What’s Small and Medium Enterprise (SME)?

byPaytm Editorial TeamLast Updated: October 11, 2024

SME: Full Form and Meaning 

SMEs stand for Small and Medium Enterprises. These are businesses with a limited number of employees and have lower revenue or assets, as compared to larger corporations. The definition of SMEs varies from country to country depending on the size, structure, number of employees, and financial turnover. In India, SME is a broad term that refers to small-scale and medium-scale industrial units that consist of fewer employees and lower revenues or assets as compared to large-sized enterprises.

As SMEs in India generally operate on a smaller scale, factors such as working capital, equipment loans, and funding can become a bottleneck for them. With the arrival of SME loans and various government-funded schemes, these innovative businesses are gaining the required financial support to contribute to the country’s economic growth. In fact, the number of MSMEs in the country is expected to grow from 6.3 crore, to ~ 7.5 crore in the coming times, growing at a projected CAGR of 2.5%.

SME Finance

Under the Small and Medium Enterprises Development Act of 2006, SMEs involve various functions including production, manufacturing, processing, or preservation of goods and commodities. Various types of SMEs include Micro Enterprises having up to 10 employees and a turnover of up to INR 5 crore, Small Enterprises with about 10 to 50 employees and a turnover between INR 5 crore to 50 crore, and Medium-sized Enterprises having 50 to 250 employees, and a turnover upto INR 250 crore. 

To help SMEs expand their business in terms of financial, technical, and market-related assistance, the Government of India has designed specific schemes including the Credit Guarantee Fund Scheme, the Technology Upgradation Fund Scheme (TUFS), Pradhan Mantri Employment Generation Programme (PMEGP), Udyog Aadhar Registration, MSME Sambandh, and Cluster Development Program. 

These schemes will support these small and medium-scale businesses to improve their operations and open more entrepreneurial opportunities for them. Additionally, SME loans are also offered to cover financial needs, achieve the desired turnover, and expand and invest in new equipment. These loans have flexible repayment schedules, low interest rates, and are free of any collateral, thus contributing to the easy management of these enterprises for better results and advancements.

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