The need for funding arises during various phases for small businesses. These phases may include setting up the company, managing its operations, equipment up-gradation, inventory management, or recovering from losses.
Out of these, the most challenging part is the starting off phase. It is during this phase, ensuring a smooth flow of cash is crucial. However, the available resources may not be sufficient. In such a situation, businesses can fund their requirements by availing an SME loan. These loans bring with them numerous benefits. Some of them are as follows:
There are various complexities associated with running a business. Financial institutions offer flexible terms of repayment after understanding such conditions. For instance, leading financiers may extend a business loan for SMEs for up to 84 months and may allow applicants to pick the best-suited tenor as per their repayment capability. Moreover, they might also increase or decrease EMI upon request based on existing borrowers’ financial condition.
The borrower does not need to waive any control of the owned business by taking an SME loan. They can take advantage of a wide variety of loans according to their business needs. For instance, they can opt for a working capital loan to fund the working capital requirements or discount the invoice receivables.
Through SME loans, borrowers can choose a payment plan that best aligns with their business’ cash flow requirement.
▪ Simple application process
Previously, firms had to face many issues regarding the documentation process for acquiring business loans. Fortunately, that is not the case nowadays. Most SME loans come with minimal documentation, which is quick and hassle-free. Apart from this, the loan amount gets sanctioned within a relatively shorter time frame than most other finance modes.
Unsecured SME loans further reduce the time taken to get these funds sanctioned as these are collateral-free business loans. Moreover, the loan application has been digitised exponentially, because of which applying for an SME loan is just a few clicks away.
▪ Improvement in cash flow
The business’s cash flow gets an instant boost as SME loans are flexible and get sanctioned quickly. This proves to be immensely helpful to those seeking to expand their businesses or accounting for seasonal business requirements. Major SME loan types are utilised for funding short term business requirements. Therefore, the business’ cash flow can be managed accordingly without being burdened by any long-term debt.
The cash flow thus generated helps in overall business development. A stable monetary condition ensures that all other business requirements are met smoothly.
▪ Low-interest rates
Financial institutions provide lower interest rates on SME loans compared to informal channels for credit. This helps SMEs to manage their debt easily and repay EMI on time without straining their disposable income.
The factors based on which an SME loan’s interest rate is determined include applicants’ credit history, monetary condition, loan tenor, and business’ viability. Due to this reduced interest rate, the company does not need to spend a considerable amount of funds on repaying the loan. This, in turn, keeps the cash flow free to be utilised on other vital business needs. SME loans generally come with low-interest rates, especially the government-backed schemes. These loans are usually designed for public welfare.
Several factors determine the disbursing of a business loan. These factors include loan tenor, the company’s balance sheet, borrowers’ credentials, and business model. Once the loan gets approved, nominal one-time costs such as processing fees are added to the loan.
▪ Readily available
Many leading financial institutions do not ask for collateral for small business loans. Due to this, entrepreneurs find availing such loans convenient. In addition to this, most financial institutions have made business loan online applications form available on their websites, which has further made the process more comfortable than it used to be earlier.
▪ Zero prepayment charges
Some top SME business loans waive the prepayment charges for closing loans early. Therefore, if the borrower pays the full debt before the end of the term, there would be significant savings on interest payment without paying any extra for early loan closure.
Entrepreneurs looking to grow their business can always bank on an SME loan. However, apart from acquiring a regular loan, they can take advantage of the various offers the financial institutions provide.
For instance, financial institutions like Bajaj Finserv provide pre-approved offers that help in simplifying and accelerating a lending process. These offers are provided on various financial products like personal loans and business loans. You can check your pre-approved offer by providing a few details such as your name and contact number.
SME loan has become the order of the day for the small establishments. The above-mentioned features of the said funding option helps fulfil one’s business needs and help plan for its expansion more effectively.