Micro, Small, and Medium Enterprises (MSMEs) are contributing significantly to the Indian economy at present. According to experts, the trend is expected to continue over the forthcoming years, making MSMEs an integral contributor to the country’s GDP.
Many entrepreneurs dream of establishing their own firm, whether it is for products or services. However, few of them fail due to a lack of financial assistance. To tackle these problems, the government and financial institutions are offering affordable MSME Loans to help small businesses achieve their goals with ease.
MSME Loans or Business Loans for MSMEs are offered to small business owners, entrepreneurs, and budding businesspersons to expand and scale their businesses. These loans are unsecured, thereby helping small business owners acquire funds without risking their assets.
However, having a healthy credit score is crucial for getting your MSME Loan approved. A credit score is the most important criterion that lenders check even before going through your entire loan application
What is a credit score?
Your credit score, is represented by a three-digit number that ranges between 300 and 900. This number is assigned to you by credit agencies such as TransUnion CIBIL, Equifax, CRIF Hi Mark, Experian, etc. The score is calculated on the basis of based on history, credit mix, number of ongoing loans, credit utilization, etc.
There are two types of credit scores, individual credit score, and business credit score. These scores are calculated on the basis of different metrics.
Why is your credit score important?
When it comes to already established businesses, the business credit score is taken into consideration. On the other hand, the personal credit score might be considered for small and micro enterprises with a sole propreitor.
Besides this, suppliers and vendors check your credit score before signing any agreement related to business. Having a healthy credit score clears away all doubts and apprehensions when it comes to lending funds to small business owners. It not only makes availing of MSME Loans easier but also improves your credit profile and financial history in case you want to borrow funds in the future.
You can use Business Loans for MSMEs in a variety of ways, which include the following:
Infusing working capital into the business
Procuring raw material
Maintaining inventory
Upgrading machinery and equipment
Hiring staff
Paying short-term expenses
Office/manufacturing facility expansion
Debt consolidation
Documents required for MSME Loan
KYC documents- Company PAN card/ Director/Proprietor/ Partner PAN card, Aadhaar card, Passport
Business documents- Business registration proof, business address proof
Address documents- Utility bills/ Rent agreement
Financial documents- Bank account statement for the past 6 months
How to apply for an MSME Loan?
Applying for a Business Loan for MSMEs has become easier now with online applications. Most banks and Non-banking Financial Companies (NBFCs) are offering Low Business Loan interest rate.
The online application process is simple and quick and does not require hefty paperwork. All you have to do is visit your chosen lender’s official website, fill out the loan application, and upload soft copies of documents required for MSME Loans.
Post verification, your application will be approved quickly, and the funds will be disbursed into your account within a day post approval. You can apply for these loans from the comfort of your home or office.
In conclusion
MSME Loans are a fantastic financial instrument for small business owners. These loans come with no end-use restrictions, allowing you to use them for any business-related purpose. Thanks to online applications, availing of these loans have become easier.
You can also use an online Business Loan calculator to determine your EMIs before you submit your loan application. Having a healthy credit score will make it easier for you to acquire funds, and lenders might even offer you a lower interest rate on your MSME Loan.
Courtesy - Zee Business
Link - https://www.zeebiz.com/agencies/smart-ways-smes-can-apply-for-a-quick-business-loan-218419
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