Understanding The Key Benefits of An SME Business Loan

Understanding The Key Benefits of An SME Business Loan

Over 63 million MSMEs or micro, small and medium enterprises were operating in India, as per an FY2020 report. This MSME cluster primarily consists of micro and small enterprises responsible for employment generation in the country. However, often these enterprises struggle due to a shortage of funds at the right time. 

In such scenarios, individuals resort to an SME loan to meet the gap between demand and supply. Thus, they need to understand the benefits of availing of this credit and meet their business goals with ease. 

Features and benefits of SME loan 

Following are the key benefits of SME business loans that individuals need to consider. 

1. Collateral-free

The definition of small and medium enterprises depends on the annual turnover. For instance, the annual turnover of a small and medium business does not exceed Rs.50 crore and Rs.250 crore, respectively. 

Generally, an SME loan is available without collateral and therefore, it becomes feasible for enterprises without valuable properties to avail funds without much hassle. Similarly, it also becomes easier for entrepreneurs to apply for credit in the initial phase of their venture. 

2. Versatility 

Another perk of availing a business loan for small enterprises is that borrowers can utilise the funds for various purposes that include

  • Replenishing working capital funds 
  • Boosting business cash flow
  • Expanding the business to another city
  • Purchase machinery 
  • Renovate the office

Besides, individuals can use an SME loan for other business-related expenses as well. 

3. High loan amount 

Primarily, the loan amount depends on the MSME loan eligibility of the applicant. For instance, lenders sanction the loan to those with a credit score of 750 and above. 

Selected financial institutions like Bajaj Finserv extend an SME loan of up to Rs.45 lakh at competitive interest rates. 

It also extends pre-approved offers that make the credit availing process straightforward and faster. Apart from business loans, these offers are also available on a range of financial products like personal loans, credit cards and several others. You can check your pre-approved offer by providing some basic credentials like your name and contact number. 

4. Easy repayment structure 

Generally, a small business loan comes with a tenor of up to 84 months, and borrowers can choose a repayment schedule that fits their capacity. In this regard, they can use a business loan calculator that helps in estimating the monthly installments. It allows them to repay the loan without difficulty and avoid burnout while running their small business. 

Borrowers should compare different lenders as well to get the best interest rate that eventually decides the borrowing cost. 

5. More savings with Flexi loan facility 

Business owners who want to save further on the interest payment can also opt for a Flexi loan facility. It ensures that individuals pay interest only on the fund utilised and not on the whole corpus. 

Therefore, with this facility, individuals can also lower their EMI burden significantly that further facilitates repayment. 

6. Simple eligibility and documentation 

Constant credit flow is a determining factor for any business, and therefore, every SME needs a solid financial plan to sail through the rainy season. However, the first step towards availing funds is meeting the lender-specific criteria. While it changes with lenders, the following are some of the standard requisites they need to fulfil while applying for an SME loan. 

  • A business should have a vintage of 3 years or more.
  • The ITR should be settled for at least one year. 
  • The age of the applicants must range between 25 years and 65 years. 

Apart from these, they also have to submit a checklist of relevant documents to complete the eligibility. For instance, they need to present KYC, PAN card, GST statement, bank account details of the last 6 months, etc. 

Therefore, after knowing about the benefits of an SME loan, business owners can utilize the funds in various ways and generate more revenue within a short period.