Collateral Free Business Loan for MSMEs as Covid-19 Relief

Last Updated : May 14, 2020, 1:40 p.m.

After the Coronavirus Outbreak and Lockdown, the small businesses and MSMEs are facing a lot of financial problems. Therefore, in order to boost the working of the MSMEs and bring them on track, the government of India has provided Collateral Free Business Loan for MSMEs as COVID-19 Relief. The Finance Minister has announced ₹3 Lacs Crores loan budget without collateral for the MSMEs so that they can improve their business activities and this loan will have tenure for 4 years. There is also a provision of ₹20 Thousand Crores as a subordinate debt in this loan scheme and it will help up to ₹2 Lacs MSMEs to bring their businesses back on the track. So, you must explore all other benefits of this COVID-19 and Lockdown Relief funds for MSMEs.

Features of Covid-19 Relief Loan for MSMEs

• MSMEs and Businesses will get an emergency credit line form banks and NBFCs of up to 20% of the entire outstanding credit as on the date 29 ^th February 2020.
• These Loans will have tenure of 4 years and it includes a 12 months moratorium on principal payment with the capped interest amount.
• Banks and NBFCs will get a 100% guaranteed cover on the principal and interest.
• This business loan scheme is only available up to the 31 ^st of October 2020.
• There is no need for any collateral in order to take this loan.
• There is no guarantee fee on this loan.
• As per the analysis, 45 lacs units can resume their normal business activities and safeguard job.

Eligibility for Taking this Loan

The Businesses and MSMEs having up to ₹25 Crores as an outstanding amount and a turnover of ₹100 crores are only eligible to take this loan. Those businesses are not eligible to take the loans that are having a huge sum of money that is more than ₹25 Crores as an outstanding amount and a turnover of less than ₹100 crores.

Global Businesses Entry Limit

All the Indian Businesses and MSMEs have to face competition with the foreign companies that are running in India. So the government of India has disallowed such foreign businesses in India that are having a tender value of less than ₹200 Crores. This move will help the MSMEs and businesses to manufacture and sell only Indian products to the customers.

Equity Infusion

The government has infused ₹50000 crores into equity for MSMEs. In this provision, the money will be invested in funds of funds and will be managed by a mother fund and a few daughter funds that will help to increase the productivity and capacity of the MSMEs.

The Benefits of this Business Loan from the Government

• Increases the Productivity of MSMEs and Businesses.
• Helps to bring the business back on track after lockdown.
• Creates Job opportunities in MSMEs and Businesses.
• Increases the working capital and other resources of the business.
• Helps the MSMEs and Businesses to purchase machinery and improve their infrastructure.

Importance MSMEs

• MSMEs help to improve the economic conditions of our country.
• They are often considered as the backbone of our country.
• MSMEs have a great share in the GDP of the country.
• MSMEs help in employment generation and helps the laborers and workers too.

Conclusion

Now you know about the Collateral Free Business Loan for MSMEs as COVID-19 Relief provided by the government. So, if you fulfill the eligibility criteria for the loan then you must apply for it and improve the working of your business. This emergency credit line from the government will definitely improve the performance of your business and help you to generate more profits.