SMEs or Small to Medium Enterprises are categorized, depending upon the country they are situated in and the industry they belong to. These are non-subsidiaries and independent firms. In most countries, SMEs, along with major payers of the concerned industry, constitute the bulk of import and export of their countryâ€™s economy and are responsible for being the country’s most diversified employers.
Generally, the number of employees for these firms range from 250 for small to 1000-1200 for medium enterprises.
In the Indian context, SMEs are those enterprises where the investment in plant and machinery ranges from 25 lakhs to 10 crores or between 10 lakhs to 5 crores in a manufacturing firm. SMEs have proved to be the most dynamic and promising sectors of the Indian economy in the last 50 years, helping to improve employment and leading to the per capita income of the country’s people. SMEs contribute to almost 8% of the GDP of the country.
If your enterprise falls under the SME category and you are looking for the best business loan for small businesses like yours, this article is designed just for you. In this article, we will delve deep into how SMEs can avail business loans online. Though there are many articles to tell you how to get loans and stuff, most out there are difficult to follow because of excessive jargon use. Please read on to find out how to avail of small business loans in India online.
With rising NPAs (Non-Performing Assets), banks are becoming more and more stringent. Availing business loans is becoming a hectic, time consuming, and more often than not a futile way to raise funds for your business. Even when there are many sources where people can generate necessary funds for their business, such as the following:
- Letters of Credit
- Short, Medium, or Long-term funding
- Discounting of Bills
- Loan against immovable assets (mainly and or house)
- Unsecured business loans
- Venture Capitalists
- Peer-to-peer lending;
However, the loans provided by NBFCs (Non-Banking Finance Companies) without collateralÂ are the most sought-after loans. Letâ€™s find out why these SME businessÂ loans are so popular when it comes to SME business loans.
- First and foremost, any loan agreement and disbursal can entirely be carried out online. While in banks, getting your loan application stuck in long procedures and waiting for a long time even when you are in dire need of money urgently seems to have been taken for granted as a painful process everyone have to go through, the loan application procedure of NBFCs is found to be saviors of many. You can sit anywhere and anytime and be able to sign your loan agreement while taking a small business loan through NBFC.
- When businesses with a turnover of 10 lakh+ approach NBFCs, no collateral or security deposit is asked for small business loans of 1-5 lakhs, this has increased the consumer base of NBFCs, as in a country like India, many small businesses wouldnâ€™t be able to afford these security deposits.
- While banks have very high-interest rates on most of the products, NBFCs tend to keep low-interest rates so that small businesses can flourish.
- With their strict and complex regulations related to business loans, banks tend to scare off potential customers. Many prospering MSMEs in genuine need of money end up wasting time and without the required funds to run the business. Whereas due to minimal document requirements and straightforward & clear set rules, NBFCs tend to be the better choice.
- In case you have underestimated your requirements while taking a business loan and have run out of funds to keep the business running, you can borrow funds on top of your outstanding loan amount. The â€˜top-upâ€™ loans come with a lower interest rate and processing fee than your current loan.
- Due to their stringent rules, banks are always skeptical about disbursing business loans to enterprises with not so good past repayment records. Whereas NBFCs evaluate an enterprise beyond just a credit score for a business loan sanction. There are many aspects of a business, apart from just a credit score, which determines whether it will be profitable in the long run. NBFC considers all those aspects.
Still undecided? You should be. Please research thoroughly before heading out to make decisions on applying for loans. One hasty decision can cost you dearly. Happy Hunting!