The Covid-19 pandemic and the consequent lockdowns have had a very deleterious impact on the MSME and SME sector in India.
If you are a small business owner, after grappling with the Covid-19 epidemic, you may require a small business loan to help you tide over the crisis. Once you have crystallised the quantum of the loan, you could use the small business loan amount sanctioned to boost your business in several ways. Some of these include:
- Strengthen your working capital financing and bridge the working capital gap: You can use this money for clearing your urgent payables until you collect your receivables.
- Purchase new machinery and equipment. If you are a manufacturing company and your current equipment is depreciated, you can purchase new machinery and equipment that will help increase the productivity of your business.
- Upgrade your work premises: This can be beneficial as it will help you attract new customers and grow your business.
- Expand your network of offices: A small business loan can help you fund new office premises, hire additional staff and improve sales and establish your brand in a recovering economy.
- Increase your product range and add additional product offerings: This can help you offer a complete range of products and services. You can increase your bottom line and effectively compete against the other firms in your industry or sector.
- Hire additional staff: With a small business loan, you can bring in skilled and qualified professional staff who can help improve your gross sales revenues, sales margins and improve your profitability.
- Invest in digital and social media marketing: Social media marketing, e-commerce and digital marketing have become the top marketing tools after the onset of the pandemic. If you have not expanded in these areas, now is the time to take a small business loan to invest in these latest marketing tools. Relying on purely traditional marketing mechanisms will be a non-starter for your business.
Small business loans are available from various financing companies on easy terms. Some of these include:
Quantum of loan: You can get a loan of up to Rs 75 lakhs through a small business loan.
Eligibility for small business loans: The financial strength of the Balance Sheet, age limit, business health and accruing cash flows, CIBIL score etc. helps determine the eligibility for a loan. Additionally, you should be between 25-65 years of age to apply for this loan.
Your business should have a successful track record of at least 3 years with consecutive profits for three financial years. Your sales should show a clear upward trend, and all your financial statements should be audited by a registered Chartered Accountant.
Required documentation for the loan application includes photo ID proof, documents of title to the business, ITR for two years, bank statements for the preceding six months, registration of incorporation and Memorandum and Articles of Association of your company.
Interest rates on small business loans: Interest rates on small business loans start at about 19% p.a. and climb upwards depending on your circumstances. All other charges are transparently disclosed upfront.
EMI calculator for small business loans: Most financing companies provide a Business Loan EMI calculator where you can input the loan amount, the applicable interest rate and the period of the loan. This will give you the stream of EMI payments you have to make. This will help you to plan your cash flows and schedule the loan repayments accordingly
Prepayment Calculator: If you want to analyse scenarios where you prepay the loan, the prepayment calculator will help you to understand the likely impact.
EMI options: Financing companies offer various EMI options including fixed EMIs or structured/flexible EMI options where you can plan your EMI payments according to cash flows.
Collateral and security: A small business loan does not require any collateral and security. You can easily apply for a small business loan, either online or offline.