India’s SME and MSME sectors, one of the backbones of the nation’s economy, accounted for nearly 63 million organisations in FY 2020. These so-called growth accelerators of Indian economy, SME and MSME sector contributed about 30% to the nation’s GDP.
- Apart from being the second-largest micro, small, and medium-scale enterprise sector globally, India’s MSME’s also play a crucial role in generating employment. Today, more than 110 million people are employed in various MSMEs across India.
To ensure this industry continues to lead India’s economy on its path of growth, the Government of India introduced various schemes to guide, fund, and develop this sector. Apart from new business loans offered by various public and private sector lenders, MSMEs have recently been classified under revised criteria. Such an initiative is likely to boost business growth and help manufacturing businesses that are booming.
- The number of registered MSMEs increased by nearly 18% in FY 2020, currently standing at 25.13 lakh units (as of March 2020).
Such changes were overdue for some time now, as the SME and MSME sector started facing various new obstacles in the last few years. Changing international relationships, dried up sources of import and export, availability of raw materials and labour was slowly but surely reshaping the industry. Moreover, the recent economic slowdown increased the demand for a new business loan significantly as this industry had a history of facing somewhat of an economic crunch.
Business loans – The preferred method of funding
In India, unsecured business loans are extended by various financial institutions, offering as much as Rs.20 lakh to eligible establishments. These credits also offer unprecedented flexibility; apart from the standard business loans, one can opt for business equipment loans, working capital loan, credit for supply chain financing, business loan against property, etc.
Thanks to online application and verification process, availing such a business loan has become hassle-free and quick. Organisations also prefer these credits over their secured counterparts, as these present lesser risk, quicker disbursement, and often very little end-use restrictions.
- Monthly credit data released by the Reserve Bank of India shows that credit to medium-sized industries rose nearly 13.8% between March and September 2020.
The above-mentioned benefits of MSME loan offer several quick ways to secure credit. Let’s take a look at a few of those.
- Determine the loan requirement –
A new business loan can be availed for multiple reasons; one can avail such a credit to start a new organisation, fund everyday expenses, grow an existing business, or to create a financial backup. The principal amount is likely to vary according to the requirement, and it is of utmost importance to calculate the funding requirement before applying for credit.
Lenders are more likely to offer credits readily (and at better terms) if an applicant shows the exact requirement, how the funding is likely to be used, and a repayment plan during application. It is also an essential financial habit to better manage business growth.
- Zeroing in on the type of loan –
Similarly, deciding on a particular type of credit is also necessary. For example, business equipment loans may be more helpful if one needs to upgrade existing infrastructure or procure new machinery. Contrarily, a working capital loan might offer better monetary backing if an organisation is seeking funds to tackle overheads. Applying for a particular type of credit will also increase the chance of successful approval.
- Selecting a financial institution –
There are several commercial lenders operating in India’s financial market who extend such credits at attractive terms. Borrowers should carefully compare the terms of lending as well as other factors while selecting a financial institution.
Other than the rate of interest, repayment tenure, and other aspects, one should also look at additional benefits. Companies like Bajaj Finserv often extend pre-approved offers as well, which simplify the application and disbursal process of a new business loan. These offers are available on a range of financial products, like business loans, personal loans, etc. One can check his/her pre-approved offer online by sharing only some essential details.
Availing a credit has become significantly easier nowadays, especially with revised borrower-friendly guidelines. Following the steps mentioned above is more than likely to help a credit seeker to find the best financing option available in the market.
