As a small business owner, it is a bit challenging to manage day-to-day operations of the business. Managing the cash flow is yet another cause for concern as micro businesses rely on their everyday revenue to a large extent.
Even if you are a new entrepreneur of a small business, you should consider getting your business registered under the MSME Act, which basically deals with two categories of businesses, those which are engaged in manufacturing and those who are in the service sector.
What does MSME mean?
MSME stands for micro, small and medium enterprises. MSME registrations are done under the Micro, Small & Medium-Size Enterprises Development Act which allows businesses in the manufacturing and/or service sectors to register as an MSME.
Though it is not compulsory to do so, but there are several benefits for businesses of all sizes to register under the act and enjoy the various advantages afforded to enterprises of all sizes.
Why register my business under MSME?
Businesses registered under MSME can apply for MSME loans, which would depend on the annual turnover of the business. They can choose from the various plans offered by banks and NBFCs online as well as offline to check the best plan tailored to their needs.
Also, MSME registrations are free of cost and offer a number of other benefits like lower rates of interest, relaxation in repayment, tax benefits, etc.
Eligibility criteria for MSME Registration
MSME has easy eligibility criteria that suits a variety of businesses. As a micro business owner engaged in the manufacturing or service sector, eligibility for MSME registration is as follows:
| Sector | Micro Businesses | Small businesses | Medium businesses |
| Service and/or manufacturing sector enterprises | Capital should be less than Rs. 1 crore and turnover should be less than Rs. 5 crore. | Capital should be less than Rs. 10 crore and turnover should be less than Rs. 50 crore. | Capital should be less than Rs. 50 crore and turnover should be less than Rs. 250 crore. |
Why is MSME Registration important?
MSME registration aims to distinguish medium enterprises into three categories, micro, small and medium which establishes a uniform legal process and balanced representation of stakeholders.
Following are the benefits that MSME registration accords to businesses:
- Provides financial assistance even to micro and small sized enterprises.
- Offers tax benefits to MSME registered businesses
- Provides protection against non-payment of dues against a MSME loan
- Individuals and sole proprietors eligible for MSME registration.
Benefits of MSME Registration
There are many advantages for businesses of any size to register under the MSME Act.
As a small business owner, you can get the following benefits through an MSME registration:
- Lower interest rates
As a business registered under the MSME Act, you will get lower rates of interest as compared to other loans. MSME loans are specifically afforded to enterprises registered as an MSME, and they have much lower interest rates like traditional business loans.
- Protection against non-payment
In case of failure to repay the loan dues, registered MSMEs enjoy certain relaxations like extension of loan period and waiver of legal proceedings.
- Subsidies
MSME firms enjoy many subsidies and rebates as well. MSME registered businesses get tax, tariff and capital subsidies from the government. Additionally, these enterprises also enjoy exemptions against direct taxations.
- Easy licence and permit approvals
Registered MSMEs get quicker and hassle-free licences, approvals and registrations. It also helps in getting government tenders, depending on the past performance and vintage of the business.
- Other benefits
There are more benefits accorded to MSMEs like reimbursement of the cost for ISO certificate and subsidies on import of fully automated machineries under bank loans.
Documents required for MSME Registration
The following documents are required for registering as an MSME:
- Duly filled application form
- Passport sized photographs
- KYC documents like Aadhar Card, Voter ID, Driving Licence, etc.
- Business Incorporation Certificate
- Business PAN Card
- Proof of income
- Previous 6 month’s bank statement
- Rent or lease agreement with NOC from landlord, if applicable
- Any other document as may be required by the lender.
MSME Registration Process
As mentioned above, registering under the MSME Act is very easy and completely online. You just have to furnish the following the details:
- Name of business
- Aadhar card number and copy
- Bank details
- PAN details
Once you have filled in all the details, a reference number will be generated to and you will receive your MSME registration certificate after verification of all details provided.
The registration certificate would be valid for a lifetime and you can cancel it at anytime by giving a request in writing along with reasons for such closure to the Udyog Aadhar Registration Centre.
Where to register?
You can register online as an MSME with the following authorities:
- Ministry of MSME
- MSME Development Commissioners
- National Small Industries Corporation Limited (NSIC)
- Coir Board
- Khadi and village industries and commissions
FAQs
- Can individuals register for MSME registrations?
Any individual willing to start a micro, small or medium sized enterprise can register as an MSME by providing true personal information like Aadhar number, PAN number, industry name, contact details and bank account details.
- How can I check my MSME registration status?
Applicants can check their MSME registration status by following the below steps:
Step 1. Visit udyamregistration.gov.in
Step 2. Enter your 12 digit UAM code along with the verification code and captcha.
Step 3. Click on verify and your registration status will be displayed.
- Who can apply for MSME registrations?
The following entities can apply for MSME registration:
- Sole proprietorship
- Private Limited Companies
- Public Limited Companies
- Limited Liability Partnership (LLP)
- Partnership firms
- Self-Help Groups
- Trusts
- Co-operative Societies
- As an MSME, can I get collateral-free loans?
As a registered MSME, you are eligible to get collateral free loans from banks as well as NBFCs.
With a good credit history and a CIBIL score of at least 650, one can get collateral free loans from banks. If your credit score is not up to the mark, you can consider approaching NBFCs for loans, although they would charge a higher rate of interest.
- What is the difference between Udyog and MSME registrations?
Udyog Aadhar is a government initiative to help medium and small sized businesses with access to various government programs upon registration.
Whereas MSME registration promotes various schemes, subsidies and other benefits to micro, small and medium sized enterprises.
