An SME loan is a lucrative funding option that helps businesses grow and stay afloat during financially challenging times. Entrepreneurs running out of funds can apply for a Business Loan at lower interest rates from lending institutions or NBFCs and take their company back on track. The most sought-after Business Loan benefits SME owners expect are hassle-free application, competitive interest rates, flexible repayment terms and quick approval.
Running a small or medium-sized business and expanding it over time requires significant investment. However, an entrepreneur’s dream to grow an existing business should not hold back due to a shortage of funds. Business Loans offered by NBFCs at attractive interest rates help turn the business expansion plans into reality without straining the finances. Many business owners borrow these loans to meet their day-to-day expenses and ease financial woes. Let’s learn how these loans rescue when business owners run out of funds.
Modern NBFCs have easy Business Loan eligibility criteria to make the lending process hassle-free and smooth. Aspiring borrowers can check the eligibility criteria online before applying for the loan. No lengthy discussions and paperwork are necessary, unlike looking for funding from conventional financial institutions and equity investors.
Getting a small Business Loan is also convenient, as most NBFCs like Clix Capital have simple eligibility conditions and minimal documentation requirements. Loan seekers can visit their website and follow their application procedure to apply for the loan online without hassles.
Competitive Interest Rates
One significant benefit of a Business Loan is that it is available at competitive interest rates. Usually, the loan interest rates depend on the applicant’s loan amount, credit rating, business turnover, and business vintage. The Business Loan interest rates are much lower than most other financing options. Affordable interest rates encourage SME owners to expand their businesses and consolidate operations. Intense competition among NBFCs also gives borrowers more negotiating power to get the lowest loan rates.
No Interference from Lending Institutions
Non-interference from lending institutions and NBFCs is one of the key Business Loan benefits entrepreneurs appreciate. When SME owners take a Business Loan, there is no interference from the lending institution in how they utilise the money. The business owners can use the loan to buy raw materials, purchase equipment, hire staff, or invest in marketing per their requirements. In contrast, if the business owners seek funds from equity investors, they would control how the SME owner uses the money or run their business.
No Need to Share Profits
Entrepreneurs work hard to operate their businesses and prefer to keep their profits private from others. However, when they get funds from investors, they expect a share of profits from the business owners. No profit sharing is the most lucrative benefit of getting a Business Loan. Entrepreneurs with small businesses can retain all their earnings. They are only required to repay the loan EMIs as per schedule.
No Collateral Requirement
Reputed lending institutions and NBFCs offer collateral-free Business Loans to applicants who meet their Business Loan eligibility criteria. So, business owners do not need to pledge any property as collateral or liquidate their assets to access these loans.
Taking a Business Loan while running out of funds offers tax advantages too. According to the Income Tax Act 1961, the borrowers can claim tax deductions on the interest amount paid on the Business Loan. The interest paid is subtracted from the gross business income, reducing the overall tax burden. However, remember to maintain a proper loan record, as tax authorities can ask for these proofs. Notably, there is no tax deduction on the principal repayment.
Quick Approval and Disbursal
When a business runs out of funds, it needs quick funds to cover its needs. Fast approval and disbursal are the added Business Loan benefits that make them the best funding options. With the facility to apply online with minimal documentation, loan disbursal takes place quickly after a brief in-person verification. Some NBFCs also offer instant SME loans for customers with high credit scores. Consequently, the business activities do not suffer a break due to funds shortage.
Opportunity to Strengthen the Credit Rating
When the finances are low, a small Business Loan helps improve the credit rating to enhance eligibility for future loans. The credit score depends on the applicant’s repayment history, credit portfolio, debt-to-income (DTI) ratio, and other factors. Repaying the dues on time, retaining old accounts, and diversifying the credit portfolio with minimal financial obligations can help build a good credit score. Usually, business loan applicants with a credit score of 700 or above and a CMR score of up to 6 get easier access to credit at lower interest rates and favourable terms and conditions.
Most trustworthy NBFCs have flexible repayment terms, allowing borrowers to repay the loan as per their convenient repayment period. The loan duration ranges from 12 to 36 months, depending on the business type, applicant’s credibility, and repayment capacity. A longer term reduces the EMI amount and makes repayment more manageable, while a shorter term pays off the loan quickly and saves on the interest outgo. While facing temporary monetary problems, business owners can get instant funds to get their business on track and repay in easy EMIs.
How Does an SME Loan Power Business Growth?
Quick fund availability is one of the most significant Business Loan benefits borrowers expect for business growth. Their ambition to expand business gets fulfilled due to easy access to funds through a Business Loan. Often, SME owners need more funds to invest in their business growth, which prevents them from hiring skilled staff or implementing the latest technology. They can take loans from an NBFC that offers them the most suitable interest rates, terms and conditions. Modern NBFCs provide a range of collateral-free Business Loans with flexible repayment terms and competitive interest rates.
Whether looking for funds for a small or medium-sized business, entrepreneurs can access the required funds in a quick turnaround time with minimal documentation and easy Business Loan eligibility criteria. They can use the loan funds to open a new office, hire more staff, upgrade technology, or any other purpose that instigates growth.
Devanshu Shrivastava has over ten years of experience in the areas of credit, personal loans, business loans, SMEs,s and financing. He has a wide range of exposure in fintech, SaaS, banking, insurance, and financing. He has successfully delivered multiple projects on go-to- financial strategy, analysis, business expansion, and others. He loves to help others to get better financial stability and standards.
Krishna Murthy is the senior publisher at Trickyfinance. Krishna Murthy was one of the brilliant students during his college days. He completed his education in MBA (Master of Business Administration), and he is currently managing the all workload for sharing the best banking information over the internet. The main purpose of starting Tricky Finance is to provide all the precious information related to businesses and the banks to his readers.