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Do Start-ups Really Need A Sme Loans?

By Author: manish damani
Total Articles: 9

Any business venture starts with an idea and grows from there. For a business or venture to start and expand, capital or money is required to set the ball rolling. To find the right investors or financers seems like an uphill task for many budding entrepreneurs. To make businesses run and grow smoothly, loans are taken from banks or financial institutions.
Therefore, a business loan is basically a loan given out to meet any sort of requirement of the business that is paid back with interest over a period of time.

However, taking a conventional loan from bank or a financial institution can become a cumbersome process as there is a lot of eligibility criterion and documentation needed. This where microfinance institutions and NBFC (non-banking financial companies) fulfills the demand for loans or funding required by startups. These bodies are far quicker and flexible in providing loans to small businesses or startups. These loans are termed as SME loans.

SME finance is the funding of small and medium enterprises that constitute a major part of the economic development of India. Small and medium enterprises are important for any developing nation. India is home to 26 million small enterprises that constitutes 20% of the GDP. They help in-

1)Creating Jobs
2)Generating Income
3)Economic Growth
4)Social Stability

For this reasons, there have numerous financial institutions and enterprises working to provide loans and assistance to startups. Top companies offer tailor made SME loans to-

1)Manufacturers
2)Traders
3)Small and Medium enterprises

Also, before applying for a SME loan, you need to fulfill some basic essential requirements. Different companies have different set of criterion for granting SME loans. Some general eligibility is:

1)Number of years in business
2)Credit history
3)Management
4)Net earnings

Therefore, startups can avail a host of advantages when applying for SME funding:

1)SME loans can range from small to a big amount. You will get a loan irrespective of the number.
2)Have low interest rates. SME loans are designed in such a way that it is paid over a period of time. They can be short or long-termed.
3)All SME loans are pretty flexible.
4)They can be availed for various purposes ranging from product launch, expansion of business, marketing or hiring employees.

Increased efforts by the government and RBI have decreased the gap between demand-supply of finances. One of the major reasons for this gap was unsure security or collateral. However, things are improving and major finance companies are stepping up to bridge the gap between startups and banks.

Author Bio: Manish Damani, a financier by profession, loves to write during his spare time. He combines both his interests, by dispersing financial related information whenever possible. Through his work, he has provided information on how SME funding and its uses to a startups.

Total Views: 49Word Count: 448See All articles From Author

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