Everything That You Should Know About SME Loan and How We Can Get Benefits ?

SME Loan
SME Loan

Small or medium-sized enterprises (SME) are an integral part of India’s economy as it plays a crucial role in the country’s industrial output while employing a large number of people. Whether it is the launch of an establishment or a matter of expanding the enterprise, SMEs also require a stable influx of monetary funds to meet various operational costs, recover from losses, procuring resources, etc. to register steady growth. 

While small business owners have several avenues to acquire working capital, opting for a sme loan is considered an easy and reliable source to run their organizational processes without any hindrance. Read on to know about the benefits of availing an SME loan.

List Out The Benefits Of Availing an Sme Loan:

  • Collateral-free 

One of the key advantages of choosing an SME loan is that it is an unsecured form of credit. To acquire the funds, the business owner does not need to pledge or mortgage any valuable asset as collateral or security against the loan amount. While this brings a great sigh of relief for small entrepreneurs, it also speeds up the whole process of loan approval as no property or securities need to be investigated and verified that might consume a lot of time otherwise.

  • Contactless and fast processing

With the advent of the corona crisis, it has been advised by governments around the world to incorporate digitization into their working model which in turn will help curb the pandemic. Hence, obtaining SME loans has also been made simpler after the emergence of various private lenders in the financial marketplace. Upon placing the loan request, the financial institutions tend to perform the KYC verification along with other background checks online these days. Upon loan approval, the amount is also credited to the entrepreneurs’ bank account instantly without any hassle. 

  • Easy to apply

Depending upon the business loan requirements, one could physically visit a financial institution to apply or choose to submit the SME loan application online through a few clicks without stepping outside to save time and energy. Subsequently, one could also upload the softcopies of required documents along with the form for verification. Upon successful submission, the borrower shall also receive a confirmation message regarding the acceptance of their request along with a reference ID to track the status of their application.

  • Minimum documentation

While obtaining a regular business loan, the lenders may demand you to present various documents such as financial statements, a list of owners, partners, or shareholders, etc. However, in the case of SME loans, basic business-related documents such as ITR statements, bank statements, and GST details are sufficient to borrow the money. Therefore, a lot less paperwork is involved in obtaining an SME loan nowadays.

Optimal eligibility criteria

A regular business loan may require you to fulfill stringent eligibility conditions, you can easily avail SME loan by meeting the below-mentioned eligibility criteria:

  1. The candidate’s age should be minimum of 22 years at the time of application and a maximum of 65 years of loan maturity
  2. The candidate must be engaged in the current business for at least 3 years with a total of 5 years of business experience.
  3. The business turnover should be at least Rs. 10 lakhs per year
  4. The business owner should possess the documented proof of running a minimum of 2 years in profit.
  • EMI affordability

Since SME loans are designed to help small and medium business owners achieve their full potential without facing any financial limitations, they usually charge an affordable interest rate that enables the borrower to make timely EMI payments. Based on various factors such as the borrower’s net income, business stability, collaterals, and existing monthly obligations, the lenders decide the interest rate levied on the SME loan that could easily be repaid over time.

  • Flexible tenure

Another key benefit of opting for an SME loan is that it has flexible repayment tenures to help the small entrepreneurs conveniently repay the loan amount along with the accrued interest. With tenures ranging between 12 and 60 months, a small business owner could plan the finances accordingly for efficiently repaying the loan within the due date.

  • No foreclosure charges

Last but not the least, in case the borrower decides to close the SME loan before the fixed tenure, the financial institutions do not levy any prepayment fee or foreclosure charges. This helps small business owners to undertake an early settlement and focus on expanding their organizations while leading a debt-free life without any worries. Read more articles at europeanmagazine.

Arnold Bloom

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