Scalability in business can be difficult without a consistent flow of capital, which is why every small business requires financial assistance at some point. MSME Loans provide funds to Micro, Small, and Medium Enterprises, with low MSME Loan interest rates, allowing them to move up the growth curve. Small Business Loans can be used for multiple purposes, including purchasing equipment, meeting operating expenses, updating infrastructure, R&D, etc. Read on to learn more about MSME Loan details.
What Exactly is an MSME/SME Loan?
Credit facilities include MSME/SME (Micro, Small, Medium, and Enterprise) loans. It is a type of financial assistance provided to small businesses for long-term, working capital, growth, or expansion purposes.
Loans are highly beneficial for MSMEs in maximising their full potential through adequate funding, particularly for businesses that are in a nascent stage, where it’s difficult to arrange finances in case of expansion or upgrade.
Why are MSME Loans a Good Choice for Small Business Owners?
- Loan eligibility requirements are moderate
- Tax exemptions on certain items
- There are government-backed MSME Loans available
- Equal opportunities for all types of businesses
- Funding to meet all types of business requirements
MSME Loan: Key Advantages
MSME or SME Loans serve specific purposes that meet the needs of small businesses that traditional loans cannot. It is intended to help small and medium-sized businesses in particular. The following are the MSME Loan details:
1. Reduced Documentation
The most difficult challenge in obtaining loans is collecting and organising stacks of documents. Regular Business Loans necessitate the submission of property deeds, financial statements, and information about the owners, partners, or shareholders.
However, these requirements are not necessary for granting MSME Loans at Non-banking Financial Companies (NBFCs) like Poonawalla Fincorp. All you need is easily accessible documents such as GST details, bank statements, and income tax filings.
2. Unsecured Loans
For creditors, SME loans are mostly unsecured, meaning they are collateral-free. You are not required to submit property papers or mortgage business equipment as an MSME owner. Simple proof of business documents is enough to qualify for funds.
3. Reduced Interest Rates
Because SME Business Loans are specifically designed to help small businesses, the interest rates are set to match their affordability. MSME Loan interest rate is set after considering a company’s ability to repay its liabilities, ensuring a fair deal for both parties.
4. Flexibility in Tenure
The loan term is determined by the ease with which the MSME can repay the loan. For example, MSME offers short-term loans ranging from one month to 36 months. NBFCs provide repayment flexibility by offering weekly, monthly, or bi-monthly installment options.
5. No Prepayment Fees
Most MSME Business Loans also exclude prepayment penalties for early loan repayment. As a result, if you can pay back your debt in full before the term expires, you will save money on MSME Loan interest rate payments while not incurring any penalties for early repayment.
MSME Loans come with numerous advantages, including government subsidies for businesses that qualify for them. The Ministry of MSME was established in 2007 and has since taken the initiative to provide support to all micro, small, and medium-sized businesses to increase their income, cash flow, and employment resource on an individual level.
While on the other hand, leading NBFCs like Poonawalla Fincorp also do their part with easily accessible and available MSME Loans for businesses that need minimal paperwork, come with quick approval, no hidden costs, and require no collateral whatsoever from partners.
Well-known schemes like MUDRA, PMEGP, Start-up India, etc. do their part in uplifting MSMEs and promoting the independent spirit of Indian entrepreneurship, and so does an increasingly involved private financial sector.
There are also many tax breaks available to MSMEs, including capital gains tax breaks and 100% tax breaks for the first three years of their operations. MSMEs receive funding assistance and credit guarantee funds.
MSMEs can now benefit from both public and private financial offerings; quick procedures are also designed to assist upcoming businesses scale their operations and grow, in a vibrant and supportive economy.