Every small and medium business organization can take up business loans to meet business-related expenses. They can also use SME business loan to expand their business. These loans are unsecured, and one can easily apply for them. It helps to support the small business organizations based on critical areas like finance, infrastructure, and many more.
However, one needs to have specific eligibility criteria for applying the amount. When someone speaks about SME loans, it is one of the best options for financing their business. The SME full form stands for the small and medium enterprise.
Criteria for application
Whenever you are applying for an SME loan, you need to look for these criteria:
- One should be of minimum 24 years to get the loan
- Above 70 years of age, the financial institution won’t provide the loan
- Business should have a minimum turnover of Rs 1 crore
- The business should be in running condition for 3 years
- The company should have fair dealings
Documents required for applying for the loan
Once you are eligible, you need to provide certain documents.
- Complete application form
- Passport size photographs
- Identity proof
- Address proof including the utility bills, driving license, passport, or voter ID card
- Ownership proof
- Various financial documents including PAN card, GSTIN, photocopy of the recent income tax return form, last two year’s audited balance sheet with computation of income and profit and loss account, proof of the continuation of the business
Benefits of taking the loan
There are certain benefits of taking a small and medium business loan.
- Easy application
Getting a small business loan is quite favorable. With minimum documentation and easy eligibility criteria, you can get your loan approved at any point in time. This loan comes in handy whenever you urgently need funds for your business.
- No collaterals
Small business loans are always unsecured. It means that you need not pledge any security to get the loan. The main aim of this kind of loan is to help the business boost productivity.
- Flexible repayments tenure
Businesses tend to take quick and medium-enterprise loans for financing their short-term requirements. Therefore the payment dorm ranges between 12 months and 36 months for any business owner. But in the case of self-employed professionals, it is between 12 months to 48 months. Therefore, the repayment term is quite flexible. It can help you to manage the flow of cash in your business. In addition to that, you can also take the help of a business loan EMI calculator.
- Competitive interest rate
Every rupee is a saved rupee for your business. With a reasonably high SME loan interest rate, one would see business collapse. Hence before you take up the business loan, you should consider a lower interest rate.
When can you use a loan?
You can consider the small and medium enterprise loan under these circumstances:
- purchasing land to expand the business
- the purchase of equipment and machinery
- buying inventory
- buying raw materials
- Settle the employee wages, bills, and debts
- For financing the marketing campaigns
- To hire skilled labor
- For refurbishing your organization.
Small and medium enterprises are the backbone of the economy of India. They should be growing profitability. Moreover, the prime growth engine of the same would be backed by small and medium enterprise loans. As it can help create a healthy banking ecosystem. It also becomes the entrepreneurs’ prime duty to choose the financier carefully.
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Almost everyone is familiar with the SME full form. But, very few businesses know about the available SME loans. While running a business of any size, you may need some additional funds. Several NBFCs have tailored their loan products to the needs of SMEs. But, before applying for the loan, you need to know the SME loan interest rate and eligibility criteria. You may also consult your lender to know the documents to be submitted.
Nowadays, it is very easy to apply for a small business loan. Private lenders are ready to offer loans without collateral. Thus, small business owners can easily apply for a loan.
The SME loan will enable you to grow your business in different ways. Technology, human resource, and finance are major essentials for every business. But, finance is the most important one of these factors. With the right amount of funds, no business will be successful. For instance, you may use the loan to buy equipment, hire employees, start a marketing program, and purchase raw materials.
Reliable NBFCs will provide you with loans at the lowest interest rate. Some government-backed loan schemes are also available for SMBs. Still, you need to focus on your business model, loan tenure, and processing charge while applying for the loan.
The lenders also set different repayment schemes, and thus, you have to know about them before applying for the loan. Calculate the EMI and apply for the small business loan online. The loan amount will benefit your business.