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What is SME Loan – Guide to SME Finance

By Finserv MARKETS - Jan 30,2019
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SME Loan

SME stands for ‘small and medium enterprises’ and are important enterprises that contribute significantly to India’s economy, playing second fiddle only to agriculture. SMEs account for 40% of India’s exports and 45% of the industrial output, thus making them a major driver of the country’s economy.

An SME loan is a type of business loan that has been designed for individuals who wish to start their own business and make a positive impact on the industry as well as society. The availability of such credit is important for the overall economic growth of India and for safeguarding its national interests – by promoting and supporting local industries. In case of SME loans, you can repay the loan amount at a fixed interest rate which will make financial planning easier, convenient and hassle-free. If you’re planning on starting a business and need funding, sme finance is the best option.

It’s a no-brainer why small businesses in their infancy stage need a helping hand, and so do medium-sized enterprises looking to further growth/expansion. You can also avail a plethora of complementary services (as discussed below) provided by many lenders. If you’re handling more than one business, then each company will have its own distinct requirements.

There are many mind-boggling offers available as well due to stiff competition among financial institutions in the market. All this translates to better deals/offers for you! There are many varieties of SME loan that are definitely worth researching. If your financial requirement is 5 lakhs or 5 crores, you can get the loan if you’re able to provide a robust business plan to your financier. It’s that simple and easy!

Purpose of SME Loans

The purpose of the SME loan is to meet the business needs such as the purchase of raw material, machinery, managing working capital, marketing, hiring new employees, expansion of business operations, etc.

Eligibility of SME Loans

The eligibility criteria for SME loans may differ from one financial institution to another. Most financial institutions have simple eligibility criteria for SME loans. However, it is advisable to check the eligibility criteria set by the particular lender before applying for an SME loan. This will reduce the rejection chances of your loan application. Moreover, try to improve your CIBIL score to enhance your loan eligibility.

The eligibility criteria for SME loans available at Finserv MARKETS are mentioned below:

  • Applicants must be between 25 to 55 years of age
  • Applicants must have a business vintage of at least 3 years
  • Applicants must have their business’ IT returns filed for at least the past 1 year.

Also know how you can apply for MSME Loan scheme under Atmanirbhar Bharat Yojana

Interest Rates of SME Loans

While availing a business loan for your SME, you must carefully make a note of the interest rate charged by the lending institution. Lower the interest rate; lower will be the repayment burden in the long run. SME loans available at Finserv MARKETS have nominal interest rates starting from 18%.

Read more about CIBIL MSME Rank

Cash Outflow

The cash flow of your business plays a crucial role in determining the success of your business. Positive cash flow can help the business survive during difficult times. Make sure that the cash outflow of your business is lower than the cash inflow. Cash outflows include the payment of the salaries, bills, rents, etc.

Low Processing Fees

The processing fee is charged when the financial institution sanctions the loan. Always try to settle for a lender that has low processing fees for SME loans.

Collateral Requirement

SME loans available at Finserv MARKETS can be availed without providing any collateral. This keeps your valuable assets safe in case you default on your loan by any chance.

Future Payment Ratios

After availing a loan, your prime responsibility should be to make its timely repayment. The ratio of your EMI to your income should not be more than 25%. This will help you repay your loan without straining your finances.

Advantages of SME Loans

  • You can conveniently get a loan regardless of whether your business is small or medium sized.
  • Flexible repayment tenure ranging from 12 months to 60 months, thus rendering the repayment process hassle-free.
  • There is no requirement of collateral for availing an SME loan.
  • You can obtain a loan amount up to 15 lakhs.

Now you know the benefits also learn the process of MSME registration only at Finserv MARKETS

Benefits Provided by Lenders

  • Gone are the days when applying for an SME loan was a long and tedious process. The processing time for your loan will be within the blink of an eye – you’ll be pleasantly surprised by the quick and easy online approval process. You can also avail a host of other business loan benefits.
  • Prominent financial institutions have minimal documentation requirements for SME credit.
  • You can avail the competitive interest rate by on these loans.
  • There are many customised payback options available for esteemed clients like yourself. Flexible repayment tenure ranging from 12 months to 60 months.

You should always calculate EMI on business loan calculator to understand your monthly outflow.

Now that you’re well equipped with all the necessary information, visit the Bajaj Finserv MARKETS website today to avail Business Loan and make an impact on the society as well as your industry.

Download Bajaj Finance App to enjoy wide range of product offerings like Bajaj Finserv Loans, Bajaj Allianz Insurance, Cards, Investments & UPI Payments.

Read more on MSME Databank

“Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!”

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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