A silent and effective solution to boost your small business using MSME Finance

effective solution to boost your small business using msme finance

MSMEs (micro, small and medium enterprises), loans chiefly help new enterprises as well as small business owners. The loan duration and the interest rate vary from lender to lender, and depend mainly on the profile of the company.


These are unsecured loans and are provided by both banks and NBFCs. However, one must meet certain eligibility criteria. The guidelines are defined by the RBI in concurrence with the Govt of India as loans are required for the commercial companies to purchase equipment, expand the business and increase their working capital. 

MSME loans and NBFC


In addition to state-subsidized schemes, several private financial institutes offer MSME financing at a reasonable rate of interest. 


Why is MSME Finance important for small businesses?


Small businesses are often considered the pillar of the Indian economy. These businesses have contributed to the global economy for many years. In recent years, the country’s economy is growing at a 10% rate due to the success of the small business. 


Also, a small business helps society by offering more jobs, the industrialization of rural areas and sells multiple products overseas. Based on the estimates by the Ministry of MSMEs (Indian Government), the sector accounts for 38%, 45%, and 40% in a row of Indian GDP, manufacturing, and exports respectively.


Therefore it is important to boost small business and the effective way is to rely on the MSME financing. 


Let us understand the advantages of MSME finance 

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How you can boost your small business with MSME Finance


Anyone can avail MSME finance and registering process is optional. But, by doing so, one can maximize all the benefits listed below offered by MSME loans. These include priority, corporate financing loans and the possibility of adopting the most recent QMS – quality management standards.


  • Purpose-free MSME loan


Loans for MSMEs are based on the lessons learned from the different market scenario. Yes, a small business owner applies for a loan for many purposes. Hence MSME loan does not pressurize loan seekers to disclose the reason why these loans are applied for. This will let the entrepreneur to freely use the fund without worrying about any paperwork to show their plan before requesting for funding. 


  • Time 


Time is of the quintessence in small businesses. A very minimal delay in arranging for the fund will lead to the loss of business to the competitor. But, MSME loans are the saviors and one can quickly claim for money. Also, they do not demand for collaterals which will not only relieve from burden but also saves time in valuing the assets. The short turnaround times (TAT) and a quick payout in not more than 48 business hours it the key success formula in availing MSME finance. Stay at par with the market and do not feel different at any stage in developing your business. 


  • Rate of Interest offered by MSME finance is low 


A low-interest rate is another factor to consider when choosing a loan. The lower interest rates will offer relief to the loan seeker as they need not provide a substantial amount each month to pay off the loan. The money thus saved by the low-interest rate of MSME loans can be better used to further stimulate the business. Given this requirement, MSME finance has a line of credit. It allows every entrepreneur to withdraw funds and pay them according to their own needs. Since only the withdrawn funds generate interest at any given time, unnecessary debt service is avoided.


  •  Interest exemption on overdrafts


Businesses with good credit ratings and good banking relationships can use the overdraft feature. MSMEs enjoy a 1% tax exemption on overdraft interest. This is great news for small business owners. Word of caution! Make sure you check with the lender before you avail MSME financing from them.


  • Your business in your control 


The funds offered by angel investors and venture capitalists will share the ownership of the business. However, MSME loans obtained from financial corporation’s (non-bank financial corporation NBFC) do not include insolvency of control. The control aspect is important allowing small business owners to own their business with the available assets.


  • Booking conditions


As mentioned earlier, the chief advantages of the MSME business are, third party influence is very minimal. As a result, the success rate is usually higher. Much of this victory is attributable to the government’s reserve policy. Some sectors of MSMEs have the exclusive right to produce certain goods. As part of the government store purchase program, more than 300 goods reserve such rights and the central government has approved the same. This strengthens the MSME market.


  • 50% grant in a patent application


When you make a new product or offer a new service you are the founder and the credit is yours. This means you can apply for a patent and this will fetch you with royalty every time others use it. But do you know, the patent process is costly and many people lose their copyright due to this? Now, with MSME loan process you can get 50% discount on the process and get the patent rights which will also earn your business both money and reputation. Become an innovative leader in your business. 


  • Unsecured Loans


MSME financing can be obtained without submitting any collaterals and this is the greatest boon to the small business owners. They can obtain a loan for any purpose and without pledging any guarantee.


  • Preventing from late payment penalties 


Another edge of MSME financing is, all registered business owners are saved from the penalty payment for delay in making payment. This protection against late payments applies to buyers in business relationships. If a microenterprise or a small business registered in an MSME providing goods or services, the buyer must pay at the latest on the date agreed with the seller at the time of purchase made. If the contract does not contain a payment date, the buyer is obliged to pay in 15 days after the acceptance of the services or goods. In case of late payment, the buyer must pay a fine and this is not required for an MSME registered business. This will protect the credit history of the lender. 


  • Technological update for MSMEs


It is possible that some MSMEs cannot fully exploit their resources due to advancement in technologies. The government is helping these companies, through the technology update program, to modernize their facilities with advanced technologies, helping them obtain a loan at lower interest rates from the banks. With the advent of technology, the Indian government is encouraging more and more small-business owners to enter the technology space through financial aid and support.


Summing up thoughts


From the above details provided about the edge of MSME finance, we are sure that every small business owner can boost their funding. We only request you to complete the registration process. Alternatively, contact us and we will walk you through the process and offer you with loan as well. 


Start planning your business as your concern for financing ends here.  


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