It’s been a year of this Global Pandemic and a year of the hot discussion of MSME too. Although, the MSME is an older concept but it took a high rise in the discussions when lot of businesses were getting disrupted due to Covid-19. Some of the existing entities took this pandemic as an opportunity and explored in the new avenues of businesses.
What is MSME?
MSME, an acronym for Micros, Small and Medium Enterprises is a legal term given to entities registered under MSMED Act, 2006 under one of the following two categories:
MSME -A separate legal structure?
While addressing a lot of queries from general public i.e. people from non-finance background, I observed a lot of confusion in their minds. These are the most common confusions:
So, now I think it’s a high time to address this ambiguity.
First of all, MSME do not have any separate legal structure.
An entity can be registered as MSME under the following forms:
Did you notice something? Almost all the types of entities are covered under MSME.
So, it is now very easy to convey first message that MSME can be a company, a firm or anything else you are desiring of. MSME is an umbrella with multiple colors.
Before proceeding to answer the question “Why MSME?”, let me first brief you on the eligibility part.
Who can opt for MSME?
|< Rs.1 crore
< Rs.5 crore
|< Rs.10 crore
< Rs.50 crore
|< Rs.50 crore
< Rs.250 crore
Earlier, there was separate limits for manufacturing and service sectors, but the above table depicts the revised Composite limit for manufacturing and service sectors both.
Do you still think that MSMEs is a discussion for people having shorter business vision? I don’t think so.
Why to register under this Act?
My audience is an intelligent one and they all will say Yes to it.
So, just go for MSME as registration under this Act gives an access to Government e-Marketplace and various other State Government portals which gives easy access to their marketplace and e-tenders too.
So, with one registration you can not only sell your products easily, but it will become easier for you to acquire government tenders too.
So, the main point here is that the bank loans become cheaper as the interest rate is low for MSMEs as compared to other entities and secondly, it becomes easier to obtain loans for MSMEs.
Adding more to this, bank loans are collateral free in case of MSMEs. You might be thinking that why did I mention this line in the last under this point. The answer is practical issues being faced by the entities while approaching the banks for collateral fee loans. Banks do not give collateral free loans easily specifically after the Covid-19 disturbances.
So, let me brief you on more interesting financial benefits of MSME:
What’s the point of discussing them here?
Okay, so let me brief you on this. In any business, one of the major risks is delayed payments. An entity cannot work without money and it is more painful when the money is blocked by the customers. So, here the government is available to help by giving them the right to collect interest on the payments that are delayed from the buyer’s side. This mechanism is operated using the conciliation and arbitration tools.
Further, Section 16 of the MSMED Act provides that the buyer shall be liable to pay compound interest with monthly rest to the MSME supplier at three times the bank rate notified by the RBI. So, just relax and do the business.
Another important question:
Which is better: MSME Registration/Udyog Aadhar Registration/Udyam Registration?
The simplest answer is All of them because all of these are same. These are the alternate names of one single thing i.e. MSME registration.
Quick Checklist for Registration:
It is always advisable to hire a professional for registration process but still before visiting a professional or having a virtual meeting, keep the following documents handy to make the discussion easier:
That’s all for today.
For any queries in the above article, the author may be contacted at [email protected] or 9888855340 (Only whatsapp, No calls)