Business Loan Tips for Young Entrepreneurs in India

In the post-pandemic era, young entrepreneurs are one of the prominent driving forces for economic growth in India. The MSME sector comprises more than 40% of the GDP and offers employment to a large number of people. Several factors impact the smooth working of a small business. Some of them are infrastructural needs, marketability, patience, hard work, cash flow, and so on. In this blog, we will devolve our attention on how to ensure smooth cash flow for young entrepreneurs and how budding entrepreneurs in India can get funding for their small businesses.

Unwanted complications are engraved like small and medium businesses. Situations like these can occur due to sudden demand surges, delays in payments, increased expenses, and so on. The bottom line is, as a small entrepreneur in India, you need to manage the overhead expenses of the business to keep it afloat. Here are some of the ways to secure a loan for entrepreneurs in India to keep the show running:

What is an MSME loan or loan for entrepreneurs?

As the name suggests, MSME loans are a kind of loan that are custom-tailored to serve the needs of small and medium businesses. It can be used by startups to expand the business, serve any specific need, buy new equipment, extend the inventory and so on. Since MSME loans are offered at a reasonable rate of interest and need no collateral, they can help SMBs to set up or expand their business in their early days while not burdening the entrepreneurs with too much debt.

The MSME loans or loans for entrepreneurs in India are backed by the government under the scheme named the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. It was initiated by the Indian government along with the Reserve Bank of India (RBI) and Small Industries Development Bank of India (SIDBI) to promote the MSME sector in the country. Small entrepreneurs just need to fulfil the eligibility criteria and have to come up with a viable project to implement their vision to secure the loan.

Advantages of an MSME loan

Entrepreneur loans or MSME loans are especially helpful for newcomers who are struggling with financial needs and, at the same time, don’t want to risk their assets or have something to offer as collateral for a loan. Some of the key advantages of entrepreneur loans in India are as follows:

• Collateral-free: MSME loans don’t require personal assets to avail of the loan amount. It is offered on parameters like the performance of the company, the project’s viability, and the profile of the owners.
• Flexible: These loans are generally taken for a small period to manage the day-to-day business expense and avoid any long term debt.
• Accessibility: You can always avail additional funds with MSME loans. Moreover, the process of getting an entrepreneur loan in India is fairly simple. You can avail of hassle freely with minimum documentation. Additionally, many financial institutions offer customised loans for female entrepreneurs.
• Affordable rate of interest: The ROI of MSME loans is one of its biggest perks. However, there is some processing fee, prepayment charge, and late fee that is levied on MSME loans.

As young entrepreneurs of India, here are a few tips that you should adhere to while opting for an MSME loan.

Eligibility for entrepreneur loans

Do a thorough check of all the eligibility criteria before applying for the loan. The details of the eligibility can be viewed on the website of the financial institution that you are applying for or can also leverage a third-party platform for it. Remember that, once you apply, the lender will look out for your credit score and other financial parameters. Moreover, various lenders have various business loan eligibility criteria. It is always good to be aware of these beforehand and apply only to lenders that suit your profile. These eligibility criteria include parameters like:

• Years of operations
• Annual turnover
• GST returns
• Location of the business

Required documentation

Once you fulfil the eligibility criteria, the next step is to look out for documents that are asked by the lender for offering the loan. Although the amount of paperwork is minimal, you will still need to produce some paper. Be ready with the paperwork to get your entrepreneur loan processed as soon as possible. The list of documents includes:

• KYC documents like PAN, Aadhaar, Passport, Voter ID, address proof and so on.
• Business documents like PAN card of the business, ITR returns, rent agreement, bank statement, and others.
• Licences like a licence from FSSAI, Udyam registration certificate, and others.

Need of the loan

While applying for the loan, be ready with the purpose of the loan i.e. how you will use the loan amount. It will also give the lender clarity on where you will be spending the loan amount. Even before you apply for a loan, it is important to outline the purpose of the loan. For an MSME, it’s always good to have a line of credit ready as the space is always prone to unwanted issues. In simple words, make a plan and stick to it.

Loan amount

In general, whenever we go to seek any fund we always go for more funds than is needed. For a young entrepreneur in India, it is not advisable as it will overburden you. Remember that you also have to repay the amount as well as the interest on it and it will increase your monthly EMI. So always seek the amount that is needed.

Repayment plan

Once the loan amount is credited to your business account, the most crucial aspect is its repayment. Any delay or hiccup in repayment will have a poor impact on your credit score. That’s why it is crucial to draw out a plan for repayment and stick to it.

Conclusion

Lastly, these loans for entrepreneurs are an excellent way for SMBs to scale up and run their businesses smoothly. FlexiLoans offers affordable and hassle-free MSME loans for businesses so that they can meet their goals easily. They have easy-to-meet criteria, quick approval, fast disbursal, and offer flexible tenure options for small entrepreneurs in India.