After the financial crisis, the global economy is still facing difficulties to achieve better growth rates. Similarly, India’s GDP is pushing for better economic conditions. Recently, Moody’s Investors Service has projected a 6.2 percent reduction in India’s GDP. Slowness in the economy is also due to many reasons, including rural domestic crisis, weak hiring and difficult finance.
In addition, the report also points to a slowdown in business modules and a slow credit flow for businesses contributing to more inadequate investment. However, SME (small, medium scale industry) is constantly going in the same direction. One reason for this is that the Government of India has relaxed some norms in SME loans, which has given further impetus to growth.
Currently, there are over 42.50 million registered and unregistered SMEs, employing around 106 million people. The availability of online SME loans, unsecured business loans and other loan schemes are giving SMEs the direction of development. In India, both banks and non-banking financial companies (NBFCs) give loans to SMEs. The customer has to be guaranteed for some and not for some. There are many types of SME loans available in India. However, it is important to know what exactly it is.
What is an SME loan?
Simply put, loan companies provide SME loans to meet the needs of SME companies. SMEs are responsible for providing excellent employment opportunities and supporting industrialization in rural areas. There are many types of SME loans in India, which a businessman can choose.
But to get a loan, there is a scale of eligibility, which has to be met. These include machinery loan, working capital loan, term loan etc. Traders take these loans to buy machinery and increase working capital. Different financial institutions provide different loan amounts and tenure. The range of this loan is from 1 lakh to 5 lakh rupees.
Before knowing how to apply for a business loan, let us tell you what are the types of SME loans.
This SME loan is the most popular, which NBFC provides. Lending institutions provide both short and long term loans. The loan amount, tenure and interest rate of each lender varies. Many lenders get fixed interest rates, while others are floating. If you meet the qualification scale, then NBFC will give you a loan in 78 hours or 3 days.
Working Capital Loan:
In simple words, companies take working capital loans to meet everyday needs. The main objective of this loan is to pay more attention to the entire development of businesses and help to maintain capital. Small businesses may need the money at any time to achieve growth. It is then, that working capital loans come in the role of dealing with financial needs. Most working capital loans are unsecured.
It is also called loan capital. It is a form of loan, bond and stock lending that has to be paid back to the investor. In a capital loan, the borrower has to make some periodic interest payments to the investors. However, the investor will not get a share from the advantages of the organization.
How to apply for a small business loan
Gone are the days when SME traders had to wait a long time to get a business loan. The process and eligibility criterion of heavy documents used to eat a lot of time. Thanks to online loan application, in which the buyer does not have to go through any tedious process to take an SME loan. But before applying for SME loan, it is very important to compare loan payback, duration, interest rate and processing fees.
How to apply for SME loan, this is the way
Check your credit score: This is the most important part of the loan. The lender will check your credit score, which should be more as per the rules. Lending companies prefer to give loans to business owners who have a credit history of 700 or more. If you have no way to check your credit score, then go to the online lending sites. Maintain the credit score (CIBIL) more by repaying the previous loan on time. This will definitely help in getting SME loan immediately.
Check your eligibility criteria: Different companies have different eligibility criteria’s, which you should compare and know about. These are included in the eligibility criterion of many well-known lenders.
– Previous sales should be 5 lakh or more.
– Last year’s ITR should be at least 1.5 lakhs.
– There should be a business campus, which has enough assets.
– ID proof- PAN card, business and house address, 9 months statement of bank.
– Commercial and house property documents
Maintain the correct account: As a business unit, it is necessary that you keep a record of the business account properly. It is advised to keep an audit record of your business finance to present before the lender.
Benefits of taking an SME loan
Many repayment options: Since lenders also understand the ups and downs of the business, they offer several repayment plans while sanctioning the loan. Apart from this, lenders offer several repayment periods like 12 months, 18 months, 24 months. If you pay 6 EMIs.
No hassle application process: Minimum documentation, easy process and approval of loan without hassle in three days. The SME loan application is also available online so that you can apply for it according to your convenience.
Instant Fund Distribution: You will get instant loan to increase your existing business. Some well-known SME loan companies provide funds in three days.
SMEs have an important role in the Indian economy. Apart from creating employment opportunities, it also takes GDP forward. Finance companies are giving their best to help such enterprises. Choose the best SME loan for good business growth.