SMEs or Small and Medium Enterprises have been significant contributors to the growth of the Indian economy in the last decade. Presently, every organised industry in the country has witnessed the rise of SMEs in its turf, which has in fact levelled up its outputs and the overall contribution to the GDP of India.
The growth of these businesses simultaneously also raises the need for necessary financing required to run the businesses and expand their presence. Not to mention, the potential of these businesses can be best utilised with the availability of required financing. The likes of small business loans can suit just right in fulfilling the financing needs that the ventures may come across.
An SME must be aware of what these loan options comprise and how they can be suitable for venture financing. So, here’s a detailed insight into how such a business loan can be the right financing option for SMEs.
Financing Without Collateral
Small business loans are financing options that usually come as unsecured funding options. It means that you do not need any collateral to avail the loan and can secure it by meeting the set eligibility requirements only. The absence of collateral makes it convenient to avail the advance especially for SMEs in their initial years of operation.
It is because such businesses may not hold the necessary asset for collateral creation, or at best, may even not be willing to risk their asset for raising finance. You must, however, make sure to check that you meet all eligibility requirements set by your lender for a smooth borrowing process.
Quick Loan Availability with Easy Approval and Disbursal
Small and Medium Enterprises often come across financing emergencies that need to be fulfilled in a short duration. It is primarily because they operate in short credit cycles and keep their working capital minimal. Their allocation to emergency funds is also low which keeps them reliant on external financing availability to meet their funding needs from time to time.
Small business loans come to the rescue with their quick approvals and disbursals. If you apply for the advance with all criteria and documentation in place, you are likely to receive approval for the advance within a few minutes, with disbursal following in the next 1 to 2 working days.
Types of Small Business Loans
SMEs can also avail these loans customised for their varying needs. For instance, if the business faces a crunch in the working capital of the venture, it can seek out a working capital loan to infuse short-term financing immediately into the business and keep the operations going on smoothly.
Similarly, to maintain the business’s trade cycle, the owner can avail financing through invoice discounting, a type of business loan availed against invoices due for the upcoming months to recover credit dues before their due dates. These loans are also customised for equipment and machinery purchase to introduce to the business.
Affordable Rates of Interest
Given that affordability is one of the foremost and crucial factors to consider, financial institutions keep the requirement their priority too, keeping the unsecured business loan rates in check. These advances also come with other fees and charges set at nominal rates to keep financing convenient for borrowing SMEs and other eligible businesses. To find the best rates, you must make sure to compare available financial institutions providing the loans. You can also work on your borrowing profile and improve on the risk factors related to your creditworthiness to avail the lowest rates.
Funding of High Quantum
Another feature of small business loans that makes them suitable is the high financing quantum that they come with. This makes it easy for the SME to finance its various big and small-ticket funding needs through a single loan without needing to go through elaborate processes for availing collateral-based loans. For businesses with the right eligibility, a financing value of up to Rs.25 Lakh can be availed as a loan.
The easy-to-meet eligibility criteria and paperwork requirements for small business loans have made them more accessible than ever to SMEs. They have cut down on the total time involved in loan processing and documentation, thus bringing about fast approvals and disbursals. Check if you have met the minimum individual and business credit score requirement before applying as it can be crucial to getting favourable terms on your loan.