After starting a small business, you may require funding to start a new project, expand operations, or recover from losses. In such cases, you have two options to meet your requirements. You can redeem your cash reserves or take a loan for SME. At times, your savings are just not enough, and therefore, the best available alternative is small business loans in India.
Whether you want to buy new stocks, purchase equipment, expand office space, or pay for new staff, business loans in India can cater to all your short-term business requirements without touching your savings. The best part is that applying for a small business loan has become hassle-free. You are not required to pledge your asset as collateral to secure a loan for yourself.
What is a small business loan?
SME Loans or small business loans are unsecured credit facilities provided by both banks and non-banking financial institutions in India. They are primarily provided to small business owners and women entrepreneurs to meet their business requirements and thrive in a competitive business environment. They best suit the short-term needs of a small business. To get a loan for SME, there are minimum eligibility criteria.
However, it is important to note that the eligibility of SME loans and small business loans differ. SME Loans are particularly given to enterprises registered as SMEs with the MSME Ministry of the Govt. of India.
Benefits of small business loans in India
There are numerous benefits of small business loans in India that you, as a business owner, can avail of to cater to your business needs without redeeming your savings.
Here are the top benefits of small business loans in India:
Whether you need to replenish stock or purchase new machinery in your business, you can use an SME loan or a small business loan to meet your business requirements without putting any financial burden on your shoulders. Applying for a small business loan is simple and hassle-free. After meeting the eligibility criteria of your lender, you can get the sanctioned funds in no time. Besides that, most lenders offer loans for SMEs online. It means that you do not have to visit any physical location and stand in long queues to get a loan. You can fill in your application and submit the relevant documents from the comfort of your home.
Lower interest rate
Compared to other business loans in India, loans for SMEs or small businesses come at a lower interest rate. To get a lower interest rate, you will ensure that your business earns a profit and you have a credible profile. Your business credit history will also be considered before assigning an interest rate for you. So, before applying for a loan, make sure to assess your business needs and have a solid repayment plan to avoid any default in your payments.
Minimum eligibility criteria
Unlike other unsecured loans, the criteria to get a small business loan are a bare minimum. Here are requirements that are common across all platforms:
- You must be an Indian citizen.
- You must be at least 21 years old while applying for a loan and 65 years old during the loan maturity.
- Your business must have been active for a minimum of six months.
- Your business must have earned a profit in the past three months – based on your lender’s policy.
- Your business must be on the SBA finance list.
Keep in mind that Trusts, NGOs, and charitable organizations are not eligible to apply for small business loans in India.
Minimum documentation involved
To apply for a small business loan, you do not need to submit lengthy documents like other unsecured business loans. The documents required to apply for a loan for SME or small business loans are – proof of business registration, such as GST registration, bank statements, PAN Card details, Income Tax Returns, and KYC documents.
Small business loans in India are unsecured loans. It means that you do not need to pledge your asset with considerable value as collateral. However, you must convince your lender that you will not default on your loan repayments. Your lender may have to check your GST records to determine your credibility. Having regular payments of tax ensures the approval of your loan applications. The best part about a loan for SME is that you do not need to submit financial statements or a balance sheet.
Improve your credibility
The best part about small business loans is that business owners and entrepreneurs can improve their credibility in the market, due to which they can foster more profits. With small business loans, you can create a reputation for your business in the loan market. When you take a small business loan and ensure on-time payments, it will reflect positively on your credit profile and increase your credit ratings. Having a healthy credit score ensures loans in the future.
So, don’t worry about your businesses operations and fuel them with a quick small business loan when needed.