Sources of Credit for MSME

Sources of Credit for Exporting MSMEs

Products: Export Packing Credit (EPC), Post-shipment Finance, Term Loans, Cash Credit.

Purpose: Working capital for raw material procurement, processing, and packaging; finance against export receivables.

Interest Rate: Often offered at concessional rates under Priority Sector Lending (PSL) norms.

Tenure: Short term (EPC) to long-term (capital investment loans).
Schemes:

SIDBI-ETFS: Export Targeted Financial Solutions.

SIDBI Make in India Soft Loan Fund for MSMEs (SMILE) – for capital investment.

Benefit: Refinancing support to banks and NBFCs, venture funding, and technology upgrade finance.
Products:

Pre-shipment and post-shipment credit.

Overseas investment finance.

Buyer’s credit, Line of credit.

Special Programs:

Grassroots Initiatives and Development (GRID) for MSMEs in handicrafts, handlooms, etc.

Benefit: Market development, technology support, and risk mitigation.
Products: Export Credit Insurance (to banks and exporters).

Benefit: Enables banks to extend more credit; mitigates the risk of non-payment by foreign buyers.
CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises):

Provides credit guarantee up to ₹5 crore for working capital or term loans.

No collateral or third-party guarantee required.

Interest Subvention Scheme:

3% interest subsidy on pre- and post-shipment export credit for MSMEs.
Products: Invoice discounting, supply chain finance, short-term trade finance, project finance.

Benefit: Faster disbursement, tech-enabled assessment, limited paperwork.
Digital platform approved by RBI to finance MSME receivables from corporate and government buyers.

Platforms: RXIL, M1xchange, Invoicemart.

Benefit: Real-time working capital, ensures liquidity and cash flow.

In the context of promoting exports by MSMEs in India, various credit sources and financial instruments have been developed by the government, financial institutions, and development banks to support working capital and project finance needs. These aim to reduce financial barriers, enhance competitiveness, and integrate MSMEs into the global value chain (GVC).

Intended Benefits for Export-Oriented MSMEs

Objective	Benefit
🏭 Working Capital Access	Smoothens cash flow, enables timely fulfillment of export orders
🧾 Receivables Financing	Reduces payment delays, accelerates turnover
🛠️ Project & Capex Finance	Enables plant modernisation, technology upgrade, expansion of export capacity
📉 Lower Cost of Funds	Concessional interest and subvention reduce financial burden
🧮 Risk Mitigation	Insurance and guarantees reduce lender risk, increasing credit access
🌍 Export Market Facilitation	Finance tied to overseas marketing, joint ventures, participation in fairs
💡 Innovation and Tech Adoption	Special funds for digitization, energy efficiency, certification, etc.

Special Credit Incentives by Government

Scheme	Objective
MSME Champion Scheme (Incl. Zero Defect Zero Effect - ZED Certification)	Financial assistance for quality improvement to access export markets
Production Linked Incentive (PLI)	Promotes investment in scale and technology for export-led growth
Cluster Development Programme (MSE-CDP)	Supports shared infrastructure and credit for cluster export promotion
PMEGP Export Facilitation	Project finance support for micro enterprises entering export
Niryat Rin Vikas Yojana (NIRVIK)	Enhanced credit guarantee for high-value exports (ECGC supported)

Visit Member’s Area to access the Checklist for MSME on Steps to Access Credit (you will need to register first).

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