Union Budget 2024 Highlights: How Does it Affect MSMEs?

The latest budget for 2024-25 has brought a wave of positive changes specifically aimed at supporting Micro, Small, and Medium Enterprises (MSMEs). Here's a closer look at the key announcements that promise to uplift and empower small businesses:

1. Continued Credit During Stress Periods

MSMEs often face challenges when financial stress hits. To address this, the government has introduced a new mechanism ensuring that MSMEs can continue accessing credit even during tough times. This means that if your business is going through a rough patch, you won’t have to worry about your credit lines drying up. It’s a safety net designed to keep your business afloat and operational when you need it the most.

2. New Credit Assessment Model

Public Sector Banks (PSBs) are set to revolutionize how MSMEs are assessed for credit. Moving beyond traditional asset or turnover criteria, PSBs will develop in-house capabilities to evaluate MSMEs based on their digital footprints. This innovative approach will make credit more accessible and tailored to the unique characteristics of small businesses, enhancing their growth potential.

3. Increased Mudra Loan Limit

Good news for those relying on Mudra loans! The maximum loan amount has been increased from INR 10 lakh to INR 20 lakh. This boost in funding capacity can significantly help MSMEs in expanding their operations, purchasing new equipment, or even just managing day-to-day expenses more comfortably. With this increased limit, more substantial financial backing and better cash flow is now within reach.

4. Lower Threshold for TReDS Onboarding

One of the persistent issues MSMEs face is delayed payments from buyers. To ease this, the turnover threshold for mandatory onboarding on the Trade Receivables Discounting System (TReDS) platform has been reduced from INR 500 crore to INR 250 crore. This means that more buyers will now be required to join TReDS, speeding up the receivables financing process and ensuring quicker cash flow for MSMEs. Essentially, you’ll get paid faster, which can be a game-changer for managing your finances.

5. SIDBI Branch Expansion

The Small Industries Development Bank of India (SIDBI) is on a mission to expand credit access. This year, SIDBI will open 24 new branches, with a plan to cover 168 out of 242 MSME clusters in the next three years. This expansion will bring financial support closer to where it’s needed most, fostering the growth of local MSMEs and therefore the MSME sector as a whole.

6. Financial Support for Food Irradiation Units

For those in the food production sector, there’s more good news. The government has committed financial support for setting up 50 multi-product food irradiation units within the MSME sector. These units will help enhance food safety, extend the shelf life of products, and open up new market opportunities. It’s a significant step towards ensuring that MSME food producers can meet both domestic and international standards, making their products more competitive.

7. E-Commerce Export Hubs in PPP Mode

For MSMEs and traditional artisans looking to go global, there’s fantastic news. The government plans to set up E-Commerce Export Hubs in a Public-Private Partnership (PPP) mode. These hubs will enable small businesses and artisans to sell their products in international markets, providing a seamless regulatory and logistic framework for global exposure and increased sales. It’s an incredible opportunity for MSMEs to tap into new markets and grow their businesses beyond borders. This initiative aims to bridge the gap between local artisans and international markets, opening new revenue streams and broader customer bases.

8. Credit Guarantee Scheme:

To further support MSMEs, a new Credit Guarantee Scheme has been introduced. This scheme will facilitate term loans to MSMEs, offering a government-backed guarantee fund covering up to INR 100 crore per applicant. This initiative will provide a safety net for lenders and encourage them to extend more credit to small businesses.

What Does This Mean for MSMEs or Small Businesses?

These measures reflect a clear commitment to nurturing the MSME sector. Whether it's easier access to credit, quicker payments, enhanced food safety standards, or global market reach, the new budget is designed to address some of the most pressing challenges faced by small businesses. By fostering a supportive ecosystem, the government aims to drive economic growth and ensure the resilience and prosperity of MSMEs.

So, if you’re running an MSME, this budget is packed with promising opportunities to help your business grow and thrive. It’s time to take full advantage of these initiatives and scale new heights.

The Union Budget 2024-25 has been all about empowering MSMEs with innovative support mechanisms and enhanced financial access, setting the stage for MSME growth and resilience. In this transformative landscape, Godrej Capital aligns with this vision by simplifying access to credit for MSMEs. 

Through its customized loans for businesses in both secured loans and unsecured loans category, Godrej Capital provides tailored financing solutions that meet diverse needs. Unique offerings such as "Design Your EMI" allow businesses to customize their repayment plans for better cash flow management, while "BizRewards" offers additional benefits and incentives, making financial support not only accessible but also rewarding. Additionally, Godrej Capital's "Flexi Funds" provides an overdraft-like facility, offering instant withdrawal and repayment options to address fluctuating business requirements seamlessly.

As the budget lays the groundwork for a more supportive environment for MSMEs, Godrej Capital is committed to helping them thrive with flexible and dynamic credit solutions.

Disclaimer

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com