How to get SME Loans to Finance, Grow and Expand Your Business

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Micro-financing is a way of providing short-term loans to small and medium enterprises that do not have access to traditional financial resources. More often, small businesses struggle to access loans and other financial products that will grow their business. 

So, if you are running a small business and in need of funds to meet your financial requirements, you can opt for SME loans in India. There are several small business loans that you can avail of based on your needs. Whether you need to buy new stocks, purchase equipment, expand office space, cover business marketing, or pay for additional staff, an SME loan can cover all your needs.

Types of small business loans in India

There are several types of SME loans in India that you can get based on your needs. Before making an application, you will ass your requirements. 

  • Working capital loan 

It is a type of SME loan that enables you to cater to the operations costs of your business. It is collateral-free and comes with a lower interest rate. The repayment tenure generally ranges between 12 to 24 months. 

  • Term loan

It is a short-term small business loan that aims to meet the short-term requirements of your business. For instance, you can use the loan amount to buy new stock and repay your loan within 2 years.

  • Machinery loan 

It is a type of SME loan in India that caters to the specific need of a business, such as buying machinery. For instance, if your small business requires new equipment, you can get a machinery loan to manage your finances. 

Perks of getting SME loans in India

There are several benefits of a small business loan that you can avail of to grow and expand your business. For instance, you can get a loan amount, interest rate, and loan tenure based on your needs, allowing you to make timely repayments. Compared to other loans, you can secure a low interest rate. It is worth noting that your interest rate depends on the loan amount, loan tenure, financial conditions of your business, credit score, business model, etc. 

Here are some of the top benefits of getting a small business loan: 

  • SME loans in India are collateral-free. It means that you do not need to pledge your asset as collateral. 
  • You are eligible to get tax deductions on the interest payable. 
  • There are multiple options you can opt for, such as term loans, standard business loans, MUDRA loans, etc. 

How to increase your small business loan eligibility

To get micro-financing for your business, you need to choose a lender that offers a small business loan that best suits your business requirements. However, before submitting your application, you will need to ensure that you meet the eligibility criteria of your lender. To enhance your business loan eligibility, it is imperative to have a strong business. Your lender will also consider your business cash flow and your repayment capacity before approving your application. 

Furthermore, It is crucial to have a healthy credit score. The minimum CIBIL score requirement to get a small business loan is 700. Any score beyond the said range will not only qualify you for a loan but also get you a lower interest rate. 

The process of getting a small business loan

Here are the crucial steps to follow to get a small business loan in India: 

  • Choose the type of a loan 

Before applying for a loan, you will need to understand what type of loan you need. Assess your business needs and apply for a loan according. There are numerous options available. For instance, you can get a working capital loan, term loan, cash credit facility, or machinery loan. 

  • Choose your lender 

The loan amount and interest rate differ from lender to lender.  You will need to find a lender that offers a loan amount and interest rate that best serves your preferences. It would be wise to make a comparison before submitting your application. 

  • Find out your credit score 

After choosing your lender, it is crucial to know your credit score. Most lenders require a minimum CIBIL score of 700 to apply for an SME loan. You will need to ensure you have maintained an excellent credit score to enhance your creditworthiness.  

  • Get your documents ready 

Furnishing the required documents to apply for a small business loan ensures your qualification for a loan. Here are the documents you need to include in your application: 

  • You must document proving that you have a minimum of Rs. 500,000/- sales in the previous years.  
  • You must have filed a minimum of Rs. 150,000/- as ITR in the previous financial year.
  • Documents proving your business registration
  • Identification documents, such as PAN Card, Bank Statement, etc. 
  • Commercial of house property documents (if opting for a secured loan).

 

Follow these steps to avail easy SME loans and fuel your business needs. 

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