sme loan

How To Get The Best SME Loan To Meet Your Requirements

Adequate capital and a great business idea with a detailed plan can drive success. A Small and Medium Enterprise (SME) loan with lending institutions can help entrepreneurs during a crisis or unpredictable times. Financing your business through a loan maintains the existing ownership structure, unlike equity distribution. 

How to Get the Best SME Loan

Following are the factors to consider getting the best Small Business Loan:

  • Business Needs 

For an efficient loan, an entrepreneur needs to know the business requirements. You should understand your business requirements regarding operations and future growth. You should determine your current financial position and estimate your requirements for additionHow To Get The Best SME Loan To Meet Your Requirementsal funds. You should apply and utilize the loan amount prudently. Hence, a better understanding of your business position will help you to make the right decision for a loan as per your requirements.

  • Your Financial Credibility 

While approving a business loan, lending institutions look at the applicant’s creditworthiness. CIBIL score is an important factor for lenders to determine the SME or MSME loan interest rate offered to the borrower. A good credit score can offer you more favorable terms for your loan.

  • The Timeline 

Know how soon you want the funds. Lending institutions can process your loan instantly and disburse the loan amount on the same day of loan approval. 

  • Repayment Tenure 

Borrowers need to repay the loan amount and interest within the loan tenure. Loan repayment is one of the key factors to select the most suitable loan at a competitive MSME loan interest rate. You should understand your business cash flow to make decisions on repayment tenure accordingly.

Thus, pair up with the best lending institution to take a business loan, like SME loans, at favorable terms. 

Also Read: 5 Useful MSME Business Loan Tips for Young Entrepreneurs

Benefits of Registration for SMEs

MSME refers to micro, small and medium enterprises. Partnerships firms, one-person companies, limited companies, cooperative societies, and Hindu undivided families can obtain MSME registration in India. The eligibility criteria for qualification as MSME depends on the enterprise’s investment and turnover. For instance, enterprises with investments of less than one crore and turnover of less than five crores are classified as micro-enterprises. Below listed are the advantages of obtaining registration for small and medium enterprises. 

  • Reduced Interest Rates

Availability of business loans for starting a business is difficult for small business owners. However, with MSME registration, financial institutions offer loans at reduced interest rates. It also becomes easier to access credit as the lenders give MSME entities priority. 

  • Exemptions from Income Tax

Small enterprises can avail of income tax exemptions with an MSME registration. Furthermore, such enterprises are exempted from carrying out audit procedures with registration certificates. 

  • Technological Support

The technological up-gradation requirements of MSME units are reimbursed by the government. This promotes cost-effectiveness and promotes clean energy use for enterprises. 

  • Subsidies

All companies registered under MSME registration are eligible for promotion subsidies. Such subsidies promote the growth of these enterprises, and the limit may be set by the government from time to time. 

MSME can avail of loans that are specific to their business on fulfilment of business loan eligibility criteria. The primary utilisation of such loans is to meet the working capital requirements, facilitate the expansion of businesses, and for increasing the cash flow of the business. For availing of such loans at attractive interest rates and flexible repayment tenures, contact us.

Additional Read: 5 Steps to Apply for MSME Loans?

What are the Benefits of an SME Loan

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An SME loan is designed specifically for small and medium enterprises. Therefore, it comes with a lot of benefits attached to it. These benefits include.

Benefits of an SME Loan:

  • Minimal Documentation

When wondering how to apply for an MSME loan in a time of emergency, the first thing that might strike business owners is how lengthy the process will be. This is far from the truth. MSME loans require very minimal and basic documents to get sanctioned which saves you a lot of time. 

  • Flexible Tenure

Most SME loans have flexible repayment tenures which ensures that the borrower is not burdened by the stress of tight deadlines. Hence, allowing them to focus primarily on the growth of their business and get good returns to be able to pay back on time too.

  • Unsecured

MSME loan eligibility is not based on the pledging of assets. Due to its unsecured nature, small and medium business owners find it much more convenient to avail it as they do not have many, or any assets, for that matter in the initial stages of business establishment.   

  • No Prepayment Charges

Prepayment penalties are levied if borrowers try to disburse their loan before the tenure matures and to secure lenders from losing out on interests. For MSME loans, however, these charges are not levied. This makes repayment even more flexible. 

Fullerton India offers business loans to MSME’s that can help you boost your business without having to worry about funding. With competitive interest rates and flexible tenures, it is surely a step in the right direction for your enterprise

Must Read: What Are The Steps To Get A Small Business Loan?

How to Maintain a Good Credit Score as an SME?

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Having a high credit score as Small and Medium Enterprises is important. It helps get funding through as well as new clients. This is because your business credit report can be accessed by other stakeholders in the industry before getting into business with you. The following are a few things you can do to maintain a good credit score: 

Things to Do to Maintain Good Credit Score are:

  • Consistency 

A good credit score is built overnight. When availing an SME loan, your credit score needs to be in place consistently. A good practice to boost your score over a period is by credit utilisation – use your line of credit but do not max it out. 

  • Updating Information 

There are a few major bureaus in India that maintain profiles of companies. Make sure your profile is up-to-date across these platforms. Information such as years in operation, number of employees, and financial statements must be updated periodically. It is also advised to only borrow from lenders registered on these bureaus.

  • Credit History
    It is essential that business owners have a good credit history. This means that they must have no defaults in repayments of previous debt or financial commitments. Having a clean public record is also of the essence, it is a business loan requirement and not having a good rep makes lenders sceptical. 

Fullerton India has expertise in business loans that can give your SME a head start. With our flexible tenures and competitive interest rates, you can focus on your business’s growth and be at ease about financing.

Additional Read: Tick-off These 5 Requirements Before Availing Small Business Loan

What is SME Loan and What are the Documents Required To Get an SME Loan?

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SME loans are credit facilities provided to small and medium enterprises to cater to their financial needs. SME loans are tailor-made to suit the specific requirements of SMEs. For instance, you can use the loan amount to invest in your factory infrastructure or maintain a healthy cash flow in your business. 

SME loans are particularly beneficial for women-run businesses. Through proper funding, small businesses can flourish in their operations and make significant contributions to India’s GDP. 

It is mandatory to prepare the following small business loan documents to apply for an SME loan.

  • Identification Proof: Passport, Aadhaar Card, Driving License, Voter ID Card, PAN Card. 
  • Address Proof: Aadhaar Card, Driving License, Voter ID Card, Passport, Utility bill, etc
  • Valid Business Proof: Business Entity Proof, Incorporation Certificate, Article of Association, Partnership Deed, Shops and Establishment Certificate. 
  • PAN Card of business entity and those of partners. 
  • Company financials: Tax audit reports, Balance Sheet, Profit and Loss, VAT returns for the past three years. 
  • Last three months’ bank statement. 
  • Duly signed application form. 

Before applying for an SME loan, you will need to make sure that you meet the underlying eligibility criteria: 

  • You must be a proprietor, self-employed individual, or a private undertaking. 
  • The borrower must be 21 years old at the time of application and 65 years old at the end of the loan tenure. 
  • You must show a minimum income and turnover of the business based on your lender’s policy. 
  • Your business must have been making profits for at least 2 years.
  • You must have a minimum of five years of business experience.

It is one of the popular options among small business owners to secure funding for their businesses. Its popularity stems from features and benefits like minimum business loan documents requirement, collateral-free, flexible tenure, and no prepayment charges. 

Must Read: 5 Major Obstacles That Confront MSME Loans in India

Here Is How You Can Maintain An Excellent Credit Score For Your SME

Small and medium-sized enterprises play a vital role  in our economy. They bring innovation to the field of business. Moreover, SMEs also provide employment to thousands of people. Do you own a small business? Well, then you might face problems in arranging for finance.

However, there is no reason to worry. You can take an SME loan to fund your business. Several financial institutions offer loans to small and medium businesses these days.  However, the lender will check your business credit score before sanctioning your loan. So, you have to maintain a decent score to get your loan approved.

How To Maintain A Good Credit Score For SMEs?

  1. Update Your Information At Fixed Intervals

Always keep your financial profile up to date. That will increase your chances of having a higher credit score. An incomplete profile will lead to a poor credit score. That will lower your chances of getting the loan.

  1. Pay All Your Dues On Time

Punctual payments will increase your credit score by leaps and bounds. You can pay your dues earlier if possible. That will give a nice boost to your score.

  1. Use Instruments Of Credit Regularly

Make it a habit to use instruments like credit cards. It will improve your credit utilisation ratio, giving the much-needed boost to your credit score.

Maintaining a high credit score will help you get a lower business loan interest rate. So, never ignore your business credit score.

Final Word

Fullerton India encourages small and medium-sized enterprises. It offers loans at affordable rates without collateral. So, when are you expanding your business?

Must Read: Know the Top 5 Benefits of SME Loans

Why Take a SME Loan From NBFCS?

Are you thinking of starting your dream business? You might be worried about the capital. Keep all your tensions at bay. Now, you can take a quick business loan from an NBFC. 

An SME loan is the perfect way to begin your startup. It will provide you with the necessary funding for your small business. Moreover, it is also easy to get.

Benefits Of Taking SME Loan From NBFCs

NBFCS are Non-Banking Financial Institutions. Does that mean you cannot trust them? Well, there is nothing to worry about. They have got recognition from the RBI. Let us look at some of their advantages.

  • You Can Get A Loan With Minimum Documents.

You only need to register your business as an SME with the government of India. Along with that, you need your business proposal. Forget the hassle of submitting multiple documents.

  • Your Loan Will Get Approved Instantly

We know it is hard to control your excitement when you are starting your new business. Waiting for days to receive the funds is the last thing you want. NBFCs will approve your loan within a couple of days.

  • You Will Get Greater Flexibility

You can compare the business loan interest rate offered by various NBFCs. It will let you make a better decision. Moreover, you will also have several options for repayment. Isn’t that superb?

Are you still waiting?  Go ahead and start planning for your dream business.

Must Read: What are the Actual Crucial Differences Between a SMB vs SME?

How To Avail SME Business Loans For Growing Business?

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Loans that address the financial requirements of Small and Medium Enterprise are SME business loans. SME and MSME sectors provide substantial employment opportunities, primarily through industrialisation in rural and backward areas. It is also making important contributions to the nation’s GDP.

Generally SME loan are available under government schemes in conjunction with many banks and NBFCs. You can apply online by filling an online application form and submitting necessary documents, like:

  1. Identity Proof: Aadhaar Card, Driving License, PAN Card, Passport, Voter’s ID, etc.
  2. Address Proof: Aadhar Card, Driving License, Passport, Voter’s ID, etc.
  3. Proof of Business: Business Entity Proof, Incorporation Certificate, Partnership Deed, Shops and Establishment Certificate, etc.
  4. PAN Card: of the business entity and all partners/promotors.
  5. Financials documents: Audited financial statements, Balance Sheet, Profit and loss statement, Tax audit reports and VAT returns, etc., for the last three years.
  6. Bank Statements: For the previous six months.

To avail SME business loan, you should be a proprietor, a self-employed, or a partnership or private limited company. You should be in the age group of 21 to 65 years, the minimum annual income of your business should be Rs. 1.5 lakhs and you should be in this business for at least two years.

Additional Read: Startup Loans v/s SME Loans- Types of Business Loan