SMEs or Small and Medium-sized Enterprises are a growing crop of business ventures that are taking the economy of the country by storm with their innovation and outlook. Lending institutions have come up with a new category of financial instruments, viz. SME loans for the requirements of such promising enterprises. These are basically business loans that can be utilized during working capital shortages, and for purchase of or leasing new machinery/equipment, repairing old equipment, scaling up, business expansions, recruitments, advertising, marketing campaigns and buying raw materials or inventory.
The key things worth knowing about these SME loans are as follows:
SME loans can either be secured or unsecured depending on the lender approached. You will find banks and NBFCs that provide these loans. When you do not own any asset that can be collateralized, look for lenders who provide collateral free SME loans.
Flexible and Convenient Options
You can look for options like a line of credit facility which is a convenient financial instrument that allows multiple withdrawals from a dedicated credit limit for a specified tenure.
Lending institutions for SME loans could be banks and NBFCs. Apart from these two options, which are considered formal lenders, there are informal lenders as well that provide loans at very high interest rates. Hence, it is best to stick to the formal lenders.
Different lending institutions provide SME loans at different rates of interest. These institutions have varying eligibility criteria based on which the interest rate is decided.