MSMEs and SMEs are essential for a country’s growth due to their significant contribution to the GDP. However, these organizations often witness a shortage of funds and fail to conduct day-to-day operations. In this scenario, reputed financial institutions extend MSME business loans at competitive rates to address such issues.
With the help of this credit option, borrowers can bridge the gap between supply and demand. Thus, borrowers need to understand the benefits of availing of MSME loans for small businesses and meet their organisation’s goals easily.
Features and benefits of MSME loan
MSMEs and SMEs are always considered the backbone of the development of the economy in India. Many businesses have the opportunity to procure finances from different credit options. However, when it comes to small businesses, the most preferred option to address financial requirements is an MSME loan.
Nonetheless, here are the factors that make the MSME loan an ideal option for small business owners:
- No requirement for collateral
The financial standing of small and medium organizations relies on the annual turnover. For instance, the yearly turnover of these enterprises does not exceed the mark of Rs. 50 crore and Rs. 250 crore, respectively.
Usually, MSME loans can be acquired without pledging any asset; therefore, it becomes a viable funding option for these enterprises to avail of funds with ease. Similarly, it becomes convenient for entrepreneurs to apply for credit during the initial phase of the venture.
- No-end use restriction
Another advantage of availing of a business loan for small companies is that borrowers can use the funds to fulfill various purposes that include –
- Boost cash flow
- Purchase machinery or equipment
- Expand organization
- Increase working capital
- Renovate office
Besides, borrowers can utilize their finances to meet other business-related expenses.
- Substantial loan amount
Usually, business loan lenders sanction the amount based on the applicant’s eligibility. For instance, applicants with a credit score of 685 and above are eligible to avail of the sizeable loan amount. Besides, with a healthy CIBIL score, borrowers can negotiate with the lender for a better MSME loan interest rate.
In this regard, borrowers must know how to maintain a good business credit score to ensure smooth business financing. Moreover, selected financial institutions like Bajaj Finserv extend substantial SME loan amounts at competitive interest rates and flexible repayment tenors. Furthermore, these NBFCs also provide pre-approved offers on various financial products such as business loans, personal loans, credit cards, etc.
With the help of these offers, existing borrowers can dodge the hassle of documentation and expedite the loaning procedure. Therefore, one can check his/her pre-approved offer by mentioning his/her name and contact information.
- Flexible repayment structure
Usually, small businesses come with a tenor of up to 84 months, and borrowers can select a repayment schedule that fits their repayment capacity. In such situations, they can use a business loan EMI calculator that helps in evaluating EMIs and the overall interest outgo. This will further allow them to repay the loan with ease and avoid burnout while running their small business.
- Save more with the Flexi loan facility
Business owners who want substantial savings on interest payments can choose the Flexi loan facility, where they need to pay interest only on the used amount and not on the overall sanctioned amount. Therefore, with this facility, borrowers can significantly reduce their EMI and burden, thereby facilitating hassle-free repayment.
How can a business flourish with MSME loans?
Here are some of the ways that will allow small business owners to grow their business with MSME loans:
- Managing inventory
Restoring inventory is essential for small firms to generate substantial revenue. An MSME credit facility allows small business owners to guard their supply chain, deliver voluminous orders and manage seasonal upswings.
- Manage working capital
Working capital refers to the cash flow required for an organization to conduct daily operations and reflects the company’s liquidity status. However, small businesses require additional financial assistance to ensure that their business never runs out of working capital.
- Consolidating debt
With an MSME loan, organizations can combine various loan payments into a single EMI. This provides relief from the financial burden on EMIs and helps in aligning the repayment and invoicing schedule.
With the above explanation, borrowers now have an understanding of MSME loans and how to use them to grow their business to new heights. Moreover, such credit options are available against simple eligible and minimal documentation. Therefore, business owners can avail funds whenever they require them and continue their business activities.