Startup vs MSME: What's the difference ?

This document covers

1. Startup
2. MSME
3. Advantages of being registered under MSME
4. Budget 2025 changes
5. Frequently Asked Questions

1. Startup

A startup is defined as an organisation to develop a repeatable and scalable business model. Startups typically pursue novel ideas that has the potential to generate larger employment, productivity improvements, transformational technologies to drive economy, lifestyles.

Legal definition from The Ministry of Commerce and Industry, Government of India, a Startup is

1. The Startup should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership
2. Turnover should be less than Rs. 100 Crores in any of the previous financial years
3. An entity shall be considered as a startup up to 10 years from the date of its incorporation
4. The Startup should be working towards innovation / improvement of existing products, services and processes and should have the potential to generate employment and / or wealth creation. An entity formed by splitting up or reconstruction of an existing business shall not be considered a 'Startup'

2. MSME

• An MSME (Micro, Small and Medium Enterprises) is an "independently owned and operated enterprise, designed for profit and sells known products to known customers in local markets".
• The MSMEs are further sub-divided into a Manufacturing and Service Enterprises. The criteria for classification of enterprises in micro, small and medium has undergone major changes over the time.
• Check more on upcoming new definition of MSME @ new definition
  
  

  	Before July 2020						W.e.f July 2020 to 31st March 2025 (For Goods and Services)				W.e.f 01st April 2025 (For Goods and services)
  Type	Investment (For Goods)		Investment (For Services)		Turnover (For Goods and services)		Investment		Turnover		Investment		Turnover
  	Micro	Upto 25 lakhs		Upto 10 lakhs		Not Applicable		Upto 1 crore		Upto Rs 5 Crore		Upto 2.5 crore		Upto Rs 10 Crore
  Small	More than Rs. 25 lakhs but does not exceed Rs. 5 crores		More than Rs. 10 lakhs but does not exceed Rs. 2 crores		Not Applicable		More than Rs.1 crore but does not exceed Rs. 10 crores		More than Rs 5 crore but does not exceed Rs 50 crores		More than Rs.2.5 crore but does not exceed Rs. 25 crores		More than Rs 10 crore but does not exceed Rs 100 crores
  Medium	More than Rs. 5 crore but does not exceed Rs.1 0 crore		More than Rs. 2 crore but does not exceed Rs.5 crore		Not Applicable		More than Rs. 10 crore but does not exceed Rs.50 crore		More than Rs 50 crore but does not exceed Rs 250 crores		More than Rs. 25 crore but does not exceed Rs.125 crores		More than Rs 100 crore but does not exceed Rs 500 crores

• A business needs to register as MSME to get the benefits provided by the Ministry of Commerce in availing skill development and training, long and medium term loans, working capital loans, seed loans, and bridge loans.

3. Advantages of being registered under MSME

Registering or classifying under MSME has lot of benefits.

• Access to Government Subsidies and Schemes like Credit Linked Capital Subsidy Scheme (CLCSS), Prime Minister’s Employment Generation Programme (PMEGP), subsidy on the purchase of plant and machinery etc
• Priority Lending from Banks
• Collateral-Free Loans under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
• Delayed Payment Protection under MSMED Act, 2006,
• Support for Technology Upgradation
• Market Access and Promotion like GeM (Government e-Marketplace)
• Ease of Compliance
• Support During Crises like Emergency Credit Line Guarantee Scheme (ECLGS)

4. Budget 2025 changes

• The credit guarantee cover will be enhanced from Rs 5 Crores to Rs 10 Crores for Micro and Small Enterprises
• Introduction of customized Credit Cards with a 5-lakh limit for micro enterprises registered on Udyam portal.
• The credit guarantee cover will be enhanced for well-run exporter MSMEs, for term loans up to Rs 20 crore.

5. Frequently Asked Questions (FAQs)