sme loan

Short term loans also known as SME loans are crucial in running an enterprise. Regardless of your business size and its niche, money plays an integral part in your entrepreneurial journey. Regular pump in of funds is essential to help you maintain the flow of business or to expand the scale of operation. Fresh with rejuvenating ideas, you do not want the financial constraints to thwart your progress. Compromised business opportunity is something nobody wants to miss out on. Here comes SME finance.

What is an SME Loan?

SME loan is nothing but working capital which is provided to your company. For small-medium enterprise who are suffering from financial crunch or those who are lacking funds to initiate change, an SME loan proves to be quite useful. SME loans as the name suggests have short-term tenors; herein a borrower has to repay the loan within 5 years.

SME loans in India have the power to make or break your company. Thus, it is essential that you have a proper knowledge about how it works. Moreover, that can start by understanding the five important things to know about SME Loans:

Clear Purpose: When you decide to take an SME Loan, it is important that you have a clear purpose. A pre-requisite for SME loan is for you to have a clear picture of what you want to do with it. A clear goal will help you to utilise the money optimally. Thus, set a clear purpose at first place. For instance, whether you want to hire new employees, invest in some new technology or expand your network, and so on. If you want to hire new employees and that is the reason why you are borrowing an SME loan then make sure you do not deviate from the goal in future. Without a clear plan chalked out, you are more likely to end up in trouble.

Prepare an Operational Plan: Before securing an SME loan for the financer, it is important that you have your business strategy in place. A strategy which can help optimise the resources. A proper operation plan will help you from landing in a debt-trap.

Conduct Overall Research: When you take any loan, the interest rate is a factor which you cannot overlook. Similar is the case with SME loans. Know the prevailing interest rates in the market. Discuss the rates, compare it between the various options you have. Apart from interest rates learn about the other charges which are applicable.

Evaluate the Risks: A successful entrepreneur knows that risk has to be assessed well before it arrives. Before availing a loan, you should analyse all the risks that can turn up once you have borrowed the SME loan.

Be Different: Most of the entrepreneurs are inclined towards SME loans from banks. However, they fail to take into consideration the presence of Non-Banking Financial Companies (NBFCs). There are several highly accredited NBFCs which are offering better SME loan deals as compared to banks. One of the NBFC is Bajaj Finserv, which offers utmost flexibility and other unique features.

Remember, for any business venture to succeed, financial requirements cannot be undermined. You do not have to compromise on what you want to achieve rather plan on how you want to achieve it. SME loans provide you with a better platform to make things happen for your business. “It’s risky! It might not work out well” Put an end to this dilemma and watch your business prosper with the help of an SME loan.

Also Read: All You Need To Know About SME Loans