Small business loans are loans given to MSMEs engaged in the manufacturing, services, and trading sectors. These loans can be used to start a new business or expand an existing one through diversification, modernization and technology upgrading. Business loan providers like Non-Banking Financial Companies (NBFCs) provide small business loans that can be used for the following purposes:
- To purchase or renovate business premises such as warehouses, land, buildings, godowns etc.
- Purchase of plant and machinery, such as lathe machine, CNC machine, furniture, electrical fixtures etc.
- To meet working capital needs, such as raw materials, and repairing machinery.
- Trade Finance (Bill Discounting) – used to compensate creditors when waiting for debtors to pay.
- Launching a new product, company growth, marketing and advertising credit.
There are mainly 2 types of small business loans:
- Asset purchase loans
- Working capital loans
Let’s understand both of them in detail:
Are you experiencing a plateau in your business? Then this is the right time to avail of an asset purchase loan. Let’s have a look at the benefits of these loans:
- Asset purchase loans aim to assist MSMEs by providing financial assistance to procure new machinery.
- This allows MSMEs to concentrate more on producing high-quality products.
- Availability of the latest machinery allows MSMEs to complete orders in time and produce high quality products.
Working capital can become more difficult to manage. When you can’t keep up with your everyday expenses, you’ll have to make tough decisions. With each passing day of lower revenues, your options narrow, from wage cuts and layoffs to the finality of closing your shop.
Working capital is needed at every stage of production in small companies, from raw materials or inventory to the disbursement of finished products.
You can use a working capital loan for:
- Investing in equipment
- Refreshing your inventory
- Recruiting Staff
- Controlling cash flow
How to get a small business loan?
Step 1: Eligibility check
This ensures the basic loan eligibility of whether the customer is a qualified lead and passes the basic criteria for availing of a small business loan.
Step 2: KYC verification – personal and business
This step consists of verifying the applicant’s information such as their PAN card, Aadhaar card, address proof, business KYC (registration type), bank statement and Udyam registration.
Step 3: Income verification
This step consists of uploading various business documents; there are multiple options if certain documents are unavailable. Below are the usually requested documents:
– GST verification
– Bank account statements
– Machinery details (only for the manufacturing sector)
– Property (no documents required, only information)
Step 4: Loan application and approval
This step is mostly about fulfilling loan formalities such as signatures on documents, nominee and loan sanction details. Currently, business owners can check their eligibility themselves by filling in their details on the website instantly. After which, a loan officer will contact them if they have passed the eligibility check. The loan officer will then follow up and process the rest of the application.
Trusted NBFCs like Kinara Capital provide collateral-free loans to MSMEs engaged in the manufacturing, service and trading sectors. Kinara provides loans in the range of Rs. 1-30 Lakhs. They have 110 branches across Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Telangana, and Puducherry, with their headquarters in Bangalore. The Reserve Bank of India (RBI) has designated Kinara as a Systemically Important NBFC. So, you can be assured that you are availing your loan from a trusted source.
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