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MSME Loan: The Efficient Financing Solution for MSMEs

  • Highlights

  • Why MSMEs are the backbone of the Indian economy

  • The need for finance for MSMEs

  • Why business owners prefer MSME loans

  • The flexibility of usage of MSME loans

Micro, Small and Medium Enterprises (MSMEs) are often referred to as the backbone of the Indian economy, and with good reason. The MSME sector has shown strong resilience in the face of global economic uncertainties over the years. It has been successful in maintaining an annual growth rate of 10% over the last couple of years.

The sector contributes to the nation by generating employment, bringing industrialization to rural areas and contributing to export of various products. According to estimates provided by Ministry of MSME (Government of India), the sector contributes a massive 38% to India’s GDP and accounts for 40% and 45% towards export and manufacturing output, respectively.

Loans for MSMEs

Finance is the key to success in any business, and this holds especially true for MSMEs. Small businesses require funds to buy equipment, refill inventory, expand operations and increase working capital. Among the numerous financing options available, the one preferred by MSMEs are loans tailor-made for them – MSME loans.

Why do small business owners prefer MSME loans over other financial instruments? Some reasons are:

Additional Read: Creative Ways of Raising Funds for Small Businesses

Short Processing Cycle

In the small business environment, time is of the essence. Even small delays can result in the missing of a lucrative market opportunity. In such situations, faster claim processing is a value addition. MSME loans like those from Bajaj Finserv don’t require any collateral, and hence, time is saved on appraisal of assets.
These loans have short processing times and quick disbursal of funds, some as early as in 48 hours. This is one of the main factors in the success of these loans, as it allows business owners to capture market opportunities in a short span of time.

Additional Reads: What are the Benefits of MSME Loan

Full Control Over Business

Funds coming from venture capitalists and angel investors come at the cost of reduced ownership in the business.Non-Banking Financial Companies (NBFCs) like Bajaj Finserv do not involve liquidation of control.
The aspect of ‘control’ is important for a small business owner, with limited asset at his disposal. We at Bajaj Finserv acknowledge this requirement and offer loans as high as up to Rs. 20 lakh without collateral. Thus it avoids the pleading of assets crucial to business operations by MSME owners.

Low Interest Rate

A low rate of interest is an important factor that is considered during selection of a loan. Lower interest means that the business owner does not have to commit a significant amount every month towards repayment of the loan. The money saved from the low MSME loan interest rate can be put to better use for boosting the business further.
Recognising this requirement, the MSME loans of Bajaj Finserv have line of credit facility. It allows the business owners to withdraw and repay funds as per their own requirements. Since at a given time, interest is calculated only on the funds withdrawn, it prevents unnecessary debt servicing.

No Pre-determined Purpose

MSME loans are designed with insights gained from extensive research. It is understood that small businesses require funds for varying purposes This is the reason these loans don’t come with a pre-determined usage objective. The business owner is free to utilise these funds to address any financial need he may have.

MSME Loans

The 4 types of Business Loan Explained

From time to time, every business needs an external source of finance to fund its needs. While business loans are a convenient and hassle-free source of funds, it is important for small business owners to know which is the right type of business loan for their enterprise. Here, we showcase the 4 types of business loans, and what each of them is suited for, to help you make the best decision for your business.

In Conclusion

MSME loans are the ideal choice for small business owners. They are customised financial arrangements with the right benefits packaged into them. These loans are versatile, scalable and help the business owner get the most out of their borrowing operations.

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