Small and medium business loans- an overview
Small and medium-sized business loans are crucial for improving the business environment. They provide vital support to business owners, helping them maintain operations and pursue growth initiatives. These loans are available in a variety of forms and can be tailored to meet specific needs.
Government Schemes
Diverse government schemes aim to help small businesses. They are aimed at women, minorities and small business owners, with the goal of expanding factories and covering office costs.
Project Finance
Project financing loans are designed for industrial and infrastructure projects that need long-term funding. They have flexible repayment terms.
Working Capital Loans
The loans are designed to help businesses continue their operations in the event that they need additional cash flow.
Professional Loans
Professional loans are unsecured loans that are offered to professionals like Chartered Accountants (CAs), doctors and company secretaries. These loans are not offered to small business or manufacturing units.
Micro Loans
Micro loans can be used to fund new business plans or ventures. The repayment period is up to six-years.
Insurance Loans
Business loan are available to help businesses cover their insurance costs.
Trade Loans
Exclusively for traders who are looking to expand or start their business, trade loans are available. The interest rate will be based on prime lending rates, which may be fixed or variable.
Small Business Loans: Features
Small business loans can be very useful for entrepreneurs who need extra money to expand their business, buy new equipment or pay daily expenses. Smaller loans may not require collateral. The interest rates on loans with collateral are usually lower. Some loans are based upon revenue, balance sheet, and business model. Even in rural or semi-rural regions, many financial institutions offer small business loans. This includes public and private banks.
Small business loans do carry a certain amount of risk, however, due to factors such as low profits, higher default rates and non-performing assets. Although lenders are aware of the potential in this market, caution is exercised.
Eligibility Criteria
The criteria for eligibility of small business loans are:
- Poor Credit History can lead to loan rejection.
- Feasibility – Loans will be approved for businesses that have a good feasibility plan, with profit and loss projections in line with industry standards.
- Business Plan: An in-depth business plan will demonstrate the viability of a business and its future plans. It should cover aspects such as capital investment, working cash needs, debts and assets.
Small Business Loans: Benefits
Small business loans have multiple benefits
- Regular customers are often offered loans at competitive interest rates.
- Easy accessibility: Small business loans are available from many financial institutions, and EMI Calculators help plan finances.
- Customized Financing : Loans are tailored to the needs of the company, and can ensure continuity regardless of financial circumstances.
- Online application: Online applications are available, which reduces the amount of paperwork and speed up loan processing.
- Flexible Repayment Options : Businesses can manage their cash flow more effectively by choosing from a variety of repayment options.
Interest Rates & Other Charges
Unexpected financial obligations can be met with business loans. Due to their widespread availability, they are usually offered at low rates of interest.
- Interest Rates: Starting at 11%
- Interest Rate Types: Flat or Diminishing
- The amount of the loan varies depending on lender policies
- Tenure: From 6 to 60 months
- Processing Fee: 0% – 3%
How to apply for a small business loan
It is easier than ever to apply for a small-business loan. Online applications are available from many lenders, which speed up the process while reducing paperwork. Business owners can also visit their local branch to submit an application and receive a consultation.