Guide to SME Business Loans in India

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interest rates which can be very much beneficial for you and you can maintain the cash flow. The minimum cash outflow can also be possible by taking advantage of the bank overdraft service since only the interest needs to be paid regularly and that too on the amount used. A personal loan, on the other hand, would result in huge cash outflow which is not advisable for the business. Low Processing Fees: The processing fee is taken in the initial moment when the loan is sanctioned by the bank. Ideally, this thing should be kept low as it results in benefit for us. Personal loan charges 2% initial processing fees and other loans also charge in the range of 1-3% as the initial processing fee. There may be additional charges too as the bank charges other fees too. Collateral Requirement: Collateral is an asset which is kept against the loan. Every loan demands collateral against the loan except for the personal loans and the loan from the local lenders. The loans need to be backed by the security which should not be kept at risk. If any contingency happens and you are unable to pay back the loan then this becomes a point of concern for you as the assets would be confiscated by the banks. For the risk level to be kept minimum one can opt for gold loans. Gold loans are available at low interest and can be repaid easily without the fear of the loss of the asset. The second best option can be the overdraft facility provided by the bank followed by the bank. Lastly, the requirement should be given proper importance for the loan as the asset is at risk. Future Payment Ratios: You must always take this thing as a priority that whenever you’re taking a loan for any purpose the ratio of your EMI to your income should not be more than 25% which is normal. This gives you an edge over the banks over the payment ratios. The payment should be kept properly and without any delay as most
commercial loan lenders agree to some certain key ratios while the payment of the loan such as current ratio, a debt-equity ratio which results in the certain defined limits. This is kept so that during the time of any contingency if your payment falls below the agreed ratio that can affect your credit ability in the market and mark you in the default risks. Moreover, you should keep it at a bit lower side to maintain the timely payments and to maintain your credit in the market. There are also multiple other factors while you are sanctioning a loan as a representative of the SME should take into account. If any of the employers you are working with has a bad reputation in the market then the sanction of your business loan becomes tough and you might be charged with additional interest i.e. interest higher than the normal one or you might be only provided with only 65-70% amount of the loan as compared to a person who has got a good reputation in the market. Also, you must check that you don’t have any criminal background at the time of applying for the loan as this results in a negative impression for your SME and directly results in the cancellation of the proposal. Lastly, when you apply for an SME business loan you should have a stable business of at least 5 years in which the records should be showing the growth of the business in the previous 5 years. We at Finance Buddha, help you to avail the best business loans for your SME without any much hassle. You just need to upload the necessary documents and you can get the loan sanctioned.
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Guide to SME Business Loans in India

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