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SME Business Loan

Small and medium-sized businesses significantly contribute to the Indian economy. They are not the main suppliers of innovations and technological expertise, but they create many job openings. Around 55% of India’s population resides in rural and semi-urban areas. The majority of these people work in medium or small-sized enterprises. The SME sector is India’s second-largest sector in terms of human capital, just behind agriculture. According to many economists, the SME sector will continue growing as the buying power of the common people is increasing.


What Is the Meaning of an SME Business Loan?

SME stands for Small and Medium Enterprises. Several business owners and even companies remain unaware of what SME business loans are. Companies classified under the SME sector can apply for SME loans.

These loans are typically issued on a short-term basis to small business owners, women, and entrepreneurs. The length of these loans varies according to the lending organization. Due to the unsecured business loans, the qualifying conditions are minimal. Business owners can easily apply for SME loans online through websites such as FlexiLoans.

These business loans are tailored to cater to the needs of small and medium-sized businesses. Business owners can use these loans to purchase products or sustain a stable cash balance to cover day-to-day business costs.


Features of SME Loans

  • Minimal documentation:


    One of the benefits of SME loans is their low reporting requirements. A conventional business loan can demand documents such as land deeds, financial statements, a list of sellers, partners, or shareholders. SME loans do not have these requirements. Simple records such as financial accounts, GST information, and income tax returns that are readily available are the only requirements. Small companies are not required to travel from pillar to post to obtain these documents.

  • Collateral-free:


    Small business loans are mostly unsecured. This ensures that no collateral is needed. As an SME owner, you do not have to generate property documents or mortgage company facilities to obtain financing. Basic documentation and evidence of company transactions will suffice.

  • Affordable:


    Since SME business loans are designed primarily to assist small enterprises, their interest rates are also reasonable. Lenders can set interest rate for an SME loan by analysing the business’s past performances and loan repayment history.

  • Adaptable tenure:


    The tenure of these loans are set according to the convenience of the enterprises. For example, many SME loans are short-term and may have a duration of 6 months. Many loans can have a longer duration of about 48 months or more. It depends on the borrower’s needs.

  • There are no prepayment penalties:


    Additionally, most SME business loan providers waive prepayment penalties for early loan closures. Therefore, if you are willing to pay off the mortgage before the scheduled time, you can save money while incurring no further fees for early termination.


Benefits of SME Loans

NBFCs such as FlexiLoans have simplified the qualifying conditions for business loans for SMEs to expedite loan approval. Borrowers of these loans are not required to provide paperwork that slows down the loan approval process. Some benefits of the SME loan process are:

  • Accessibility

Establishing a company in India can be very challenging. This is because of the seasonal demand for goods and the constant change in consumers’ buying behaviours. Often, small companies lack the necessary capital for catering to unexpected consumer demands. This is why SME loans can be beneficial for small and medium-sized businesses. 

Due to minimal paperwork requirements, company owners can get SME loans easily without the wastage of time. SME loans are easy to manage with the help of NBFCs. Most NBFCs provide an online account for convenient access to loan information and account statements.

  • Enhancement of cash flow

SME loans’ adaptability and rapid approval improve the overall cash flow of businesses. This can prove to be highly beneficial when you try to extend the company, meet seasonal financial obligations, or initiate a campaign.

If you are concerned about the loan’s long-term consequences, keep in mind that most SME loans are used to finance immediate needs. As a result, you can effectively handle your business’s cash flow to avoid being burdened with long-term debt.

  • Lower interest rates

In comparison to informal lending sources, financial institutions charge lower interest rates on SME business loans in India. As a result, a company will be at lesser risk than it would if it received capital from informal networks.

The interest rate is determined by the company’s feasibility, financial position, credit history, and loan period. A lower interest rate eliminates the need for a business to spend significant funds during repayment. This allows the business to focus more on business-specific needs and requirements.

  • Complete control

Small companies often have urgent financial needs while doing business. Obtaining funds for such companies can be challenging at times. Venture capitalists and other investors often demand a part of company ownership. SME loans for business come to the rescue in these circumstances. These loans are excellent means for business owners who are seeking to pay off debts or prevent liquidation.

It is essential to make the appropriate estimates and calculations while applying for an SME loan or using an SME loan. Borrowers should use an SME loan EMI calculator to ensure a smooth application process. 

Additionally, the versatility of these SME loans applies to their repayment mechanism. You should choose a repayment schedule that is compatible with your business’s cash flow. The repayment plans for these loans are very versatile, ranging from daily EMIs to bullet repayments.

Basic Eligibility Criteria

While applying for a business loan, you must fulfil the SME loan eligibility criteria. Here is the paperwork you must provide to ensure that your application is reviewed as quickly as possible.

  • An individual must be 21 years of age when applying for the loan and not more than 65.
  • MSME loans are available to individual corporations, sole proprietors, and private companies involved in trading, production, or services.
  • The applicant must have worked in the industry for three years and have at least five years of experience.
  • MSME loans are available to those businesses that have been running for at least a year and have monthly total sales of at least ₹2,00,000.
  • If the company has been in service for even more than 3 years, you can apply for MSME loan.
  • Ensure that there are no errors in previous accounts and, as such, the company is tax compliant.

Finally, verify that the paperwork is in order well in advance of applying for a loan with us, and hold it in digital format so that it could be submitted during the application process.


How to Apply for an SME Loan Online?

A few years back, getting a small business was a time-consuming process. Now, it is completely hassle-free and can be done electronically. You do not have to go to many banks to find the right interest rate or stand in a queue for the approval of your paperwork. FlexiLoans provide unsecured SME loans at reasonable rates. Follow these steps to apply for an SME loan:

  • Online application

Visit the FlexiLoans website and start the application process by entering all the necessary details accurately. The lender will use this information to determine your eligibility.

  • Online submission of required documents

Upload all the necessary documents, including identity proof, address proof, bank statements, and business-related documents. After that, the lender will evaluate your business’s performance and operations to determine the amount of money you can borrow and the applicable interest rate.

  • Loan disbursement

After checking the details and accepting the loan request, the lender will send you the loan agreement. Sign the agreement and get your loan request approved. The lender will send you the loan amount after you sign the agreement.

Documents Required for SME Business Loan

  • Personal KYC: PAN Card
  • Residential Address Proof (Anyone): Rent agreement, Driver’s License, Voter’s ID, Ration Card, Aadhaar Card, Passport
  • Banking: Last six months’ current account bank statement
  • Business KYC (Anyone): GST registration certificate, shops and establishment certificate
  • Financial documents (For loans greater than 20 Lakhs): 2 years audited financials, last 2yrs ITR, GST returns of 6 months

SME Loans Fees & Interest Rates

Here are the processing fees and interest rates on SME loans provided by FlexiLoans:

Types of Fees Applicable Charges
Interest Rate Starting from 1% per month
Loan Amount ₹50,000 to ₹1 Crore
Loan Tenure Up to 48 months
Processing Fee 2% of the loan amount

Ways to Use SME Loans

When a company is in its early stages, even the smallest decision can have a significant effect. In such circumstances, funds should be carefully used. Here are some areas where you can use your SME loan for improving your business:

  • Develop or Improve Your Website

A powerful online presence is necessary for every business in the modern era. Investing in the development or maintenance of your business’s website is an excellent use of funds. If you have an aesthetically beautiful and accessible website, you can get an unlimited number of visitors. Creating or upgrading a website does not require a lot of money, but if your website gets extensive exposure, the effects are incredible.

  • Make Marketing Investments

Regardless of how good your service or commodity is, you must sell it if you want to sustain your business. Creating advertisements that tell people about your products is essential for increasing your profit. You must sell your goods or services both online and offline to get the best results. Investing a portion of your SME loan in publicity can be a groundbreaking decision for your business.

  • Invest in New Software

As your company grows, you will use an increasing number of resources to perform your tasks more effectively. Different business tools are used to complete a large number of tasks accurately in less time. Therefore, if you want to do the same thing, you will need to purchase some software for carrying out various business procedures. Some of these software packages are very expensive. But, these packages can be beneficial for your business by enhancing the quality of your products and increasing the accuracy of the business procedures. So, you can keep some amount of your SME loan for purchasing these software packages.

  • Purchase New Equipment

Alongside changing the time zone, you must adjust your company’s organisational structure, especially if it is a product-based business. To increase efficiency and meet customer demands, you must use machines that produce with perfection and reduce commodity costs and human labour. So, try to invest in such equipment for boosting your business.

To make a business grow, one needs workforce, technology, and finance. The fact is, if you have finance, you can acquire the rest without much effort.  A smooth cash flow is the lifeline of any business.


Frequently asked questions

What are the purposes for which I can get a SME loan via FlexiLoans?

FlexiLoans is here to provide you financial access for your business funding needs. You have to undergo simple and transparent Credit Evaluation, basic documentation before we disburse the loan. You may get loans via FlexiLoans for:
  • Expanding your business
  • Servicing regular working capital needs
  • Managing seasonal working capital requirements
  • Manage short term cash flow gaps

Why should I avail SME loan via FlexiLoans?

Quick credit assessment ensures fast disbursal of loan at best rates and flexible terms, thus providing financial access at a click! Our business is to help you grow your business.

How can I get a loan under SME/MSME?

You are eligible for an SME/MSME business loan if your business has been running for at least 1 year and has monthly total sales of at least ₹2,00,000

What documents are required to apply for a SME Business loan?

KYC document

  • - Pan card

Proof of residential address (any one)

  • - Rent Agreement
  • - Driving License
  • - Voter's ID
  • - Ration Card
  • - Passport

Banking

  • - Last 6 months of bank statement of current account

Business KYC (any one)

  • - GST Registration Certificate
  • - Shop Establishment Certificate

Financial documents (For loans greater than 20 Lakhs)

  • - 2 years Audited financials
  • - Last 2yrs ITR
  • - GST Returns of 6 months

Are there any charges other than interest rate that I have to pay to avail the SME loan?

We may charge processing fee to facilitate the loan towards legal and documentation charges. You may be charged penal charges for late or irregular payment behavior.

Are SME loans available at a specific time of the year?

You can apply for Unsecured Business loans at FlexiLoans all year round.

How do I check my SME loan eligibility?

Click the link to check the <a href="https://flexiloans.com/business-loan/business-loan-eligibility-criteria/"business loan eligibility

What would be the duration of SME Business loan?

The average tenure of business loans sanctioned by FlexiLoans is 18 to 36 months.

What are the processing fees for SME loans?

We charge a processing fee of 2% depending on your loan amount.

What is the interest rate for collateral free SME Loan?

Business Loan Interest rates start at as low as 1% per month for collateral free SME Loans. However, it may depend on various factors like your loan amount, tenure, eligibility, etc.

Can I get an SME loan without providing any collateral at FlexiLoans?

By submitting the relevant information and documents over here, you can get an SME loan without providing any collateral at FlexiLoans. Our team will contact you regarding loan details.

Quick credit assessment ensures fast disbursal of loan at best rates and flexible terms, thus providing financial access at a click! Our business is to help you grow your business.

You are eligible for an SME/MSME business loan if your business has been running for at least 1 year and has monthly total sales of at least ₹2,00,000

KYC document

  • - Pan card

Proof of residential address (any one)

  • - Rent Agreement
  • - Driving License
  • - Voter's ID
  • - Ration Card
  • - Passport

Banking

  • - Last 6 months of bank statement of current account

Business KYC (any one)

  • - GST Registration Certificate
  • - Shop Establishment Certificate

Financial documents (For loans greater than 20 Lakhs)

  • - 2 years Audited financials
  • - Last 2yrs ITR
  • - GST Returns of 6 months

We may charge processing fee to facilitate the loan towards legal and documentation charges.

You can apply for Unsecured Business loans at FlexiLoans all year round.

To check the eligibility click on the link here.

We charge a processing fee of 2% depending on your loan amount.

We charge a processing fee of 2% depending on your loan amount.

Interest rates start at as low as 1% per month for collateral free SME Loans. However, it may depend on various factors like your loan amount, tenure, eligibility, etc.

By submitting the relevant information and documents over here, you can get an SME loan without providing any collateral at FlexiLoans. Our team will contact you regarding loan details.