Small and Medium Enterprises (SME) in India has emerged to be a dynamic sector from the last five decades. This sector offers substantial employment opportunities at a lower capital cost compared to the large industries. But, SMEs aid in the rural industrializations empowering unbiased national wealth and income distribution.
A SME financing is a type of business loans provided to small and medium businesses from banks and Non-Banking Financial Companies (NBFCs). The conventional Indian ideology is that you should never take debts. But this ideology might be utterly futile when it comes to business. While utilizing a fraction of your savings in business is a part of the entrepreneurial venture, burning out/liquidating all your savings would be an erroneous decision.
Benefits of SME Loans
Liquidating all your savings will leave you broke at the times of absolute monetary requirements. On the other hand, if you go for business loans, you can set your savings aside for a rainy day. The only benefit of liquidating all your savings is that you will not need to pay any interest or EMIs on the money used. Contrarily, there are quite a few benefits of opting for SME loan, they are:
- The interest rates on business loans are low
- You can grow your savings by making smart investments like fixed deposits with NBFCs offering the highest FD interest rate in India (9.10% for senior citizens).
- You can build a good credit score by timely repayment of business loans with your savings. A great CIBIL score can help you get a loan, insurance, and credit cards quickly and effortlessly.
- Under the Indian Income Tax Act, you can get tax deductions for the interest paid for business loans.
- You can borrow up to Rs. 30 lakh SME loans without collateral
- The minimum eligibility criteria for SME finance options are that your age must be between 25 years and 55 years. The company should hold a good credit score, and the ability to repay the loan amount.
- SME loan has flexible tenors ranging from 1 year to 5 years. Although, this can depend on your financial provider as well as your business requirements.
- Almost all financial providers offer online application procedures easing the entire loan application procedure. Process and disburse loan amount just within a day.
- You can bridge the financial gap that could have occurred during the initial stages of your business development/expansion.
- With the Flexi Loan facility provided, you can opt the interest-only EMI repayment and pay the principal amount as an when you can within the loan tenor. This helps in stabilizing your business funds. You can also get pre-approved offers in addition to this, which increases the benefits that you can receive from the loans that you avail.
- You can access your business loan account from anywhere at any time from the website of your loan provider.
Liquidating your savings may fulfill your temporary business requirements, but for future business or personal emergencies, you could be left with nothing. In such situations, there are chances that you may not be eligible for other loans due to lack of creditworthiness. With the dual benefit of meeting business needs and growing the savings at the same time, SME finance has turned out to be the most-preferred loan products in India. SME loans are easily available with minimal documentation procedures due to the shorter tenor and omission of collateral security.