MSME loans ensure that financing challenges do not affect growth and expansion negatively. Small business owners need to access finances at various stages of growth. Such loans benefit various business-related purposes.
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Updated: 31 Oct 2022 4:14 pm
The MSME sector in India (Micro, Small, and Medium Enterprises) is vital to the country's growth. Contributing significantly to GDP, over 40 per cent of total GDP, it is the backbone of the nation's economic development. The sector provides employment opportunities to millions of people, generating mass employment in all parts of India.
Acknowledging MSMEs’ significance as a driver of economic growth, the Government of India recognises the financial challenges faced by the sector and attempts to provide protection by helping with easy financing that leads to expansion and growth. Hence, the government introduced a framework for the banking industry that provides easy business loans to Indian MSMEs and launched some government-based MSME loan schemes that help small businesses secure funding easily.
MSME loans ensure that financing challenges do not affect growth and expansion negatively. Small business owners need to access finances at various stages of growth. Such loans benefit various business-related purposes. One can approach public or private sector banks for MSME loans. Banks are the reliable source of getting money. However, strict eligibility criteria for providing loans, lengthy documentation and verification processes, and less flexibility in terms of loan tenure and repayment are some of the disadvantages of an MSME loan from a bank.
Non-banking financial corporations, NBFCs provide collateral-free MSME loans to small businesses and offer services like a bank. Some advantages of choosing NBFCs over banks are flexible eligibility criteria for approving loan applications, a relaxed approach to ensure easy financing for small businesses. Small business owners with less financial knowledge, can easily qualify for an MSME loan with NBFC.
In such a situation, institutions like NBFCs and MFIs are good options for business loans in easy instalments with less time and minimum paperwork. But before taking a loan from these institutions, the following facts should be kept in mind:
1) Easy and transparent process: From applying loan to loan disbursement, the process should be transparent, simple, and easy so that even the common man can understand and able to fulfil it. There should not be any complicated process or any hidden conditions that do not waste both time and resources.
2) Minimum paperwork: The lending institution should do minimum paperwork. Often banks demand more than necessary documents for the loan that small business entrepreneurs cannot provide, so it is better to make sure in advance that the paperwork is minimal.
3) Fast loan approval: With the help of loan officers and technology, the loan process should be fast and quick so that the loan can be approved in the shortest time and the borrower can work on business expansion immediately.
4) Interest calculation should be at a reduced interest rate: The informal lenders charge higher and compounded interest rates, and the borrower ends up paying more interest than the actual loan amount. In such a situation, it is necessary to make sure that the interest is calculated at the reducing rate only.
5) Ease of loan repayment: After the loan disbursement, the monthly repayment process should be smooth and simple. Technologies like online NACH and UPI have made this process a lot easier. Many institutions have made it very easy through mobile apps etc. While choosing a lending institution one should consider the mode of repayment used and system transparency too.
“SEEDS FINCAP PVT LTD aims to touch the lives of entrepreneurs from all segments and sectors of the country. Underserved and underprivileged people from different domains of education, caste, class, region, gender, and profession have taken our services. With their hard work, skill, and financial support, they have successfully improved their and their family's lifestyle and future”. Says Mr. Subhash Chandra Acharya, (CO-Founder, MD & CEO)
Seeds Fincap Private Limited, a Non-Banking Financial Company – Non-Deposit Company (NBFC-ND), focuses on lending to entrepreneurs for activities involving income generation.
It has undergone remarkable progress and has taken its fair position in the financial inclusion setup by bridging the gap between the demand and supply of financial services among the financially challenged people who are not able to offer collaterals but who are running micro businesses that can prosper into larger ventures by offering business loans up to 2 Lacs.
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