most popular centrally sponsored policies aiming to financially assist MSME companies operating in the country. It can be availed by any existing company from any of 1.63 Lakh public sector branches listed on their official website.

Before analysing this government-mandated policy, it is essential to understand what is MSME. It stands for Micro, small and medium enterprises, representing companies having a capital of less than Rs. 25 Lakh (micro), Rs. 25 Lakh – Rs. 5 Crore (small), and Rs. 5 Crore – Rs. 10 Crore (medium) respectively.

Stand up scheme was launched in 2016 to mobilise the reserved sections of the society as well as women to participate in the industrial sector.

For this purpose, both secured and unsecured credits are extended to such individuals aiming to help them initiate their start-ups.

An individual has to fulfil the following conditions to avail loans under this scheme successfully –

  1. Applicants need to be scheduled caste/tribe or women.
  2. Age of an applicant should be more than 18 years old.
  3. In the case of joint business plans, borrowers should have a controlling stake higher than 51% in a company.
  4. A business loan can be procured under this policy to fund greenfield ventures.
  5. An applicant should have a clean credit history. Default on repayments of previously acquired funds with various financial institutions is not entertained.

Under start-up India, funds ranging from Rs. 10 Lakh to Rs. 1 Crore can be availed, subject to fulfilment of mandated criteria.

Credits acquired can be utilised as a term loan, or for funding working capital needs of a business. Such a business loan can benefit your business tremendously.

Such composite loans come with an interest rate lower than the ones currently dominating the market.

An interest rate levied by a financial institution should not exceed the total of MCLR, tenor premium, and an additional 3%.

This policy will fund only 75% of the total costs incurred in financing a project. 10% of it has to be funded by entrepreneurs themselves, while the remaining can be acquired through other government-mandated schemes.

A major benefit of MSME loans is that it comes with a repayment tenor of a maximum of 7 years. However, provisions are made to ensure a smooth turnover of acquired funds into profits, through an eighteen-month moratorium period.

Alternatively, you can avail standard business loans from financial institutions such as Bajaj Finserv, with multiple repayment tenors for you to choose from. Part prepayment and foreclosure facilities are also extended by this NBFC.

Another feature of MSME loans extended by the stand-up India scheme is training sessions and skill development classes. SIBDI and NABARD conduct these sessions, providing financial and vocational training at various centres across India.

Companies not requiring this benefit can directly apply for loans from Stand up India portal, on successful verification of the following documents –

  1. KYC documents as identification and address proof.
  2. Proper details of the business have to be provided. Memorandum of association, articles of association, MSME registration certificate (if applicable), etc. have to be submitted.
  3. Loans higher than Rs. 25 Lakh can only be availed if supporting business documents of the past three years are provided. Profit and loss statements and balance sheet of a company has to be given for this purpose.

MSME industry is pivotal to the development of India, and Stand up India has been aiding this to a large extent. The ready availability of credit eases production process of a company, thereby increasing revenue generation through high sales volume.

Industrial sector development has rippling effects on the entire country as a whole, as both agricultural and services sector benefit from it. A rise in the total GDP is also witnessed, along with increasing per capita incomes of individual entrepreneurs.

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