Things to Keep In Mind Before You Apply For SME Loans

If you wish to set up a small business or expand your existing business, then a Small and Medium Enterprise (SME) loan is one of the most preferred options in order to fuel your business aspirations. But before applying for a small business loan, one should be well-versed with the documentation work so as to sail through the entire procedure. Mentioned below are few tips that you can consider while preparing for your loan application.

• Research is the key to success

This is one of the most important steps that you should undertake that will help you pick the right small business loan. If you already have good relations with your bank, then rest assured because this can be one of the major reasons for receiving an approval for a loan. You research should include reading online reviews of companies and organisations that are touted as potential leaders. The most ideal situation would be to select a bank that has a great network and presence. This also requires one to constantly keep looking out for bank websites and read their terms and conditions for further insights.

• Reviewing

If you look through potential websites, you should look out for terms of repayment, tax benefits, loan tenure and other conditions before making the final choice.

• Your documents should be up to date

This is one of the major factors that banks take into consideration. You have to create a business plan that is internally approved. Also, you should make a note of the document requirement after which you should immediately start putting them together. Your income documents, PAN card details and bank statements are the necessary documents along with the following:

• Passport copy
• Loan application form
• Address proof
• Passport sized photographs
• Track record of repayment
• Professional qualification
• Bank statement of six months
• Financial record of two years (audited)
• Copies of partnership deed
• Proforma invoice of the equipment

• The Application

Make sure your application letter is free of errors along with your documents that will ensure brighter chances of an approval.

• Prepare yourself for the interview

This preparation is essential for you to present your business plan and ideas with confidence. You should provide clarity to the interviewer about how you plan to utilize the money in business. All relevant information should be provided to the officer along with a complete list of documents and material that will support your business requirement.

So increase your chances of receiving a small business loan by preparing in advance and following these tips.

Top Five Tips to Avail a Business Loan

You may have the simple desire of starting your own business, or expand the current production line. For all such entrepreneurial ventures, financial bodies in India offered dedicated business loans. Such loans are offered to business owners or aspirants who plan to start one.

Small business loan are classified as SME loans in India. SME stands for Small and Medium-sized Enterprises. As the name suggests, such loan is only offered to emerging businesses. To avail such borrowing, here are the top five tips that you should take a look at.

1.   Who provide SME Loans

The needs and financial requirements of every business are different. After considering such diversified financing needs, banks and NBFCs provide loan. There are several NBFCs in India that offer competitive SME loan interest rates over lending, versatile repayment options, and active customer service to turn your business dream into reality.

     2.  What are types of SME loans


There are different types of SME loans which are provided with various objectives. The three prime objectives include increase in working capital, expansion of business, and margin money funding (to purchase additional machinery). So, before you file an application for the borrowing, make sure you know your borrowing motive.

     3.  Get acquainted with the Loan Process

Availing such loan is quite simple, only when you follow the mentioned procedure. During the time of application submission, ensure to submit the valid documents.  Also, develop a good rapport with the credit manager if you look forward to speed up the process. Once all documents are verified and loan application is assessed, you will get the required funding.

     4.   Avoid over-drawing

Many banks provide the facility of making additional withdrawals apart from the borrowed principal amount. However, the borrower should understand that such service is only provided as a privilege and should not be abused. Furthermore, there are separate charges levied on the additional borrowings. So, avoid over-drawing.

    5.    Check the Tenure Options

Loan duration will vary on the basis of borrowed principal amount. SME loan tenure can range from 12 months to 48 months. Only self-employed individuals such as doctors will get extended tenure of up to 60 months.

Applying for Business Loans in India

Loans are extremely popular financing methods which are used for various purposes. It could be to purchase a car, a home, personal reasons, educational purposes, for gold, against insurance policies, against bank fixed deposits, from PPF or EPF, against shares or mutual funds or even for marriage purposes. So, what if you are a young, budding entrepreneur and want to start up a business?

Well, there's good news for you! There are financing options for that as well. Known as 'business loans’, these financing options are similar to other types, only the intent is different. They are taken for the purpose of starting up a new business venture or even to purchase an already existing business or also bring in funds to an existing business to finance its current and future business activity.

It is easy to read about these business loans in India online by visiting the bank or financial institute’s website. One can also get instant online approval as well. There is no need for any guarantor for this process.  All a person has to do is fill in their personal details online such as their first, middle and last name, residence city, mobile number, PAN card number, date of birth and email ID.

After they fill in all the necessary details in the online application form, the bank will verify the data. Banks will pay attention to all the possible factors, even one’s credit score before approving the same. They would also require a business plan, which will demonstrate one’s ability to repay the amount.  

After submitting all the required information there are also certain essential financial documents that are required, besides merely providing information. Banks also want to see hard copies of your PAN card, identity proof, address proof, bank statement of the past 6 months, voters ID card, driving licence, projection of future operations and any other if required. Only after all of the above has been approved will the bank issue the same.

One of the most important and common of these is the SME loan. They are taken for small and medium sized enterprises. These financing options are known to form a major chunk of the general business finance market. They can be taken for many different purposes; working capital requirement, new purchases, expansions, vendor and dealer financing, bill discounting, etc.

Researching about these products and making oneself aware about the features offered for the same is very important. One should also compare the procedure from different banks as well. Only after comparing different banks should one make a decision where they want to obtain their loan.