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What Is An Sme Loan? Its Meaning And Benefits

By Author: Manish Damani
Total Articles: 12

An SME stands for a small and medium enterprise. These enterprises form the backbone of the economy. They not only provide employment, but contribute 29% to India’s GDP. Ensuring adequate funding to these units is an essential goal.

SME are classified into micro, small and medium depending upon their investment in plant and machinery. The type of organization does not matter; the SME may be sole proprietor, partnership, or even a public limited company.

What are SME loans?

1. These loans are provided to SMEs depending upon their finance needs and business performance
2. These loans are provided at lower rates of interest to give impetus to these businesses
3. The lender does not specify the purpose of the funds while disbursing the same. The SME can use the funds for meeting working capital requirements, or expanding business, or any other business related expense.
4. While applying for an SME loan, the lender checks the eligibility of the business. The business needs to meet certain minimum revenue requirements, and be in existence for at least 3 years.
5. These loans are unsecured. The business does not have to put up any collateral for them.
6. The repayment tenure for such loans is flexible. A strong business can negotiate for better terms.
7. The application for SME Funding for most lenders is completely online. It is possible to check the eligibility and the EMI for such loans online.

An SME loan has several advantages, which make it an excellent instrument to raise funds for business.

1. No purpose for loan:
These loans do not come with conditions for use. The business is free to use them as needed. They can be used for business expansion, or for meeting day to day expenses in the time of need.

2. Speedy approval:
SME Finance is quickly approved on checking eligibility of the business. Since the application and approval process is online, it does not take a long time. A business owner can get finance quickly without hassles using an SME loan.

3. Quick disbursement:
Once the loan is approved, the funds are quickly transferred to the applicant’s bank accounts. Lenders usually disburse funds within 72 hours, up to 7 days. Checking the eligibility of business is the most important task, and once that due diligence is completed, the loan is quickly disbursed.

4. Loan amount:
The maximum amount of these loans can go up to Rs. 50 lakhs. Although the final amount approved by the lender depends upon the strength and performance of the business. The lender charges processing fees over and above the loan amount.

An SME loan is a convenient way for small businesses to raise funds for their needs.

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 a sme loans.

Total Views: 13Word Count: 461See All articles From Author

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