Immediate funding is an integral requirement of any business for performing its core functions like expansion, recruitment, hiring, procurement, training and so on. SME Loans play a pivotal role in an entrepreneur’s attempt at managing uncertain/unplanned situations or bearing a loss without disturbing the allocated running costs.
Salient features
Eligibility
The banker/lender will check for these aspects before granting an SME loan:
Documents required for applying for an SME loan
Popular SME loans in India
Types of SME loans offered by FinanSME
FinanSME provides various kinds of loans to promote the MSME sector because we understand that the small-scale sector is the lifeline of the country and contributes to 45% of India’s manufacturing and 40% of India’s export.
Some of the loans in our array are explained below.
Description
A loan issued against collateral security is called a secured loan. The loan issued by the bank or financial institution without keeping any collatoral security is called the unsecured loan. Secured loan attracts lower interest rates as compared to unsecured loans because of the limited risk involved.
Entrepreneurs typically have specific objectives behind applying for secured loans, such as the purchase of an asset, long-term investments, expansion of office space and so on. An unsecured loan is used to meet the short-term needs of the business, such as working capital.
Primary lenders
Description
Generally, revenue-based finance is offered by private investors to small businesses to meet their most urgent capital expense requirements. Under this scheme, the borrowers promise to pay a percentage of their gross monthly income towards the loan repayment.
Distinctive features
Primary lenders
Who can apply
Businesses that are unable to secure traditional finance for reasons such as low credit rating or an inability to provide collateral may opt for RBF.
Description
The MSME sector is a significant contributor to India’s GDP and employment generation. It employs around 106 million people or 40% of India’s workforce. To boost the performance of MSMEs, the government offers loans to help improve their status.
Loan distribution
Prominent institutions
The major institutions offering government loans to MSMEs are as follows:
Who can apply
Small-scale businesses that find it challenging to afford traditional funding due to high interest, high collateral requirement or low credit rating can apply.
Description
Subsidised loans are those under which the government offers a subsidy for loan repayment to small businesses. Subsidised loans are issued primarily by private lenders, banks and NBFCs. These loans are sanctioned under government initiatives to boost MSMEs, and the schemes vary in terms of eligibility, subsidy amount and purpose for which it is issued.
Primary lenders
These loans are sourced for lenders in the open market.
Process
Who can apply
Subsidised loans are prominently applied by start-ups who face challenges in meeting their business funding and are unable to repay their loan amounts.
Producing Rs 20 lakh crore of goods and services annually, MSMEs contribute as much as 40% to India’s GDP. Loans are major drivers to accelerate their pace, which is promoted by both public sector and private lenders.
FinanSME is a one-stop destination that aids MSMEs in sourcing low-cost credit for businesses and helps them in their financial decision-making. Contact FinanSME for a consultation now.
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