India houses 63 million MSMEs, contributing 30% to GDP and offering millions of jobs. Small business loans transform financing for this sector, aiding expansion, cash flow, and inventory with up to Rs. 75 Lakhs and 60-month repayment.
This blog offers a roadmap through the maze of small business loans.
Government-backed loans boost SME capacity. MUDRA, Stand-Up India, and CGTMSE are some collateral-free initiatives from India's small business loans wing.
Working capital loans provide funds for day-to-day business operations, such as paying salaries, buying inventory, and covering overhead costs, ensuring smooth cash flow cycles.
Microloans are small, short-term loans offered by microfinance institutions (MFIs) and NBFCs to SMEs that lack access to traditional banking services. MFI business loans under Rs. 1 Lakh in India qualify as microloans.
Simply put, equipment loans offer funding for purchasing or leasing new equipment for the business unit.
A business loan works like a regular unsecured personal loan, where you can borrow up to Rs. 25 Lakhs with relatively high interest rates. Since these loans don’t have end-use restrictions, you can use the funds to meet any business requirements.
Applying for a small business loan can be complicated when there are so many options. Here’s how you can simply do this:
The type of small business loan you choose should align with your business needs and goals. If you need funds to hire more personnel, a working capital loan is your best option. But if you wish to upgrade your offices, get new inventory, and install better tech, a personal business loan would be better.
Small business loans have eligibility criteria, including annual turnover requirements. Some government loan schemes, like MUDRA, are only for non-corporate firms. Checking eligibility helps you make an informed choice.
Remember that paying EMIs for the loan will be an added expense to your business ledger. Thus, using online EMI calculators and ensuring EMIs are within your affordability threshold is always prudent.
Small business loans provide accessible credit to help businesses fund various expenses, such as inventory, renovations, hiring, and tech upgrades. Assessing your business needs and funding requirements can help you choose the right loan to support growth.
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Small business loans are small-ticket loans issued to mainly SME ventures for various uses like generating working capital, equipment purchases, salary payments, etc. Generally, lenders can issue up to Rs. 70 Lakhs that must be repaid in EMIs over a maximum tenure of 60 months.
Checking the eligibility criteria for a small business loan can help businesses know the turnover cut-off requirement for the loan. Similarly, evaluating the business’s immediate funding needs can help entrepreneurs determine the right loan amount.
Business growth, multipurpose use, increased cash flow, and equity maintenance are some pros of small business loans. However, some drawbacks of small business loans include strict eligibility criteria and the possibility of asset loss (in loans that need collateral).
Managing business expenses frugally, making part-payments, and documenting the loan payment plan can help businesses repay these loans successfully.
Small business loans can be used to invest in new technology, lease or buy new office space, invest in new equipment, and initiate marketing campaigns to fuel growth and expansion.
