According to a study, India’s small business sector contributes nearly 30% to the country’s Gross Domestic Product (GDP).
This makes it evident that any kind of disruption in the supply chain and capital flows of this sector will have a trickle-down effect on the country’s overall economy.
Even though the global economic crisis of 2020 had a huge impact on the SME industry, the emergence of e-commerce platforms and upgraded business strategies are bringing new opportunities to the sector.
Clearly, this can be an ideal time for budding entrepreneurs to invest in their small businesses and make the most of this ongoing demand.
To secure their business’s future and meet working capital requirements, a business loan can be the most viable solution. However, before proceeding further, it is necessary to check all the loan options available to choose the ideal one.
Types of loan options to expand your small business
Even though the global crisis brought cash flow challenges initially, the inclination towards digitalisation protected the SME sector from the anticipated loss. With boosted access to different credit facilities, entrepreneurs can now keep their businesses afloat without much hassle.
- MUDRA loan
Identifying the ongoing business opportunities, even the Government has been launching business loan schemes to help new entrepreneurs. The Pradhan Mantri MUDRA Yojana is one such scheme that bridges the working capital gap for several small businesses.
Those planning to build a successful manufacturing business, or working in the trading and service sector, can easily avail of capital loans of up to Rs.10 lakh under this scheme.
- Credit Guarantee Scheme (CGS)
One of the key advantages of this scheme is that both new and established MSMEs can benefit from it. This collateral-free loan allows eligible borrowers to avail up to Rs.2 crore, and a special preference is given to the women entrepreneurs.
The application process is quite simple for this scheme. All you have to do is prepare a business model and approach your preferred lender, offering an affordable business loan interest rate.
Note that the loan cannot be availed if your business is related to agriculture, educational institutions, or retail trade.
- Stand-up India Scheme
The sole purpose of this scheme was to help entrepreneurs falling under scheduled caste (SC) or scheduled tribe (ST) sections to execute their business ideas. Under this scheme, financial institutions offer loans ranging from Rs.10 lakh to Rs.1 crore. Depending on your business requirements, this scheme covers up to 75% of the project cost.
The repayment period is quite flexible and stretches for up to 7 years. Additionally, financial institutions offer a moratorium period of up to 18 months to make repayment more convenient for borrowers.
While the long repayment period makes the monthly instalments comparatively affordable, you still have to bear the high-interest rates levied on your business loan.
- Business loans
Several NBFCs across India also extend business loans to MSMEs to help them meet their financial requirements. These loans are available against easy eligibility and require business owners to submit only a few documents. These business loan interest rates are also kept nominal to boost their affordability.
Financial institutions like Bajaj Finserv also extend pre-approved offers on these loans. These offers are available on most financial products, including business loans, personal loans, etc. Simply provide your name and contact number to check your pre-approved offer and expedite your loan application process.
- CLCSS for technology upgradation
Central Government’s Digital India initiative has opened different avenues for small-time entrepreneurs as they are now relying on online businesses. However, to match the demand of the market and establish a wide consumer base, it is essential to keep up with technological advancements.
The scheme allows eligible borrowers to get up to 15% upfront capital subsidy and business loans up to Rs.15 lakh to increase their efficiency using the right technology. Make sure you have necessary documents like partnership deed, company registration certificate, including your PAN and Aadhar card, ready to make the application process smoother.
- MSME business loan in 59 minutes
This is one of the advantageous Government-backed credit facilities that allows eligible business owners to avail up to Rs.1 crore within 59 minutes. This particular loan is mainly designed for individuals who are just starting their business, and a reservation of 3% is available for women entrepreneurs.
For this MSME business loan interest rates offered by lenders vary depending on your loan eligibility. For instance, applicants having a high credit score will inevitably get a preference and a substantial amount disbursed in their account within 11 days.
Keep in mind, certain eligibility parameters get assessed by financial institutions before approving these business loans. Make sure you meet all these parameters and keep the supporting documents handy to expedite the loan application process. It is also crucial to conduct thorough market research before choosing any of these above options.
