Small businesses require funds from time to time to maintain their cash flow. They need working capitals to ensure smooth business operations and boost profitability. For instance, buying new stocks, purchasing equipment, hiring new staff, or expanding the operation spaces.
In such cases, bank and non-banking financial institutions offer SME loans to startups, small business owners, and women entrepreneurs to meet their small business requirements, and manage their finances without pledging any asset with considerable value as collateral.
The loan amount, interest rate, and loan tenure depend on factors like the bank, candidate profile, business history, etc.
So, whether you own a Kirana shop, restaurant, salon, or clothing store, you can use a small business loan in India to reduce any financial burden that you face when moving up the growth curve. You can avoid potential loss and generate a good income.
Why SME loan is an ideal choice for small business owners
There are several benefits of a small business loan in India. For instance, some lenders offer up to Rs. 30,00,000/- as a loan. The loan approval process is quick and can help you access fundings within 24 hours of approval.
Meet working capital needs
The benefit of SME loans is that you can cater to your business’ working capital needs and expand the business operations. It enables you to purchase equipment, pay for new staff, or expand office space, etc.
The best part is that you can maintain the cash flow during financially challenging times. During the COVID-19 era, SME loans can help strengthen the financial stability of a small business.
Flexible to apply
Small business loans in India come in different types, and you can apply for a loan based on financial requirements. Depending on the loan amount and the repayment tenure, you can opt for short-term and long-term loans. Generally, a short-term loan does not exceed more than one year. A long-term loan can go up to five years or more.
Before applying for an SME loan, it would be wise to assess your needs and choose a loan that you can afford to repay within the stipulated EMIs.
Attractive interest rates
Compared to other unsecured loans, SME loans come with affordable interest rates. However, it is worth noting that the interest rates depend on factors, such as repayment tenure, collateral, and creditworthiness.
If you offer something as collateral, you may enjoy a lower interest rate. Also, a higher credit score plays a crucial role in securing a lower interest.
Besides the interest rates, SME loans come with a nominal processing fee and payment penalty. So, with an attractive interest rate and nominal processing fee, you can reduce the total cost of borrowing.
Easy repayment options
Small business loans in India come with easy repayment options. It enables you to repay the loan amount within the stipulated EMIs without any financial stress.
You can sit with your lender and work out a repayment plan that best suits your needs and affordability. You can even lower your period EMIs or increase them based on your business profitability.
Further, there are flexible modes of payment. For instance, you can opt for an auto-debit facility through Electronic Fund Transfers (EFT) from your registered bank account.
The best thing about SME loans is that they are collateral-free. While applying for a loan, you do not have to pledge any asset with considerable value as collateral. You can get a loan with an affordable interest rate based on your credit score, business profitability, etc.
Since you are not providing any collateral to get a loan, you will have to convince your lender that your business is making profits, and you are a credit-worthy borrower.
This way, your lender feels assured that you will not default on your loan repayments, and therefore, offer you the loan amount you need.
Boost your business loan limit
With small business loans, you can also build your business loan limit. Applying for a short-term loan may enhance your business credibility and increase the business loan limit in the future.
If the need arises in your business, you can opt for a large loan amount in the future without any hurdle in the process of acquiring a loan.
SME loans come with a host of features and benefits. As a small business owner, you must assess your requirements and apply for the right type of loan.