SME Loan

While every bank or NBFC might charge different interest rates for offering business loans to SMEs, the lowest interest rate provided under Government Loan Schemes is 8.50% p.a. onwards or even lower . The interest rate charged for an SME loan will depend on different conditions like the provision of collateral (if applicable), loan amount, repayment tenure, and applicant’s profile, creditworthiness, and repayment capacity.

Every bank or NBFC will have a loan application form that requires to be filled out. Some of the common details that are required in these forms are:

When you apply for a loan from any financial organization, it is common that they will require certain financial details regarding your current debts and background. These are some of the commonly required details:

Apart from financial details, you are also required to mention certain legal details necessary for processing:

Here’s how banks and non-banking financial companies (NBFCs) categorize the small-medium business segments:

Also Read: Small Business Funding Options to Raise Capital

Among these different sizes of firms, banks also offer firms, SME loans after they have qualified the below-mentioned eligibility criteria which slightly vary from bank to bank:

Documents Required for Project-Oriented Businesses

Working Capital Loans

Every business requires constant liquidity for conducting business as efficiently as possible. In order to ensure that there are no obstacles in the regular operations of a firm, many firms avail working capital loans. Not only do they help in handling temporary financial crises, they also allow businesses to focus on growth while the regular expenses are managed through a loan.

Term Loans

When you have planned long-term expenses but find it challenging to set aside an amount for it, which is where term loans come into the picture. They are long-term loans that are usually borrowed for a certain purpose. The available duration of payback for term loans ranges from 5 years to 15 years. Furthermore, some banks also provide term loans without provision of collateral.

Equipment Financing

Manufacturing businesses require modern equipment to stay ahead of their competitors in the market. Equipment loans are specifically provided by banks and NBFCs to buy new machinery for a firm. Equipment financing helps businesses grow and explore their potential by providing loans of up to 25 crores. While the limit is higher, SMEs usually do not require a higher amount for equipment financing. As the equipment in question is considered collateral in the loan, the interest rate for this type of loan is low.

Pradhan Mantri Mudra Yojana (PMMY)

The Government of India considers that small business requires investment and financial help to truly realize their potential. Taking this into consideration, the government has introduced the PMMY scheme which is specifically designed to serve SMEs and MSMEs of all types. There are 3 categories within the Pradhan Mantri Mudra Yojana for different ranges of amounts:

• Shishu Loans are the basic category that provides loans of up to Rs. 50,000
• Kishor category is a notch higher and provides loan amounts ranging from Rs. 50,000 to Rs. 5,00,000
• Tarun Category loans are the highest category of PMMY loans which provide an amount from Rs. 5,00,000 to Rs. 10,00,000

The key advantage of this type of loan is that you can use this loan amount flexibly into working capital needs, machinery, as well as vehicles.

Stand Up India Scheme

This is an SME loan option that is specifically designed for entrepreneurs that belong to a scheduled caste or scheduled tribe. This scheme’s benefits are also extended to female entrepreneurs. Under the Stand-up India scheme, entrepreneurs can avail a loan amount between Rs. 10 lakh and Rs. 1 crore. At least 51% of the shareholding stake should be held either by an SC/ST individual or a woman entrepreneur in the case of non-individual enterprises.

List of Popular Banks and NBFCs offering SME loans

All of these banks provide different types of loan offerings that help SMEs in different areas. For instance, SIDBI offers different loan options for availing micro-credit, purchasing equipment, as well as special loan offers for female entrepreneurs.

Any growing business requires a constant flow of cash to ensure healthy development and effective decision-making abilities. Furthermore, the amount available through an SME loan can be withdrawn at any time, providing financial flexibility to businesses. One of the critical purposes of an SME loan is to act as an additional working capital, which can help a business in expansion and allows them to take bigger orders or buy better machinery.

Many Banks and NBFCs offer loans to small businesses without collateral or security, which is an easy and low risk option for getting financial help. Small business can also choose between the loan options like working capital loan, term loans, overdraft.