Self-employed, start-ups, micro companies, small firms, and people with low financial requirements can apply for Micro Loans, which are short-term loans with smaller loan amounts. Micro Loans are a sort of small-scale financing available to micro-entrepreneurs and low-income families who have limited or no access to traditional financial or lending institutions.
RBI has begun reaching out to the unbanked to provide them with money through partnerships with private limited businesses and Micro Finance Companies, with the aid of the Government of India (MFIs). Following MFIs and private limited companies, NGOs are the most common micro lenders.
Objectives of Micro Loans
- To assist families who are unbanked or underbanked in their socio-economic development.
- To strengthen Self-Help Groups (SHGs) and utilize them for the country’s economic development.
- To encourage and assist women’s entrepreneurship and businesses across the country.
Eligibility Criteria of Micro Loans
Listed below are the eligibility check for Microbusiness loans by financial lenders:
- The applicant must be an Indian citizen.
- The applicant must be a self-employed business owner with at least three years of experience.
- Minimum age of 21 is required.
- Should be able to show documentation of business turnover and IT returns for the previous 2-3 years.
- The business’s balance sheet should reflect profitability.
Documents required for a business loan
- Aadhaar card, passport, voter ID card, etc. are examples of proof of identification.
- Passport, utility bill, voter ID card, etc. are all acceptable forms of proof of address.
- Bank statements for the previous six months.
- Business Income Tax Certificate, and a Chartered Accountant-certified balance statement showing profits and losses for the last two years.
- Proof of business – a business license, a trade license, and so on.
- Deeds for a sole proprietorship, partnerships, and corporations.
- Documents pertaining to residential or commercial property – for secured business loans.
Top banks providing Micro Loans providers in India
- Bandhan Bank
| Micro Loans – 2021 | |
| Interest rate | 17.95% onwards |
| Loan amount | Min. Rs. 1,000
Max. Rs. 25,000 |
| Processing Fee | Nil |
| Repayment Tenure | Up to 12 months |
| Doorstep facility | Available, under Dedicated Doorstep Service Center (DSC) |
- BSS Microfinance
| Micro Loans – 2021 | |
| Interest rate | 25% onwards |
| Loan amount | Min. 12,000 & Max. Rs. 50,000 |
| Processing Fee | 1% of the loan amount on Micro Loans of an amount above Rs. 25,000 |
| Collateral | Not required |
- Annapurna Microfinance
| Group Loans – 2021 | |
| Interest rate | 21.90% onwards p.a. |
| Loan amount | Min. Rs. 10,000 & Max. Rs. 80,000 |
| Processing Fee | 1% of the loan amount including GST |
| Repayment frequency | Weekly, yearly, or Monthly, as per the choice of the borrower |
- SKS Microfinance
| Income Generation Loans (IGL) – Aarambh – 2021 | |
| Interest rate | 23.55% onwards |
| Loan amount | Min. Rs. 7,591 & Max. 11,610 for the 1 loan, next loan increase set is of Rs. 14,959 determined by the applicant’s credit history |
| Processing Fee | 1% of the loan amount |
- Equitas Small Finance Bank
| Microfinance – 2021 | |
| Interest rate | 23% onwards |
| Loan amount | Min. Rs. 2,000 & Max. Rs. 35,000 |
| Processing Fee | Up to 1% of the loan amount offered |
| Offered to | Economically Weaker Section (EWS) & Low Income Group (LIG) categories |
- Ujjivan Small Finance Bank
| Micro Loans – 2021 | |
| Interest Rate | 22% onwards |
| Loan amount | Min. Rs. 2000 & Max. Rs. 60,000 |
| Processing Fee | 1.2% of the loan amount (For loan amount above Rs. 25,000) |
| Repayment Tenure | For 6 months, 1 year, 1.5 years, and 2 years |
How to avail Business Loan at Low-interest rate?
To obtain a low-interest business loan, the applicant should examine the following tips and techniques:
- Make a business plan on your own.
- Maintain financial stability and an excellent track record of loan payback.
- Increase your CIBIL score to 700 or above.
- Pay your invoices and EMIs on time to improve your creditworthiness. You should have a steady source of income.
- Make an application for long-term company financing.
- Establish a relationship with the bank and open an account.
- Do not close outdated credit cards or accounts.
- Boost the profitability of your business.
- Submit all relevant documents, which will be authenticated and audited by the CA.
- Apply for a loan from a reputable private or public bank.
- If a secured business loan is necessary, offer or present valuable collateral or security.
How to apply for Micro Business Loan?
To apply for a microloan, candidates must go to the MFI’s official website, fill out the loan application form, and submit all relevant papers. Following the submission of the form, an MFI representative will contact the applicant and begin the loan process. When the MFI is satisfied with all of the supplied documentation, the loan will be disbursed to the applicant’s bank account.
Business Loan Balance Transfer Online
Customers can transfer their existing business loans from one bank to another online for a reduced interest rate or other perks. The main goal of balance transfers is to cut EMIs and choose a lower interest rate for the outstanding loan balance.
Conclusion
People in need of money should apply for business loans from private and public banks, as well as NBFCs because the interest rates offered by banks and NBFCs are lower than those supplied by MFIs. However, if you already have tried them, MFIs are a good option. Microloans are typically sought by those with poor credit scores or no financial background. Micro Loans are the best business loan offered to applicants.