June 13, 2024

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Top Reasons Why MSME Loan is The Perfect Options for Small Business Owners

3 min read

Whether a large or small business, all types of enterprises contribute to the country’s economy by generating huge employment opportunities for the population. That being said, they also require constant monetary support to stay ahead of the growth curve as well as keep the processes running at all times. Micro, Small & Medium Enterprises (MSMEs) are no different when it comes to boosting India’s GDP and providing jobs to a large number of people. However, MSMEs still have to face various hurdles in maintaining a steady cash flow and realize their full potential over time.

While there are multiple ways to acquire funds for starting or expanding an enterprise such as bootstrapping or crowd-funding, opting for an MSME loan seems to be an ideal solution due to its numerous benefits. An unsecured form of credit, one can easily apply online for an MSME loan and get the funds credited in their bank account instantly without any hassle. With the advent of various private lenders that offer affordable MSME loan interest rates, obtaining financial assistance to fulfill short-term as well as long-term organizational goals has become a cakewalk in modern times.

Scroll down to know about MSME Loan is the perfect option for Small Business Owners.

  • No collateral required 

A key benefit of applying for an MSME loan is that it does not require the borrower to pledge any valuable asset such as property, gold, etc. as security against the loan amount. While most lenders are not in a position to mortgage their assets and resources as collateral, an MSME loan is the ultimate way to acquire substantial funds for achieving business goals.

  • Fast processing and disbursal

Comprising a paperless and contactless process, one can easily apply for an MSME loan online through a few clicks without stepping outside. Subsequently, it involves minimum documentation along with online KYC verification which also helps in dealing with the ongoing corona crisis efficiently. Upon completing the necessary background checks, the financial institutions deposit the required funds within minutes of loan approval.

  • Multi-purpose loan

Another advantage of opting for an MSME loan is that it does not have any end-use obligation and can be used for various purposes such as buying equipment, purchasing office space, designing a cool website, hiring skilled professionals, promoting the services, etc. Hence, an MSME loan is a perfect source for obtaining sufficient capital to meet the diverse financial needs of small or medium-sized enterprises without dealing with any lender-imposed restriction. 

  • Complete control 

While one can turn to other sources such as venture capitalists or angel investors for acquiring monetary support to start or expand a business, it involves sharing control of the company. Conversely, the financial institutions offer MSME loans without demanding any stake over the business revenues. Hence, choosing the latter option gives you total control over the enterprise as well as the decision-making process associated with its growth.

  • Basic eligibility criteria
  1. While many borrowing options may have stringent eligibility conditions, opting for an MSME loan requires optimal eligibility criteria such as:
  2. The candidate’s age must be at least 22 years while submitting the loan application and not more than 65 years at the time of loan maturity.
  3. The candidate must be working in the current enterprise for at least 3 years and should have at least 5 years of business experience.
  4. 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.
  5. The candidate must have previous income tax returns and compliance certificates for the business ready at hand.
  • Low-interest rate and flexible repayment

One of the most crucial aspects of obtaining an MSME loan is that it is offered by the financial institutions at a competitive rate of interest that helps in minimizing the overall loan amount. Additionally, such an affordable interest rate also helps businesses to plan their finances and use the resources efficiently to expand the enterprise.

Additional Read: Key Difference between Business Loan and MSME Loan

  • Minimum documentation

While many lenders require abundant documents for providing funds, the following are the key pre-requisites for obtaining an MSME loan:

  1. Proof of identity of the individual and the business
  2. Proof of address of the individual and the business
  3. Last 6 months bank and income statements along with Form 16
  4. Income Tax or GST Returns for the last 2 years with an audited income summary
  5. Proof of Business existence (Certificate of Incorporation)

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