Proven Ways to Reduce EMI Burden on the MSME LOAN
by Abdul Samar Business Finance ProviderAs a
small and medium-sized business, seeking a loan from any financial
institution is seamless today because of the financial agencies. However,
the EMI burden on that sanctioned loan is unavoidable. Immediate availability
of funds allows smooth operations in MSME business, but there can be market
trends that lead to a cash crunch at the time of EMI payment.
In this
write-up, we will close your issue on the Loan EMI burden. We will put on some
output-driven points for the MSME business. With the help of those points, the
business can lower its EMI loan burden.
Before
discussing EMI Loan burden for MSME, let's grab a crisp idea of how EMI is both
a blessing and a bane.
EMI- A bane!
EMI
payment on the loans knocks on the door without a blink. With EMI comes the
interest cost. There can be a situation where your business can't churn modest
profits. In such a scenario, a business may fail to repay the EMI and interest
on the loan. Non-payment of EMI along with interest will lead to a bad credit
score and harm the business's goodwill. Another issue with the non-payment of
EMI will lead to a late fee penalty.
EMI- A Blessing!
A loan
allows businesses to expand. Through EMI, the business gets time to repay the
loan. Small businesses can grow and pay back their loans together. After a successful EMI payment, the business's credit score is improved. A business can
get better loans without any hindrance with a good credit score.
EMI Burden Management on
MSME Loans
MSME
Loans are short-term cash inflows that allow a business to overcome financial
problems. MSME loan fuels the growth of the new business venture. These loans
can be repaid in the form of EMI. EMI can go up to INR 50000 to INR
100000. Some of the ways through which a business can lower the burden of EMI
loans are:
Consider the Loan Amount: Before
applying for the MSME business loan, it is advisable to check for the
deduction. To reduce the EMI burden, it is primary to reduce the loan amount. A
business reduces the EMI and interest issues if they apply and sanction the
minimum loan amount. To reduce the interest charges, a business can opt for a
small loan with a shorter repayment period.
Interest Rate Analysis: It
would be preferable if you plan for a loan prior. Applying for business without
any lag period will lead to higher interest rates. You should compare the
interest rates of different financial institutions before taking a loan. This
will allow you multiple opportunities and low-interest-bearing loans. With some
time, a business can also evaluate the best financial institutions for their
business loan. A good financial institution will guide the business on saving
interest and reducing the EMI loan burden. A business can negotiate with the
financial intuitions stating their business plans and budget.
One-Time Deposit Scheme: Some
banks like HDFC and ICICI offer a one-time deposit scheme. The scheme is
applicable for business. In this scheme, the business has to deposit a fixed
amount monthly. In the amount invested, they can earn interest. The interest
earned will help the business meet the EMI payment or other operational
expenses. Businesses are free to use the amount from this scheme. Through this
scheme, MSME can earn an extra amount and keep some chunks aside for future
risks.
Loan Divisions: Small
businesses are advised to consider the bigger divisions to pay a loan after
taking the loan. With the bigger repayments, a business can repay the loan
faster and with less EMI. If businesses choose to pay the loan amount in small
chunks, they are increasing the number of EMIs, thereby paying the EMI interest
charges.
Consider Refinancing: Refinancing
allows a business to change the old agreement. A business can transfer the
existing loan to a new lender with less interest rate and less EMI pressure.
Through refinancing, a business can shift from longer to shorter EMI tenure or
vice-versa. Refinancing also boosts the business's credit score and enhances
the working capital.
Negotiations: You
can always negotiate with your lender to reduce the interest rates on your MSME
business Loan. A conversation will not work. You will need a sound business
plan. A good business plan will help a business in negotiations. The business
idea will be more convincing if it has graphs and past revenue.
Extras: To
reduce the further EMI burden, a business can choose to pay the extra EMI. This
business will reduce the interest charges for future payments. Paying extra can
be done when a business has a good profit scenario. Repaying the EMI and not
further investing the amount is a good alternative to choose. By repaying the
EMI today, you will save the fixed cost in the future.
Fees: Before
accepting the MSME business loan, check if there are any prepayment or
part-payment charges. The bank charges 1% for processing the entire loan
payment. Few banks charge zero processing fees. For the prepayment or part
payment charges, the bank charges certain fees over the outstanding loan
amount. However, the charges are lower compared to the business loan interest
rates.
Wrapping up!
Loans are
needed for businesses to move forward. If they have sufficient money,
businesses are expected to invest in other sources. If businesses think of
taking a business loan, it will help them increase their credit ratings and
allow them to grow without thinking twice.
The loan
helps businesses to meet their working capital requirements. The business can
pay daily wages without any delay. They can upgrade the infrastructure of the
business and can invest smartly in marketing.
The loan
has multiple benefits and is the universal mode of growing any size of
business. The only burden here is EMI. With the points mentioned below, any
MSME can chalk out a plan to lower their Loan EMI burden. Businesses can
discuss with the financial consultants of the finance agency for better decisions.
Sponsor Ads
Created on Dec 19th 2022 04:40. Viewed 159 times.