
Are you a Micro, Small or Medium Enterprise? Click to Find Out.
Posted on Monday, December 23rd, 2024 | By IndusInd Bank
Micro, Small, and Medium Enterprises, generally known as MSMEs, play a significant role in shaping the country’s economy. MSMEs are considered to be the backbone of the Indian economy as they contribute over 29% to India’s GDP (Gross Domestic Product) and are accountable for nearly 46% of the country’s exports. They also play a crucial role in generating employment and introducing innovative products and trends to the market. MSMEs mainly span across both the services and manufacturing sectors. This includes businesses like Information technology services, education, financial services, retail shops, pharmaceuticals, textiles, food processing, etc.
To promote MSMEs’ growth and enhance competitiveness, the Government of India has introduced many schemes and initiatives under the governance of the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006. The act defines small-scale industry, micro, as well as medium enterprises based on their annual turnover and investment in plant and machinery. The Act also has provisions for registration and credit facilities, such as collateral-free credit facilities, capital subsidies, etc., initiated by the Government.
This article aims to provide a clear understanding of the difference between micro, small, and medium enterprises. Understanding the difference between micro and small-scale industries and medium enterprises is important to access support, incentives, and financial assistance effectively. IndusInd bank also offers quick business loans curated to the specific needs of MSMEs, provided your business is at least 2 years old.
Difference between Micro, Small and Medium Scale Enterprises
Right from the tailoring shop next door to a state-level logistics company, businesses vary in size and are classified accordingly. Depending on the business’ (manufacturing enterprise/enterprise rendering services) investment in equipment (plant and machinery) and the annual turnover, you can define small-scale industry, micro, and medium enterprises. Eligibility to seek quick business loans and access government schemes also depends on this classification. The following are the key differences between micro, small and medium enterprises.
Micro enterprises
Micro enterprises are the smallest category of businesses in the MSME segment that operate on a small scale and with limited assets. These businesses have investments not exceeding ₹ 1 crore in equipment and an annual turnover not exceeding ₹ 5 crores. Micro enterprises include food stalls, home-based business units, street vendors, and more.
Depending on the eligibility, micro-enterprises can benefit from IndusInd Bank small business loans with favourable terms for their business operations and growth.
Small enterprises
Small enterprises are slightly larger than micro-enterprises on the business scale. These businesses have investments in equipment that not exceeding ₹ 10 crore and an annual turnover not over ₹ 50 crore. Small enterprises include retail stores, small-scale family-owned businesses, and small-scale manufacturing units.
If the small enterprise has been in business for at least 2 years and the owner has plans to expand, they can opt for a quick business loan. This loan allows them to grow and expand without disrupting their small-scale enterprise’s daily operations. With the right use of business loan funds, you can transform your small enterprise into a medium-scale one.
Also read MSME guide: which businesses fall under MSME, which don’t. See the full list!
Medium enterprises
Medium enterprises are relatively large in scale and usually have a more formalised business structure. These businesses have investments in equipment not exceeding ₹ 50 crore and a substantial annual turnover of ₹250 crore or less.
Medium enterprises, too, are eligible for quick business loans from IndusInd Bank given that the business has been in operation for at least 2 years.
Classification based on | Micro Enterprise | Small Enterprise | Medium Enterprise |
Investments in plant and machinery | not exceeding ₹ 1 crore | not exceeding ₹ 10 crores | not exceeding ₹ 50 crores |
Annual turnover | not exceeding ₹ 5 crores | not exceeding ₹ 50 crores | not exceeding ₹ 250 crores |
MSMEs are eligible to avail business loans up to ₹ 50 lakhs depending on various factors such as turnover, profitability, business vintage, etc. that are considered for eligibility.
Also read: Eligibility criteria for MSME business loan
Conclusion
To sum up, knowing the difference between micro, small and medium enterprises and the basis of classification helps in understanding the eligibility for government schemes and subsidies like PMEGP, CGTMSE, & more, getting financial assistance, and making an informed decision. Access to tailored loans help MSMEs expand, grow, and continue to contribute to India’s growth story.
Disclaimer:
The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.