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Important Factors To Know About The Sme Loan
Total Articles: 9
For businesses and enterprises to thrive, they require working capital that come from either profits or loans. Loans taken by businesses are termed as business loans. And a special type of business loans is the SME loan. SME loans are offered to or cater to small and medium sized enterprises. Small and medium enterprises are important for economic and social development of any country. India has around 26 million small and medium enterprises that constitute 20 per cent of the country’s total GDP.
If you are thinking about applying for a SME loan, then you should have knowledge about the eligibility criteria and other important factors.
Here is a comprehensive list:
Who Can Apply For SME Loan- SME loans are given to
Small and Medium Enterprise
Eligibility Criteria- The eligibility criteria is different for different banks and financial institutions. However, there are certain common factors like
Number of years in business
Profit and Years of Existence- To be eligible and granted a SME loan, small and medium enterprises need to have a minimum turnover of 10 cores with a minimum 5 years of experience in the industry.
Documentation Required- The required documents vary from bank to bank. However, there are certain common documents required by every lender. These include proof of identity, proof of address, age proof, bank statements, and profit and loss statements for last 3 years, balance sheet for last 3 years, income tax returns for last 3 years, relevant collateral documents and processing fee cheque.
New Business or Start-up- SME loans have been created for and are targeted at new businesses or start-ups as these enterprises do not receive adequate financing or financial assistance that can provide them with the required working capital.
Benefits- A SME loan is tailor made for small and medium enterprises because they are critical for a developing economy like India. Small and medium enterprises form the second biggest employment generator after agriculture in the country. Therefore, they help in creating jobs and generating income for low income groups, the rural sector and the urban poor.
Flexibility- SME loans are pretty flexible with low interest rates and flexible EMIs. Moreover, the loan amount can vary from small to large sums.
In a developing country like India where the startup ecosystem is currently thriving, SME loans are bound to help not just a lot of business entities to achieve their goals but also the economy of the country to reach new heights.
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 sme loans and sme funding.
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