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Looking for an SME Loan? Here's How You Can Apply For One

By Chanel Rick - Jan 31,2022
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With the unpredictability of the pandemic, many businesses have taken a hit. You may have witnessed the unfortunate closing down of newly set up start-up ventures, along with many veteran businesses. Though, not all industries have been badly affected, with some booming businesses flouring in the market. However, it’s time to look at options businesses can choose for financial support.

However, it’s important to look at options like SME loans, which could increase the financial backing of many businesses. Especially with its many benefits like lower interests and boost a business’ cash flow.

But, wait, what are SME Loans? 

To put it simply, Small and Medium Enterprise (SME) loans take care of the financial necessities of a business. They cater to a range of different ventures like projects, businesses, start-ups and women-run businesses, among others. The investment and the sector your business is from, qualifies it to be recognized as an SME.

These SME loans also offer you benefits –

  1. Quicker approval with online applications.
  2. Usually, no collateral needed to avail an SME loan.
  3. Relatively low rates of interest.
  4. Minimum documentation.
  5. Flexible repayment structures lasting between 12 to 60 months.

Whether you choose to acquire this loan from a bank or other financial institutions, generally lenders prefer the EMI to your SME loan to be at 25% of your businesses’ income. This means you can only use the remaining 75% to fulfil other business expenses. By following the Debt to Service Ratio, you and the financial institution can ensure that the monthly instalments are paid without hindering the business’ finances.

Find out your eligibility 

Bear in mind that these criteria vary across different financial institutions.

Type of business

Businesses run by self-employed individuals and proprietors can consider an SME loan. Even businesses like private companies that are in the line of trading, manufacturing, and services, and partnership firms will be eligible to apply for this loan.

Age

The age of the borrower can range from 21 to 65 years old, with the latter at the time of the loan’s maturity.

Minimum Annual Income and Turnover 

A businesses minimum annual income must be Rs. 1.5 lakhs, with a minimum turnover of Rs. 40 lakhs.

Experience 

The applicant must have at least 3 years of experience in the same line of business with over 5 years of total business experience.

Purpose

The purpose mentioned on the loan application must adhere to business needs. These could be from availing working capital and expanding the business’ product line to hiring more employees or launching a new branch, and many more.

What to expect while applying? 

After choosing a bank or financial institution for an SME loan, keep the following information handy while filling out the application.

  1. Name of the company
  2. Date of incorporation
  3. GST Number
  4. Industry Code
  5. PAN
  6. Registered Address
  7. Operating Address
  8. Contact Details – E-mail Address & Contact Number

Documents at the ready

Here are the documents you may be expected to provide while applying for an SME loan.

  1. Business registration details
  2. SME business registration certificate
  3. Parent company/associates/group entity details
  4. Guarantee letters from Partners/Directors/Promoters
  5. Sales tax returns filing documents – copy
  6. Income tax returns filing documents – copy
  7. Sector-specific licenses
  8. Disclosure of existing loan details
  9. Bank account details

With these details secure, you or your business could easily avail an SME loan from some of India’s leading banks and financial institutions. Seek out SME loans to further your business goals with ease, and without the fear of high-interest rates and watch your business grow.

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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522