We have to address this question by stating how an application can be rejected due to many reasons. We have to list the reasons like low CIBIL score, unpaid debts, loan defaults, low cash flow, lack of a business plan, incomplete documentation, false information, etc. After giving the pointers for rejection, let's explain the right way to process the application and explain the eligibility to apply for the application. To know more, What Are the Chances of Rejection of Online MSME Applications? Read more.
India is a rapidly growing economy. This is in part due to its bustling start-up culture. The Indian Government has made registering as a micro, small, or medium enterprise (MSME) easier to encourage entrepreneurship further. If you want to start your own business or have already established it, you can grow it by applying for an MSME loan. However, it is important to note that not all applications are accepted.
Under What Circumstances are MSME Registration Applications Rejected?
There are many reasons your MSME registration application may be rejected. Given below are the top six reasons:
- Low CIBIL score: The CIBIL score is used by banks, lenders, and other financial authorities to understand how trustworthy your business is. The CIBIL score considers your lending history and how well you have been able to pay off any loan taken under your name. A poor CIBIL score shows that you have not paid your loans, EMIs, or credit card debts properly or on time. Ideally, a CIBIL score of 750 or higher is expected when registering as an MSME.
- Loan defaults: Loan defaults are a serious infraction that can undermine your application. For MSME registration, the loan history of all enterprise owners and partners and stakeholders is checked. In addition, the history of the business is also checked. If you have defaulted on paying any previous loan, lending authorities may be less willing to provide you with a loan at an affordable interest rate.
- Low cash flow: Low or negative cash flow signifies that your business is not profitable. In particular, a negative cash flow means that your business spends more money than it earns. As a result, you are unlikely to be profitable enough to repay any loan you borrow. A low or negative cash flow questions your business planning and whether or not you can repay the instalments on time.
- Lack of business plan: A business plan is one of the most important aspects of the application. Even if you have all the above factors but do not have a good business plan, you may find it difficult to get through your MSME registration. A business plan shows your business’s direction, how you plan to scale up and grow your business, and how you plan to increase your profits. In short, this helps investors understand whether your business idea is worth investing in or not.
- Incomplete documentation: Incomplete documentation can result in an automatic rejection of the application. This is quite simple to rectify since you can apply again with the correct documents. Some lending authorities also allow you to re-attach the missing documents in the same application. However, it is recommended to avoid this error. Instead, cross-check to see whether you have all the documents before submitting.
- False information: Providing false information will instantly reject an MSME registration application. This is a serious infraction that can cause your business severe legal repercussions. All information you provide on your application is cross-verified. If any false information is found, your application is rejected, and you may be barred from applying again.
What Are the Chances of Rejection of Online MSME Applications: These are the top 6 reasons your MSME application can be rejected.
Therefore, it is best to cross-check your application to reduce your chances of rejection. You should also check if your application meets all the criteria beforehand.
MSME Eligibility Criteria: MSME eligibility criteria may vary from institute to institute. However, some factors are common:
- Nationality: Most MSME registration applications require applicants to be Indian citizens.
- Applicant age: The most common application age is between 24 and 70; your age should be a maximum of 70 when the loan matures.
- CIBIL Score: Most institutes require applicants to have a CIBIL score of 750 or higher. However, some institutes also accept scores as low as 685.
- Annual turnover: The annual turnover depends upon the type of enterprise you own. If you apply as a micro-enterprise, your annual turnover can be less than INR 5 (investment value of ₹ 1 crore). If you are applying as a small enterprise, your annual turnover should be up to ₹50 crores (investment value of ₹ 10 crores). If you are applying as a medium enterprise, your annual turnover should be up to ₹250 crores (investment value ₹50 crores).
If you fulfil the above criteria, you can apply to be an MSME.
MSME Application Process
MSME applications can now be completed online.
check here to more about: https://msme.gov.in/
- Step 1: Filling in the application form. Visit the official website and fill in the application form with all your business details, including financials, services, and products.
- Step 2: Provide the documents. Provide the required documents, including your identification and business documents and incorporation certificate. You can attach scanned copies of these documents.
- Step 3: Pay the registration fees. Once you have uploaded all the documents, select submit. You will receive a registration number. Use the registration number to pay the registration fees.
- Step 4: Application review. Once your application is submitted, the Ministry will review it to see whether it meets the criteria. You will receive a confirmation once the application has been accepted or rejected.
- Step 5: Get your registration certificate. Collect the MSME registration certificate once your application is accepted. Your business is now registered as an MSME.
Registering your business as an MSME is a simple task and can be done without hassle. The application form is available in English and many other regional languages.
However, it is important to take time to fill in all details. Incorrect information, missing documents, and improperly filled applications can result in application rejections.
As this article has already highlighted, there are many reasons your application may be rejected. Therefore, you should keep all these points in mind and cross-check your application to avoid chances of rejection. This will help you save money. If you do not know how to submit your application, you can also consult the experts at VakilSearch. Visit the website today to know more!
Also read:
- Trademark Registration for MSME
- MSME Udyam Registration Web-Portal
- Can a Sole Proprietorship Firm Apply for an MSME Registration?
- Msme Registration Certificate Image
- Request for Address Validation Letter
