{"id":202,"date":"2019-02-14T10:44:06","date_gmt":"2019-02-14T10:44:06","guid":{"rendered":"https:\/\/www.finansme.com\/blognew\/?p=202"},"modified":"2019-06-26T11:23:38","modified_gmt":"2019-06-26T11:23:38","slug":"types-of-sme-loans","status":"publish","type":"post","link":"https:\/\/www.finansme.com\/blog\/types-of-sme-loans\/","title":{"rendered":"Types of SME Loans"},"content":{"rendered":"\n<p>Immediate\nfunding is an integral requirement of any business for performing its core\nfunctions like expansion, recruitment, hiring, procurement, training and so on.\n<strong>SME Loans<\/strong> play a pivotal role in an entrepreneur\u2019s attempt at managing\nuncertain\/unplanned situations or bearing a loss without disturbing the\nallocated running costs.<\/p>\n\n\n\n<h4><strong>SME Loans<\/strong><\/h4>\n\n\n\n<p><strong>Salient\nfeatures<\/strong><\/p>\n\n\n\n<ul><li>Quick disbursal<\/li><li>Flexible repayment options<\/li><li>Competitive pricing (based\non credit scores)<\/li><\/ul>\n\n\n\n<p><strong>Eligibility<\/strong><\/p>\n\n\n\n<p>The\nbanker\/lender will check for these aspects before granting an SME loan:<\/p>\n\n\n\n<ul><li>Purpose of the loan<\/li><li>Duration of the loan<\/li><li>Repayment capacity<\/li><li>Collateral security<\/li><\/ul>\n\n\n\n<p><strong>Documents\nrequired for applying for an SME loan<\/strong><\/p>\n\n\n\n<ul><li>Bank statements for the\nlast 12 months<\/li><li>Updated KYC details of the\norganisation and the applicant<\/li><li>All financial documents\nasked for by the lending organisation<\/li><li>Shop establishment\ncertificate<\/li><li>Invoice against which\nfinance is to be raised<\/li><li>Partner information<\/li><\/ul>\n\n\n\n<p><strong>Popular\nSME loans in India<\/strong><\/p>\n\n\n\n<ul><li>Term Loans<\/li><li>Cash Credit Facility<\/li><li>Pradhan Mantri MUDRA Yojana\n(PMMY)<\/li><li>Bank Guarantee<\/li><li>Asset-Based Business Loans<\/li><li>Bill\/Invoice Discounting<\/li><li>Point of Sale Finance<br>\n<br>\n<\/li><\/ul>\n\n\n\n<p><strong>Types of\nSME loans offered by <\/strong><strong>FinanSME<\/strong><\/p>\n\n\n\n<p><strong>FinanSME<\/strong> provides\nvarious kinds of loans to promote the MSME sector because we understand that\nthe small-scale sector is the lifeline of the country and contributes to 45% of\nIndia\u2019s manufacturing and 40% of India\u2019s export.<\/p>\n\n\n\n<p>Some of\nthe loans in our array are explained below. <\/p>\n\n\n\n<ol><li><strong>Secured and unsecured loans<\/strong><\/li><\/ol>\n\n\n\n<p><strong>Description<\/strong><\/p>\n\n\n\n<p>A loan\nissued against collateral security is called a secured loan. The loan issued by\nthe bank or financial institution without keeping any collatoral security is\ncalled the unsecured loan. Secured loan attracts lower interest rates as\ncompared to unsecured loans because of the limited risk involved.<\/p>\n\n\n\n<p>Entrepreneurs\ntypically have specific objectives behind applying for secured loans, such as\nthe purchase of an asset, long-term investments, expansion of office space and\nso on. An unsecured loan is used to meet the short-term needs of the business,\nsuch as working capital.<\/p>\n\n\n\n<p><strong>Primary\nlenders<\/strong><\/p>\n\n\n\n<ul><li>Secured and unsecured\ncredits are primarily issued by banks and non-banking financial corporations\n(NBFCs).<\/li><li>Unsecured loans are majorly\ngranted by private lenders and other alternative sources.<\/li><li>The criteria pertaining to\nthe credit amount, interest rate, value of collateral and the like varies for\neach institution.<\/li><\/ul>\n\n\n\n<ul><li><strong>Revenue-based\nfinance (RBF)<\/strong><\/li><\/ul>\n\n\n\n<p><strong>Description<\/strong><\/p>\n\n\n\n<p>Generally,\nrevenue-based finance is offered by private investors to small businesses to\nmeet their most urgent capital expense requirements. Under this scheme, the\nborrowers promise to pay a percentage of their gross monthly income towards the\nloan repayment. <\/p>\n\n\n\n<p><strong>Distinctive\nfeatures<\/strong><\/p>\n\n\n\n<ul><li>Amount to be repaid is\nusually expressed as a simple multiple of the loan amount. <\/li><li>EMI or fixed duration is\nvariable as repayment is based on the revenue.<\/li><li>Revenue-based finance can\nbe both secured and unsecured as per the agreement between the borrower and the\nlender.<\/li><li>Lenders\/stakeholders can\napply restrictions to the terms\/conduct of business operations. They can also\nattach covenants to the loan agreement.<\/li><\/ul>\n\n\n\n<p><strong>Primary\nlenders<\/strong><\/p>\n\n\n\n<ul><li>Private investors <\/li><li>MNCs<\/li><\/ul>\n\n\n\n<p><strong>Who can\napply<\/strong><\/p>\n\n\n\n<p>Businesses\nthat are unable to secure traditional finance for reasons such as low credit\nrating or an inability to provide collateral may opt for RBF.<\/p>\n\n\n\n<ul><li><strong>Government\nloans<\/strong><\/li><\/ul>\n\n\n\n<p><strong>Description<\/strong><\/p>\n\n\n\n<p>The MSME\nsector is a significant contributor to India\u2019s GDP and employment generation.\nIt employs around 106 million people or 40% of India&#8217;s workforce. To boost the\nperformance of MSMEs, the government offers loans to help improve their status.\n<\/p>\n\n\n\n<p><strong>Loan distribution<\/strong><\/p>\n\n\n\n<ul><li>These loans are disbursed\nthrough Government organisations, NBFCs and scheduled banks <\/li><li>The purpose may be to fund\nworking capital, finance specific projects and many others <\/li><li>Government loans are\nusually offered on easier terms as compared to private financing.<\/li><\/ul>\n\n\n\n<p><strong>Prominent\ninstitutions<\/strong><\/p>\n\n\n\n<p>The major\ninstitutions offering government loans to MSMEs are as follows:<\/p>\n\n\n\n<ul><li>National Bank for\nAgriculture and Rural Development (NABARD)<\/li><li>Micro Units Development and\nRefinance Agency (MUDRA) <\/li><li>Small Industries Development\nBank of India (SIDBI)<\/li><li>Loans are also available at\nlow rates from certain banks like SBI.<\/li><\/ul>\n\n\n\n<p><strong>Who can\napply<\/strong><\/p>\n\n\n\n<p>Small-scale\nbusinesses that find it challenging to afford traditional funding due to high\ninterest, high collateral requirement or low credit rating can apply.<\/p>\n\n\n\n<ul><li><strong>Subsidised loans<\/strong><\/li><\/ul>\n\n\n\n<p><strong>Description<\/strong><\/p>\n\n\n\n<p>Subsidised\nloans are those under which the government offers a subsidy for loan repayment\nto small businesses. Subsidised loans are issued primarily by private lenders,\nbanks and NBFCs. These loans are sanctioned under government initiatives to\nboost MSMEs, and the schemes vary in terms of eligibility, subsidy amount and\npurpose for which it is issued.<\/p>\n\n\n\n<p><strong>Primary\nlenders<\/strong><\/p>\n\n\n\n<p>These\nloans are sourced for lenders in the open market. <\/p>\n\n\n\n<p><strong>Process<\/strong><\/p>\n\n\n\n<ul><li>Under the subsidised loan\nscheme, the borrower applies for a loan with the lender and has to submit an\napplication for a subsidy to the government. <\/li><\/ul>\n\n\n\n<ul><li>The government grants a\nloan based on the scheme. The amount of subsidy will be defined as per the\nscheme and the agreement between the three parties. Subsidy here means the\npercentage of interest or loan amount to be repaid by the government.<\/li><\/ul>\n\n\n\n<p><strong>Who can\napply<\/strong><\/p>\n\n\n\n<p>Subsidised\nloans are prominently applied by start-ups who face challenges in meeting their\nbusiness funding and are unable to repay their loan amounts.<\/p>\n\n\n\n<p>Producing\nRs 20 lakh crore of goods and services annually, MSMEs contribute as much as\n40% to India\u2019s GDP. Loans are major drivers to accelerate their pace, which is\npromoted by both public sector and private lenders. <\/p>\n\n\n\n<p><strong><em>FinanSME\n<\/em><\/strong>is a one-stop destination that aids MSMEs in sourcing low-cost\ncredit for businesses and helps them in their financial decision-making.\nContact <strong>FinanSME<\/strong> for a consultation now.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>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\u2019s attempt at managing uncertain\/unplanned situations or bearing a loss without disturbing the allocated running costs. SME Loans Salient features Quick disbursal Flexible repayment [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":243,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2,3],"tags":[7,8,22,27,33],"_links":{"self":[{"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/posts\/202"}],"collection":[{"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/comments?post=202"}],"version-history":[{"count":1,"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/posts\/202\/revisions"}],"predecessor-version":[{"id":203,"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/posts\/202\/revisions\/203"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/media\/243"}],"wp:attachment":[{"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/media?parent=202"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/categories?post=202"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.finansme.com\/blog\/wp-json\/wp\/v2\/tags?post=202"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}