As a small business owner, you will need funding to some point in your business to ensure the continuation of its operations. Your cash reserves may not be enough to meet your financial requirements. In such cases, getting a loan for SME may be the best option to manage your operations, maintain inventory, or purchase new equipment without putting any burden on your savings or investments.
SME loan or loan for SME is a type of unsecured loan offered by banks and non-banking financial institutions. It allows you to meet all your business requirements without dipping into your savings. Since it is unsecured, you do not need to pledge your asset with considerable value as collateral. Most lenders offer up to Rs. 30,00,000/- as a loan. With affordable interest rates and flexible repayment options, making timely repayments is easy and convenient.
Features and benefits of SME loans in India
Although you can get a higher loan amount and lower interest rate, it is worth noting that both the loan amount and interest rate depend on factors such as income, credit score, current financial obligations, etc. You must convenience your lender that you can repay the loan on time.
Here are the top features and benefits of getting a loan for an SME:
- Meet your working capital needs
The best part about a loan for an SME is that you can meet working capital needs without any hassle. It is possible to buy new stocks, maintain inventory, update equipment, or expand your office space, SME loans can help you achieve all your business goals. It enables you to ensure a smooth running of your operation even during the recent COVID-19 pandemic and improve the financial stability of your small business.
- An easy loan application process
The whole process of applying for a loan for an SME is easy and convenient, thanks to the internet. Most lenders in the financial market do not require any collateral to get a loan. With the availability of loans online, you can apply for a small business loan from the comfort of your home. All you need is a computer with internet connectivity.
Also, the eligibility criteria and documentation requirements are a bare minimum. To get a loan, submit KYC documents, income proof, and business establishment documents.
- Flexible repayment options
Another benefit of getting an SME loan is that there is flexibility while making repayments. Many lenders offer flexible terms and conditions that make it easier to choose an EMI repayment option based on your capability. Additionally, you may also be allowed to opt for bullet payments for a periodic payment. This way, you can make repayment within the stipulated tenure.
- Interest rates and other charges
Compared to other unsecured loans, the interest rates for a small business loan are lower. The reason is that loans for SMEs are designed for public welfare. However, several factors are considered before approving your loan application. These may include business or personal credentials, loan tenure, business model, and the balance sheet of the company. After getting approved for a loan, you may have to incur a nominal processing fee.
- Collateral-free loan
Much of a loan for SME’s popularity stems from the fact that it is collateral-free. It means that there is no need to pledge your asset with considerable value as collateral to get a loan. The loan amount and interest rate depend on factors, such as income, credit score, business profitability, etc. To secure an SME loan, convince your lender that your’s is a profit-earning business and you have an excellent credit score.
- Tax benefits
Another benefit of getting an SME loan is that you receive tax deductions under the Income Tax Act. For instance, a part of your business profit used to make repayments towards your loan is exempted from tax. Besides this unique feature and benefit, loans for SMEs are easy to acquire and repay. As an entrepreneur or small business, SME loans can cater to your business’s financial requirements without pledging anything as collateral.
A loan for SME is the best way to finance your business requirements without dipping into your savings or investments. If your business is earning profit and you have an excellent credit score, it is easier to get a loan amount and interest rate more suitable to your needs.