These 5 banks offer easy business loans to MSMEs and entrepreneurs

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MSMEs are the backbone of India’s economy and may hold the key to its recovery from the impact of the COVID-19 pandemic. Nitin Gadkari, Minister of the Union of MSMEs stated that its mission was to increase the contribution of the MSME sector to the country’s GDP to 40 percent of 29 percent.

But to support their operations and eventually grow, Indian MSMEs need large amounts of capital. The sector faces a shortage of working capital and there is a lack of access to affordable credit. To take this into account, several banks and financial institutions have stepped up their lending to small businesses.

Here are some of the major Indian banks and their financial programs for MSMEs:

Baroda Bank

KP Singh, Head of MSME and Government Relations, Bank of Baroda

Founded in 1908, public sector banking and financial services company Baroda Bank is a key institution for financing the working capital needs of MSMEs and offers the following mechanisms:

Baroda SME loan package

It provides a single line of credit to meet the working capital needs of SME borrowers as well as long-term needs within the overall limit approved by the bank. The aim is to provide hassle-free credit for working capital (fund-based and not fund-based) as well as long-term needs, taking into account the nature of the business, cyclical trends, cash flow projections, peak period requirements, and any eventuality of unforeseen surges in the business.

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Capex MSME loan

The loan should be taken into account for capital expenditure related to regular business activity, such as replacement of old machinery, purchase of balancing equipment, modernization, investment in research and development, installation of captive power plants, upgrading of technology, etc.

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Short-term SME loan

The objective of this short-term loan is to fill a temporary lack / asymmetry of liquidity, to meet the real needs of the business. Micro, small and medium enterprises according to the regulatory definition and all other entities with an annual turnover of up to Rs 150 crore can apply. They must have a satisfactory credit rating within the past three years. (BOB-5 & ABOVE), latest balance sheet, satisfactory financial performance and satisfactory relations with the bank for at least three years.

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Medium Term SME Loan

This loan aims to increase the working capital gap of businesses and help improve the current ratio as well as meet the real needs of businesses. The facility will also be available for the repayment of secured and unsecured loans from other banks or institutions, but not for purposes unrelated to business activity. Micro, small and medium enterprises according to the regulatory definition and all other entities with an annual turnover of Rs 1 crore to Rs 150 crore can apply.

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Yes Bank

Yes Bank was launched in 2004. It offers loans to small businesses under a secured emergency line of credit for MSMEs, Smart Edge, Smart Overdraft, Cash Backed Lending Program, etc.

Guaranteed Emergency Line of Credit (GECL) for MSMEs

GECL is an MSME loan for which a 100% guarantee would be provided by the National Credit Guarantee Trustee Company (NCGTC) to the bank, and which will be extended in the form of an additional working capital term loan facility to MSMEs eligible.

Credit under GECL would represent up to 20% of the borrower’s total outstanding credit up to Rs 50 crore, excluding off-balance sheet and non-fund-based exposures., until February 29, 2020.

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Smart edge

The Smart Edge program is designed to empower MSMEs by providing them with easy access to finance for their working capital and other business needs, with credit limits ranging from Rs 1 crore to Rs 3 crore on the basis of a evaluation model linked to the scorecard.

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Smart discovery

This program aims to provide working capital up to Rs 1 crore without balance sheet for MSMEs engaged in manufacturing and trading as well as for professionals like doctors, chartered accountants, engineers and architects.

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Guaranteed loan program

This is an unfunded program in the form of a letter of credit, buyer’s credit, and bank guarantee. The letter of credit is valid for 180 days or up to three years in the event of supplier LC credit. The Bank Guarantee is 36 months (including the claim period). In addition, the letter of engagement is for a maximum duration of one year for the organization of the BC for non-capital goods and up to three years for the organization of the BC for capital goods. .

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HDFC Bank

India’s largest private sector lender by assets, HDFC Bank is headquartered in Mumbai, Maharashtra. HDFC Bank provides financial assistance to small businesses through these working capital loans, business loans, and term loans:

Working capital loans

The bank provides priority treatment for SME working capital needs through a dedicated relationship manager and in-home service under Cash Credit Overdraft, Term Loan (TL), Letter of Credit (LC), Bank Guarantee ( BG), packing credit (PC), post-shipment finance, invoice discount, etc.

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Commercial loans

The features of the bank’s business loans include loans of up to Rs 50 lakh, waiver of collateral or guarantor, and even the benefit of business loan balance transfer. In addition, it offers special benefits on business loans, such as an overdraft facility and flexible occupancy options.

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Term loans

Term loans are available to businesses for up to five years for their expansion, capital expenditures and fixed assets. HDFC Bank also offers structured short-term financing options to meet the individual needs of SMEs. The bank will schedule repayments based on the company’s free cash flow.

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ICICI Bank

ICICI Bank is an Indian multinational banking and financial services company headquartered in Vadodara, Gujarat, and headquartered in Mumbai, Maharashtra. It offers MSMEs a multitude of personalized financial products and services to positively impact their bottom line.

Loans for SMEs

The bank offers loans to SMEs in the form of cash / overdraft credit to meet working capital financing needs, and export credit to provide pre- and post-shipment financing. It also provides letter of credit to facilitate trade, term loans for the purchase of business assets and business expansion needs, and more.

These loans come with flexible collateral options in terms of residential, commercial, industrial and liquid title.

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Unsecured loan

Targeting SMEs that may not have the required collateral, ICICI Bank offers unsecured cash credits and term loans up to Rs 2 crore under the CGTMSE program of SIDBI and the Ministry of Small and Small Business. Medium-sized Enterprises as defined by the MSMED law, 2006.

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ICICI Bank also offers various other types of working capital loans, term loans, TPS business loans, etc. Click here for more information on these plans.


Bank of India

Launched in 1906, the Bank of India has been government owned since 1969. The Mumbai-based commercial bank provides financial assistance to small businesses through specific programs such as CLCS-TU program, Star MSME E-Rickshaw, Star MSME GST Plus Scheme, Star Weaver MUDRA Scheme, Star SME Education Plus, Star Start Up Scheme and many others.

The bank also offers government sponsored programs such as Stand Up India, Pradhan Mantri Mudra Yojana (PMMY), Weavers Mudra Scheme, Cluster Financing, etc.

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