Smart ways SMEs can apply for a quick business loan

Small, Medium and Micro enterprises (MSMEs) contribute nearly 40% to the country’s GDP. These enterprises are responsible for keeping the overall supply chain intact, as most big-box retailers also rely on MSMEs for various operations and raw materials. 

MSME financing has been made available to small business owners and entrepreneurs to fulfill their financial requirements. This financial assistance is offered in the form of unsecured Business Loans for MSMEs. These loans are unsecured financial instruments that are provided by various banks, non-banking financial companies (NBFCs), and lending institutions. 

Applying for a Business Loan for MSME is simple and the eligibility criteria are easy to fulfill. As the financial sector is undergoing a major digital transformation, loan applications are available online. Business owners and entrepreneurs can apply for a Business Loan for MSMEs online without any hassle. 

However, even though there are various credit options available for MSMEs and SMEs, many business owners find it difficult to get funds. The reasons behind this issue can be low creditworthiness, limited access to lenders, and inadequate knowledge about credit options. In addition to this, many businesses in their nascent stage are unprepared to acquire adequate financing for their operations. 

Here we take a look at how some SMEs can prepare themselves for Business Loans:

Have a healthy credit score: Credit score plays a crucial role in the lending space. It is the first factor considered by lenders and NBFCs to evaluate the creditworthiness of a business or an individual. Having a healthy business credit score is not enough to get approved for a Business Loan for MSME. 

If your business is new and has an inadequate credit history, your personal credit score will be considered. Your business credit score is calculated on the basis of factors including credit history, repayment behavior, open lines of credit, outstanding debt, credit utilization ratio, debt-to-income ratio, etc. 

Hence, it is important to be careful regarding business transactions, as even a single bounced cheque can impact your credit score negatively. Ensure that you make your payments on time, and avoid making multiple loan applications at once. 

Present a detailed business plan: Lenders also check the nature of your business and its overall performance before approving your loan request. They prefer businesses that have a stable income source to avoid experiencing default. As Business Loans for MSMEs are unsecured, showing that you have a stable income and a well-maintained cash flow will help generate confidence among lenders. This will help you gain loan approval without too many inquiries, delays, and hassle. 

Manage your cash flows: Small business owners need to maintain their working capital to continue the steady flow of operations. Lenders take financial stability into consideration while assessing your loan application. A well-managed working capital reflects that the company is making use of its assets and is able to pay its dues on time. In case you need a Business Loan for MSME, having a stable income will help you in getting loan approval faster and without any hassle. 

Create a repayment strategy: Before lenders think of advancing your loan request, they check if you are capable enough to repay the loan on time. As Business Loans for MSMEs are unsecured, lenders ensure that the borrowers are capable of repayment to avoid suffering from losses. Before applying for a Business Loan, you must carefully evaluate your finances, current assets, and liabilities, and clear all pending dues. 

Further, you can also use a Business Loan EMI calculator to determine your monthly EMIs. The process will also help you in figuring out the amount you need to take out specifically for your monthly payments, apart from your general day-to-day expenses. This will also enable you to manage your finances in a better way during the loan tenure. 

In conclusion

Business Loans for MSMEs can be used for a variety of business-related purposes such as infusing working capital, hiring trained staff, upgrading machinery and equipment, expanding services, maintaining inventory, investing in high-quality raw materials, and even for debt consolidation. 

As various lending institutions and NBFCs are offering unsecured Business Loans for MSMEs online, entrepreneurs and small business owners can leverage them efficiently. The eligibility criteria for these loans are easy to fulfill and the application process is completely online. Before applying for the loan, carefully research and choose a lender who is offering the lowest interest rate on Business Loans. 

(Above mentioned article is a Consumer connect initiative, This article does not have journalistic/editorial involvement of IDPL, and IDPL claims no responsibility whatsoever.)