Top 5 Advantages of Taking SME Loans in India

Business establishments that struggle to secure finances can avail loans to help maintain their regular operations or for expansions. Read this post to learn about how loans offered by financial institutions can benefit Small and Medium Enterprises (SME).

Most organisations need funds at the initial phase or during the process of expansion. Business loans offer an excellent opportunity for ventures with small or medium capital to thrive. They can also prevent them from failing due to their financial inadequacy.

Here are some of the advantages of taking a business loan

  1. Easy and Speedy Access to Funds: Most lending institutions have a large network with branches across the country. Since these financial institutions are known for their structured processes, the procedures to avail quick loans have also been made simple. This helps small enterprises access business loans without much difficulty.
  2. Competitive Interest Rates: Numerous financial institutions are vying to lure in customers with attractive interest rates. This can help ventures to generally get lower interest rates as compared to borrowing from individual lenders.
  3. Flexible Repayment: Most finance companies offer tenures ranging from 12 to 48 months. Businesses can also consider prepayment of the loan in part or full after a stipulated time. This flexibility aids in a small business enterprise choose how they want to pay off the loan. Depending on when they expect surplus funds or increased revenues, they can choose a convenient repayment option.
  4. No Collateral Required: Unsecured business loans are granted without any collateral. This helps small and medium businesses get loans without having to pledge any assets for security. Financial institutions look at the credibility and financial health of the company before granting the loan. They can grant an amount of up to 50 lakhs to SMEs without security. This gives enough leverage for such businesses that are short of funds to flourish.  
  5. Loan Options Tailored for SMEs: Financial institutions understand that the loan requirements of businesses are different from other loans and consequently offer customised options. These are two of the common loan options provided by lending institutions.
  6. Working Capital Loans: SMEs require steady cash flow to run their operations, and working capital loans can help them from faltering due to lack of funds. These loans are used to facilitate the smooth functioning of an enterprise without any interruptions. Once the regular expenses are taken care of by the loan, the business establishment can pay attention to strengthening the business further by a marketing campaign or hiring new talent.
  7. Term Loans: These loans are generally taken for expenses that businesses anticipate in the long term. If a large part of their finances is being used up by current expenditures, they can use these term loans for the purchase of machinery or building.

Entrepreneurs who need the loan amount but are not in a position to provide collateral can benefit significantly from business loans. Since loans from venture capitalists can involve profit sharing, SME loan is an excellent way to retain control of your business.

Most start-ups and small to medium establishments might need financial backing for them to sustain their businesses. Banks and NBFCs can help such enterprises prosper by providing them timely help through fast disbursal of business loans.