How to Get Small Business Loan Easily in India

Did you know that micro, small, and medium-sized enterprises contributed 29% of India’s GDP in 2018? Yes, the entrepreneurial ambitions and struggles of millions of businesses in the country are paying rich dividends to India’s growth. Moreover, the government is encouraging new schemes to promote the industrial nature of Indians with a massive influx of investments. The Micro, Small, and Medium Enterprises ministry announced in 2019 that it would contribute to their success with real contributions to make India a USD$ 5 trillion strong economy by 2025. So, documentation, legal support, and infrastructure will likely improve for small and medium-sized businesses soon. 

If you still are unclear about the procedure, below are simple ways to avail small business loans in India.

Documentation

Documentation is an important part for most lenders, including government lending programs like Mudra loans. The list of documentation includes identity proof, income proof, and loan requirement details. This simple procedure is often far more complicated, especially at banking institutions. Banks do offer low-interest rates for small business loans, but they can take nearly 60 days to complete formalities. So, if you urgently need a small business loan, you should consider going to a non-banking financial institute. 

Interest Rates 

As mentioned earlier, banks and government programs like Mudra loans offer attractive rates for loans for small businesses in India. Banks generally charge between 11%-16% to companies. However, these are highly secured loans. Hence, many people or companies do not qualify for these loans or miss out on possible opportunities. Ideally, you should consider going for a customized interest rate. Many financial institutions vary their interest rates depending on your business plan, loan duration, and total sum. 

Collateral

Many financial institutions provide small day loans without the need for insurance for small businesses. These include loans for amount as little as Rs. 15,000 with daily repayment options. If you are looking to borrow for covering your day-to-day operations, this is the ideal path. These loans are not usually on offer at big banks. If you require an investment without collateral – you need to contact non-banking financial institutions. 

Variety of Loans 

There are many different types of loans available. Additionally, all entities, including the government, banks, and non-financial institutions, are providing a ton of options for small businesses. These include options like working capital loans, long term asset-backed loans, among others. A word of caution here – many companies report that getting a loan remains a difficult challenge in their path. It is surprising considering the growing support for financial growth. Still, establishing a long and credible line of financial record along with collateral, and witnesses can be your meal ticket to owning a successful small business. 

However, when you are starting small, understanding of your complex financials, and daily routines are essential for every lender to understand. Companies like Muthoot Fincorp work with millions of families and small businesses to cater to their daily needs and ambitions.