
Composite Loan for MSMEs
The composite loan scheme was initiated by the Ministry of Micro, Small & Medium Enterprises. This scheme was introduced to assist the Micro Small & Medium Enterprises units financially. The Single Financial Corporation provides the term loan and working capital loan to the MSME units to reduce the difficulties in starting production.Eligibility Criteria
The scheme applies to the following:- The small enterprises of the manufacturing sector which includes cottage and village industrial units and artisans.
- The micro-enterprises in the small enterprises of the manufacturing sector.
- Micro or small enterprises of the service sector that take part in industrial activities only.
Documents Required
The required documents to avail the composite loan are:- The ownership details, educational details, personal details of the Owner or the Director.
- Bank statement of the last 6 months.
- GST number.
- Udyog Aadhaar.
- The statement of the Tax returns in an XML format.
Approved Banks for Loan
The following are the banks that can sanction the Composite loans to the Micro, Small & Medium Enterprises:- Bank of Baroda
- Bank of Maharastra
- Bank of India
- Indian Bank
- State Bank of India
- Indian Overseas Bank
- United Bank of India
- Allahabad Bank
- Andhra Bank
- Punjab National Bank
- Punjab & Sind Bank
- Oriental Bank of Commerce
- Vijaya Bank
- Canara Bank
- IDBI Bank
- Corporation Bank
- UCO Bank
- Syndicate Bank
- Union Bank
Debt Equity Ratio
The debt-equity ratio is 3:1 in the total venture of the money spent. The total venture will include the project cost and also the requirement of the working capital. This is fixed after checking about the amount of subsidy, investment or incentive that are given for the project.Contribution of the Promoter
The contribution of the promoter under the composite loan scheme will be calculated after arriving at the debt-equity ratio 3:1.Margin for the Term Loan
The Margin for the Term Loan is:- 25% for all the backward areas in the State.
- 30% for the municipal limits and other areas of all the cities in the State.
Rate of Interest
Term Loans
- The rate of interest charged for the new units in the backward area is 12.5% during the period of construction. The rate of interest is 13.5% for the remaining period.
- The rate of interest for the units in the non-backward areas during the period of construction is 13.5%. The rate of interest for the remaining period is 14.5%.
Working Capital Loans
- The rate of interest for all the loans up to an amount of Rs.2 lakhs during the construction period is 15%.
- The rate of interest for all the loans exceeding the amount of Rs.2 lakhs during the construction period is 16.5%.
Period of Repayment
Working Capital Loans: The repayment period of the loan is up to 10 years for the working capital loan, which includes the moratorium period of 13 years. Term Loans: The repayment period of the loan is up to 8 years and 6 months for the term loan, which includes the moratorium period of 18 months.Security
The State Financial Corporation will first have a charge on the fixed assets and also the current assets. For the Working Capital Loan, the corporation may also ask for collateral security.Benefits
- The maximum amount that can be availed through composite loan is 25 lakhs.
- The scheme is operated by financial institutions and banks.
Terms and Conditions
- The working capital loan should be utilised within a year of the commencement of the production.
- The Micro, Small & Medium Enterprises (MSME) unit should open an account with the bank. The working capital loan amount will be credited to the bank when the State Financial Corporation disburses the amount.
- The MSME unit should use this account for all the transactions of the business, which includes all the payments and the receipts.
- If the MSME unit approaches the bank for more working capital, then the MSME unit should have repaid the previous loans completely and the amount approved by the State Financial Corporation.
- The MSME unit should provide a statement on the monthly stock which shows the inventory level position of the State Financial Corporation. If the unit fails to submit the monthly stock system, then the State Financial Corporation will recall the loan.
Popular Post

Starting a small business can be a transformative venture, offering the exciting opportunity...

Tax deduction at source, shortly and popularly known as TDS, was introduced by the Income Tax...

Goods & Services Tax Certificate is issued to people who are registered under GST...

GST registration applies to all individuals and entities supplying goods or services in India. GST...

Gift tax in India is applied when the value of the received gift exceeds ₹50,000 in the...

The Union Budget 2025 has brought significant changes to India’s personal income tax structure, raising the...

The Goods and Services Tax (GST) is an indirect tax system introduced in India in 2017. It functions...

A trademark search is simply checking if another person or organization does not already own the...

Section 194H of the Income Tax Act in India mandates the deduction of Tax at Source (TDS) on commission or brokerage...

Section 80G Deduction is a facility available in the Income Tax Act which allows taxpayers to...

The Income Tax Department (ITD) has not provided specific guidance on crypto taxes for Indian investors. However...

Internal audit applicability is a critical concept for companies in India, impacting various...

In the business world, two main types of companies exist: private company and public company...

Ministry of Finance vide a Notification No 05/2022- Central Tax (Rate) dated 13.7.2022 has issued...

The Central Board of Indirect Taxes and Customs (CBIC) has recently announced an extension...

Depreciation is a key concept in finance and accounting. It helps us manage how the value of...

Form 10IA of the Income Tax Department must be filed by taxpayers claiming income tax deduction...

The Goods and Services Tax (GST) system in India has been a significant reform in the country's...

India's Gross Domestic Product (GDP) benefits significantly from the substantial...

The Finance Act, 2023 introduced the MSME 45-day payment rule under Section 43B(h) of the Income Tax Act...

The Direct Tax Vivad Se Vishwas (DTVSV) Scheme, 2024, was announced by Union Finance Minister...