How to Avail an SME Business Loan

SME Business Loans are tailor-made to suit the financial needs and requirements of small and medium-sized businesses. These loans are usually taken for expanding an already established business and can be availed at attractive interest rates. SME Business Loan contributes to our country’s growth and development by transforming and boosting businesses based in small towns and rural areas. These are unsecured loans and help in improving indigenous production and GDP, thus increasing the rate of exports, imports, and economy. 

You can apply for a business loan online by following a simple application process. The maximum value that is granted for SME business loans is Rs. 2 crores generally. These are granted quickly and easily without any hassles. It comes without collaterals, and there is flexibility in the tenure of repayment. There are usually no hidden charges for such loans.

Pros of applying for a Business Loan:

• Easy and fast processing
• Boosts your credibility in the market
• Collateral-free
• Helps entrepreneurs manage finances better
• Flexible repayment tenure
• Helps businessmen remain in full control of their venture
• Hassle-free documentation

Get Smart and Secured Business Loans:

• Loan amount from Rs. 25 lakhs – Rs. 2 crores: To give wings to your dreams
• Tenure ranges from 12 – 60 months so you can focus on your business goals, while your financial needs are taken care of
• No guarantor required: There’s no need to put your assets at risk. Once you’re deemed eligible, you can avail an SME Business Loan without any security
• Attractive Rate of Interest: You can get unsecured and secured business loans at affordable interest rates, so you can achieve your business goals without any financial burden.
• Balance Transfer Facility: Whenever you feel like retiring your high-cost debt, you can simply transfer the balance and relieve yourself from the EMIs.

How to apply for an SME Loan?

Every bank or financial institution needs important and relevant documentation from the applicants during the loan application process. With the rise of fintech companies, today you can apply for an SME Business loan online as well. This makes the application process smooth and easy.

If you’re a self-employed individual, you will need:

• Proof of Identity: Passport / Voters ID / Driving License / PAN Card / Aadhar Card
• Address Proof: Driving License / Voter ID / Utility Bill (Latest 2 months) / Registered Rental Agreement / Passport
• Bank Statements: Latest 6 months’ bank statements / 6 months’ bank passbook
• Latest ITR along with computation of income, B/S & P&L a/c for the last 2 years certified by a CA
• Business Continuity Proof: Shops and Establishment License / GST Registration Certificate / VAT Returns / Sales Tax Returns
• Other Documents: Certified copy of Partnership Deed, Certified copy of MOA / AOA.

If you’re a small firm, you will need:

• ID / Business Continuity Proof: PAN Card / S&E License / Tax Returns / Utility Bill
•  Address Proof: Utility Bill (Latest 2 months) / Registered Rental Agreement
•  Bank Statements: Latest 6 months’ bank statements / 6 months’ bank passbook
• Latest ITR along with computation of income, B/S & P&L a/c for the last 2 years certified by a CA
• Other Documents: Certified copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association

Eligibility Criteria:

If you are a self-employed individual applying for an SME Business loan:

• You need to be at least 21 years of age
• Your business or venture will need to be active for at least 3 years 
• Your minimum annual income must be ₹ 2, 00,000/- p.a.

If you are availing a Business loan for your firm:

• Your business or venture will need to be active for at least 3 years 
• Your minimum annual income must be ₹ 2, 00,000/- p.a.
• Your business must be making a profit for the last 2 years

How can you smartly use your SME Business Loan to build your business?

• You can upgrade your inventory. Replace your old stock with new products, invest in new product samples, etc.
• Invest in the latest machinery. You can repair your old machinery or upgrade to modern and technologically advanced machinery.
• Balance your firm’s working capital. Cater to the day-to-day expenses, salaries of all employees, other investment opportunities, marketing and sales of your firm, and guard yourself against seasonal market fluctuations, inflation, etc.
• Pay off your old debts. You can pay off any smaller debts that you had previously taken for your firm to reduce the interest rates on them.

Do’s & Don’ts of an SME Business Loan:

DO’s:

• Always check and maintain your credit score.
• Sort out and arrange for proper documentation
• Prepare a Business Plan and be ready with all details that may be required
• Assess your requirements properly to avoid any future losses or increased debt

DON’Ts:

• Do not apply to unverified lenders. Stick with only verified and trusted lenders.
• Repay the majority of your existing debts before applying for a new loan, so that the burden of debts can be reduced.
• Be extremely diligent and careful in choosing the right lender who offers extra fees, interest rates, documentation, approval, and disbursal procedures according to your needs. Conduct a proper investigation to verify the sources.

There is a plethora of options in the market when it comes to SME business loans. It’s extremely important to analyze your unique business needs and apply for a loan accordingly. You can compare the services and interest rates offered by varying NFBCs and Banks before you make a decision. SME business loans have helped enterprises sustain their operations and look at new avenues with a strong financial backing. So, new-age entrepreneurs now have the power avail a small business loan with minimal documents and take their venture to new heights.