MSMEs or Micro, Small and Medium Enterprises are those businesses that are low in revenue than MNCs but high enough to gain government incentives. MSMEs are the backbone of any developing nation’s economy. The government of India has taken several initiatives recently to promote MSMEs and provide them with incentives and subsidies.
The Indian government is at the forefront of providing small businesses with schemes to boost their business and encourage them to grow bigger. As MSMEs contribute to a whopping 30% of the country’s GDP, 48% of the country’s exports and around 45% of the country’s manufacturing output, they are very valuable to the government, which is why the government is launching a scheme after scheme to protect these businesses.
But how does one benefit from registering one’s business as an MSME? From MSME loans to free electricity, there are too many benefits to count, however, not every Indian citizen knows about it. This is also the case with many other schemes launched by the government that can help the people in many ways, but the people are simply unaware of them.
Here are a couple of reasons why you should register your business as an MSME (if eligible, of course) and how you can leverage these schemes to your advantage.
Top 5 Benefits of MSME Registration in India
1. Collateral Free Bank Loans
There are now no collateral requirements for credit to be extended to all small and micro enterprises in India due to an initiative taken by the government. It is possible for both old as well as new enterprises to benefit from this MSME loan. This is very risky for the banks, and they do check on the working capital loan eligibility of the businesses, however, small businesses can now get the capital they need for initial funds.
2. Aid in Patent Registration
The Indian government gives an astounding 50% subsidy on the registration fees for patents filed to MSMEs. In this way, small businesses are encouraged to innovate their products, work on new projects, and develop technologies. To apply for the subsidy, one must apply to the relevant ministry, that is, the Ministry of Micro, Small and Medium Enterprises.
3. Electric Bill Privileges
All MSMEs get a concession on their electricity bill which is not a fixed fee or a percentage but varies from business to business. This is an excellent incentive to register one’s business as an MSME because in this way businesses can focus their time and energy on those things that help in growing the business.
4. Low-Interest Rates
As an MSME, your business or enterprise may be eligible for a 1% discount on overdrafts, depending on your bank. MSME loans can be availed by businesses that offer appealing interest rates. As a result, businesses may spend a minimal sum of money on loan repayment using the remainder for commercial goals.
5. Protection from Delayed Repayments
It is usual for MSMEs to delay their payments. Due to this the Supreme Court of India has taken a very useful step by protecting these companies from delayed repayments. According to the mandate, the businesses are required to pay off their debts on or before the agreed date, or they can pay within 15 days of accepting the goods or services. Interest is charged only after delaying payments for more than 45 days and the RBI announces an interest rate that is three times the notified rate.
Who Qualifies as MSME?
The following definition applies to enterprises that manufacture, process, or preserve goods:
- Micro-Enterprise: A business whose equipment and plant investment don’t exceed Rs. 25 lakhs
- Small Enterprise: An organization whose investment in machines and plants exceeds Rs. 25 lakhs, but no more than Rs. 5 crores
- Medium Enterprise: A business where the capital expenditure on their plants and machinery is at least Rs. 5 crores and should not go beyond the mark of Rs. 10 crores
The following definition applies to enterprises that provide services:
- Micro Enterprise: Investing less than Rs. 10 lakhs in equipment constitutes a micro-enterprise.
- Small Enterprise: A business that has invested more than Rs. 10 lakhs, but less than Rs. 2 crores on equipment.
- Medium Enterprise: If the investment for equipment is between the range 2 to 5 crores, then the company is called a medium enterprise.
Summing Up: Is MSME Registration Beneficial?
As a result of the continuous support provided by the Indian government, the MSME industry is growing significantly. Those efforts have further inspired everyone, especially the young, to explore their entrepreneurship skills and start their own business. In such circumstances, it is critical to understand the benefits of MSME registration and the MSME program and to make the best of the government schemes.
From working capital loan eligibility to incentives on patent registration, MSME registration for any business is of tremendous benefit. The government is boosting these companies for a reason and that is to increase the flow of money into the market. As MSMEs contribute largely to the nation’s economy, it becomes the duty of companies who fall under this category to register themselves as MSMEs and help the country as well as their business.