A key contributor in strengthening India’s economy, Micro, Small & Medium Enterprises (MSMEs) play a vital role in boosting the GDP of our country. Along with generating vast employment opportunities, MSMEs constitute a substantial share of our total exports, thereby helping the economy grow at a steady pace. Although governments realize the importance of MSMEs and introduce unique loan schemes from time to time to provide them the necessary financial support, many MSMEs find it hard to survive and achieve their full potential due to a lack of steady cash flow.
While there are multiple sources to acquire a lump sum of money for business purposes such as crowd-lending, borrowing from friends, bootstrapping, etc., an ideal solution to fulfill your organizational needs is opting for an MSME loan. Easy to apply and obtain, an MSME loan is a collateral-free form of credit that comes without any end-use obligation. Since MSME loans involve minimal paperwork and a quick disbursement feature, it is recommended to avail it for starting or expanding your enterprise and meeting various operational costs without any financial limitations.
Scroll down to know more about the best choice for a small business loan.
MSME loans provide a stress-free life
Offered at an affordable rate of interest, an MSME loan does not require the borrower to pledge any security or collateral against the loan money. Subsequently, if the borrower fails to deposit the monthly installments (EMIs) on time, the lender does not hold any claim or control over the borrower’s assets for liquidation purposes. Hence, obtaining an MSME loan provides a sense of accomplishment as well as relief to the entrepreneurs due to its unsecured nature.
MSME loans involve minimal eligibility criteria
While different lenders have varied MSME or business loan eligibility, most financial institutions require the business owners to fulfill a certain set of conditions to qualify for the loan such as:
- The candidate should have a proper business plan to convince the lenders about the bright and booming future of the enterprise.
- To qualify for an MSME loan, both the individual as well as the business should have a valid identity and address proof.
- Business registration is mandatory whether it is a start-up or an established small enterprise. The candidate should also possess business compliance certificates from all the authorized agencies.
- In the case of an existing enterprise, the owners will be required to show the profit statements of past years. The annual turnover for the current business must be at least 10 lakhs with the documented proof of running a minimum of 2 years in profit.
- The owners must have submitted Income Tax Returns (ITR) for the organization and should also possess the necessary bank statements.
- The candidate should have a healthy credit/ CIBIL score which demonstrates a good debt-handling and repayment ability.
MSME loan is a multi-purpose loan
A key advantage of obtaining an MSME loan is that the acquired funds can be allocated for any kind of business requirement and handling diverse needs of an organization such as:
- Buying raw material or machinery
- Designing a website
- Paying salary to the employees or workers
- Procuring assets and stocking up inventory
- Promoting or advertising your product or services
- Meeting operational costs
- Setting up an office space
MSME loans give you total control
While monetary funds can also be accumulated through venture capitalists or angel investors, such deals require you to share the control of the company with them. The financiers might want a stake in your organization or its profit model in a certain capacity. Even though it may sound acceptable at the time of arranging funds when it comes to making tough decisions for company’s expansion and all the stakeholders are not on the same side, it may create a bit of rift in the company that is not at all beneficial for the growth of the enterprise. Hence, opting for an MSME loan is the right choice for fulfilling organizational goals without sharing its control with anybody.