Every small-medium business owner might require a loan to grow the business. It can be to upgrade technology, machinery, to meet the sudden rise in demands, or to shift the office, to meet the daily business requirements, etc.
The traditional method to apply for a loan apart from some other sources including angel investors and crowdfunding is banks. But they mostly do not lend money to businesses without security. And there are various other rules regulations along with some terms and conditions one has to follow.
Providing security for a loan is not always possible for an SME.
Therefore, the best resource to take an SME loan in India is to take it through an NBFC without collateral. NBFCs have standard eligibility criteria and documents required for every small business owner. They only check how financially sound the business is, and also the business fundamentals.
Every lender or financial institution has different eligibility criteria, therefore, it becomes important to conduct research prior to the loan application. This will help the SME owner decide which lender to go for or which lender’s eligibility criteria the business can meet.
Here are some eligibility criteria and documentation required to take a loan from an NBFC and other such financial institutions.
Basic eligibility criteria and documentation required for the loan:
- Minimum Turnover of the SME
- The age of the applicant
- The activity of the business (number of years of business operation)
- Credit Score of the business
Most of the institutions prefer a turnover of Rs. 15 lakhs to Rs. 1 crore in that financial year.
Age of the applicant to avail an SME Loan should be a minimum of 21 years and a maximum of 65 years at the time of loan maturity.
The activity of the business which is considered is between 3-5 years, but a few also prefer a year old business to take an SME loan in India.
The documents that are required to take a small business loan are those which can establish the identity of the business owner and also the financial status of the business. Through these documents, the lender/lending institution also evaluates the ability of the business to repay the loan, and also if there is any risk related to giving a loan to the business.
Few of the required documents are:
- PAN Card and Aadhaar Card of the proprietor
- Bank statements of all accounts (in pdf) for the last 12 Months
- Income Tax Returns ( previous 2 years)
- Latest Balance Sheet & P&L (provisional/audited)
- Shop Establishment License/Gumasta
- GST Registration Receipt
- GST Receipts/Challans
SMEs generate employment opportunities and also contribute to the GDP of the country. But they face the major problem of lack of funds during the functioning of their businesses. Every lender or lending institution has different schemes related to a loan for an SME.
Banks and other lenders also offer other loan schemes related to the government to SMEs so that it is easy for them to get funds for their small business.
Here are some of the advantages of these government schemes:
- Since the government promotes online transactions, there are schemes designed to help SMEs with their online transactions. These schemes are Mudra loan scheme, loan in 59 minutes scheme, and the CGTMSE scheme.
- Mudra scheme up to Rs. 10 lakhs are given to the non-corporate, non-farm, small/micro-enterprises. There are three categories in a Mudra scheme as per the stage of growth/development and funding needs of the enterprise. Shishu covers loans up to Rs. 50,000, Kishore covers loans above Rs. 50,000 up to Rs. 5,00,000, and Tarun covers loans above Rs. 5,00,000 up to Rs. 10,00,000.
- There is also a provision of applying online for the loan by filling an online application with the required documents that have to be uploaded online. These schemes save time and the trouble of visiting the lender’s office again and again. The application can be filled just by visiting the lender’s site. This can be a huge help to SMEs when there is a requirement of urgent funds and will also not affect business growth.
- Online loan system has encouraged digital lending. Because of which the NBFCs offer loans which are approved and disbursed within a few days or even a few hours.
- There are also some online applications that help grow and also help them by giving them the facility to avail loans. The business can also sell and purchase online, list the products and services offered, and connect with people.
Things to remember while applying for an online loan:
- Assess the requirements of the business. Know that the loan is needed for.
- Know about your credits including the loan take, repayments, etc. Maintain a good credit score and keep on verifying the credit report from time-to-time.
- Focus on maintaining the good financial health of the business, work towards maintaining proper cash flow.
- Conduct research on the various lenders with their eligibility criteria and other terms and conditions.
- Prepare the documents in advance so that there is no point of rejection.
If you decide to go for an online loan through an NBFC and any other such financial institution, here are a few benefits:
1. It is much easier
Can be applied for from a home or office, there is no need to visit the lender. The process is very simple and not tedious like that of a bank loan.
2. The evaluation is based on an algorithm
The loan process is algorithm-based which is used to evaluate the creditworthiness of the lender.
3. Faster loan approval and disbursal
Since the process is algorithm-based, the loan approval just takes a few minutes and the loan disbursal just a few days.
Here are the steps to follow to apply for a loan online/from an NBFC:
- Visit the website of the lender.
- Fill the application online.
- Upload the mentioned documents.
- Wait for application approval.
- Once the approval is done, the loan amount will be disbursed within a few days.
If you want to take an online loan for your SME, apply for the same with Gromor Finance. Gromor offers unsecured loans at attractive interest rates. Get in touch now!