The ongoing Coronavirus pandemic has disrupted public health and the economy to a great extent in India, with many businesses closing down. The financial burden of people has also increased, with many looking at loans as an alternative medium to sustain their financial needs. Many people had a dream of starting their own restaurant but owing to the ongoing pandemic-induced financial crunch, had to abandon their dreams. To help such entrepreneurial dreams be revived, an MSME loan can act as a messiah providing you with timely access to capital at affordable rates.
What is an MSME Loan for a Restaurant?
MSME stands for Micro, Small, and Medium Enterprises. MSME loan refers to a business loan offered by various banks for helping fund business start-ups like restaurants. These loans can be taken to set up your restaurant, purchase the required equipment, expand your restaurant and so on. This type of funding helps small businesses that are the backbone of the Indian economy thrive. Instalment payment financing and customized advice are key features of MSME loans.
How to get an MSME loan for a Restaurant in 2021?
When looking for a restaurant loan, first consider the reasons for acquiring the loan like the acquisition of furniture, kitchen equipment, working capital, renovation and related reasons. The amount of MSME loan will be dependent on such requirements and your capability to repay MSME loan.
Key Features of an MSME Loan
- The interest rate starts from 7.65% onwards.
- The loan amount starts from Rs. 50,000 onwards and can go up to a few crores depending on the type of funding required.
- Tenure of loan can be up to 15 years dependent on the loan amount sanctioned, the lender and the type of credit required.
- Both banks and NBFCs offer MSME loans in India.
- These loans are mostly collateral-free but collateral may be required based on the type of loan. You may be required to pledge personal or business assets as collateral.
- Borrowers are required to pay equated monthly instalments.
Eligibility Requirements for an MSME loan
Before availing of an MSME loan for a restaurant, one needs to be clear about the objective for availing of such a loan. For instance, for expanding the existing restaurant business, or boosting working capital flow and so on. Then compare different loan options to check the most viable options based on your purpose and repayment capability. MSME loan eligibility requirements may vary from lender to lender. Common eligibility requirements are highlighted below:
- Only registered MSMEs are eligible for an MSME loan
- Proof of address required
- Proof of identity required
- Proof of income required
- Average annual sales of an entity
- Credit history is relevant, as having a good credit score is a requirement
Additional Reading: Access your Business Health Report
Popular Types of SME Loans for Restaurants
Working Capital Loans
Ideally for bigger investments, with a repayment tenure ranging from 1 to 10 years
Used primarily for short-term capital requirements. These loans have a short tenure of 1 year.
In these loans, you have to pledge an asset like property or equipment as collateral.
Top Banks offering Restaurants Loans
- Vijaya Bank’s V Restaurant Retail Lending Scheme
- SBI Restaurant Loan
- Indian Bank’s Annapoorna and Arogya Scheme
A restaurant business can now be easily renovated or expanded or established through MSME loans which are easily available and offered by leading lenders in India. If you meet the eligibility requirements of the lender, then you can easily get approved for an MSME loan to grow your restaurant.
1. How can I get an MSME loan for a restaurant?
Various lenders in India like SBI, Allahabad Bank, etc. provide MSME loans at attractive interest rates for opening a restaurant.
2. How much MSME loan can be availed for opening a restaurant?
That would depend on the type of restaurant you want to open and the repayment capability of the borrower. Ideally, you would require at least Rs. 5 to Rs. 10 lakhs to establish a small-scale restaurant business in India.
3. How to apply for an MSME Loan?
Follow the below steps to apply for an MSME loan of your choice.
- Go to the official website of the Lender bank or NBFC where you want to avail of the MSME Loan
- Enter your personal or business particulars to avail of the MSME loan
- Upload digital documents for e-verification
- Get loan sanctioned
- Loan disbursal gets done within 3 business days after the loan approval
4. Can one run a restaurant even without experience?
That would depend on the person’s financial standing, passion and ability to get hold of good staff, finance and expertise in running the restaurant business.
5. Is it easy to get an MSME loan for a restaurant?
Yes, if you have the requisite eligibility requirements for availing an MSME loan, then one can apply for an MSME loan for their restaurant business. Such a loan can be availed for various restaurant purposes like expanding a restaurant, renovation, working capital, establishing a new restaurant and so on.