UDYAM MSME Registration: Financial Boon for Small Businesses

Simran Gupta |Updated on: April 12, 2024

The Government of India launched the UDYAM registration scheme for micro, small, and medium enterprises (MSMEs) in July 2020. This scheme was rolled out to help MSMEs run their operations smoothly by offering financial assistance. The objective was to help the MSMEs mitigate the problems they usually faced due to lack of funding, strict payment terms, and other hiccups related to loans and credit.

When MSMEs complete their UDYAM registration, they get an electronic certificate and a unique 12-digit UDYAM registration number (URN). Once the MSMEs get their registration number, they become eligible for several attractive schemes and incentives from the Government.

Though registration for UDYAM is not mandatory, many MSMEs have opted for this. Yes, the process is easy and requires minimal paperwork. However, the most important reason for MSMEs showing interest in this scheme is its financial advantages.

This blog gives you a broad overview of the top financial advantages MSMEs can enjoy when registering for the UDYAM scheme.

Protection Against Delayed Payments

When buyers default on their payments, it can impact the financial affairs of MSMEs to a great extent. In most cases, MSMEs depend on payments from buyers to buy raw materials for their next order, expand business operations, pay salaries to their employees, and carry out other operations.

When these payments don’t arrive on time, the cash flow management of MSMEs is badly affected. This is where UDYAM registrations come to the rescue of MSMEs. UDYAM registration protects the MSMEs from such payment defaults.

According to this scheme, MSME payment terms are defined clearly. Buyers have to pay within 45 days from the date of the transaction. Also, in case of delayed or missed payments, MSMEs can get a chance to complain to the facilitation council and get their issues sorted.

Eligible for subsidies and incentives

The Government of India provides subsidies and incentives to MSMEs to help them thrive and succeed. You only need to get a UDYAM registration online if you are an MSME. Show the 12-digit URN as proof if you want some benefits like the following:

• Preference over other enterprises in terms of winning government tenders
• Lesser interest rates for financial services you require
• Easier access to funding sources charging affordable interest rates

These priority lending services and incentives help MSMEs operate smoothly and greatly reduce the chances of service disruption.

Better Access to Bank Loans

Without the UDYAM registration, banks consider MSMEs risky and non-credible businesses. Therefore, they don’t grant these enterprises loans if they have a long credit history or enough collateral.

All these processes undergo a sea change when the MSMEs register online for the UDYAM scheme. This registration lends much-needed authenticity and credibility to the MSMEs. Thus, getting loans from banks becomes far easier and smoother than before.

Loans Without Collaterals

The loan disbursal process became much easier for MSMEs with UDYAM registration. It is because the scheme made the MSMEs look more authentic than before. Therefore, banks are now ready to grant loans at affordable interest rates and without collateral.

Banks considered MSMES with UDYAM registrations secured enough to give them loans without requiring any collateral. Thus, MSMEs could get quick loans for their financial requirements and run their operations without any distractions.

This is also known as priority sector lending, as banks and other financial institutions are keen to support and encourage MSMEs to run their operations without any disruptions.

Expansions and Growth

Most MSMEs dream of expanding their operations to international markets. However, they are bound by many restrictions like finance, international regulations, and other compliance-related matters.

Registering under the UDYAM scheme gives these MSMEs the backing of the government, making them credible and authentic. International rules become more relaxed for these registered MSMEs. Investors also see these MSMEs as good choices to invest in. Therefore, UDYAM registrations definitely help MSMEs expand their operations at a global level as well.

Bottom Line

The Government has not made UDYAM registrations mandatory for MSMEs. However, if MSMEs want easier access to credit, protection against defaulted payments, favourable payment terms, and other priority sector lending benefits, they must register themselves for UDYAM. The process is easy and takes only a few minutes, but the financial benefits it gives MSMEs are limitless.