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About SME Loan

SME Loans- A Perfect Guide for Entrepreneurs with Details and Tricks to Get through Financial Help

SME Loans are the loans which are taken to fund small scale and medium scale businesses which constitute of a major section of the general finance market. Obvious is the fact that small and medium scale enterprises play a vital role in most of the economies especially when we talk about the developing countries. As per the statistics provided by the World Bank, in the coming 15 years, 600 million jobs will be needed to absorb the growing workforce. However, if appropriate funds are there, there would be a steady growth in the SMEs. Hence, in order for the dynamic sector to grow and provide jobs, it is really critical unlocking the sources of capital.

Purpose and Types of SME Loan

SME Loans are majorly needed to meet the business requirements which might arise from time to time in small and medium scale businesses including requirements such as paying out salary to theemployee, business expansion, finance for marketing and purchasing any equipment. The government has also proposed many plans to provide loans to small and medium sized industries. It certainly aims at boosting the development of these industries.

Types of Loans

  • Overdraft

    A credit up to a certain amount by the bank with a specific interest is called overdraft. Conditions where in the funds withdrawn have exceeded the fund's deposited rise to overdraft.

  • Fixed Loan

    A loan which is guaranteed for a certain period of time and which includes a certain rate of interest is termed as a fixed loan.

  • Bridging Loan

    Bridging loan is the sum of money lent by a bank in order to cover the interval between buying and selling of a house.

  • Revolving Credit

    Money lent for small scale industrial purposes which are renewed automatically as and when the debt is paid is known as revolving credit. The customer has to pay a commitment fee and is then permitted the use of funds as and when needed.

Benefits of SME Loan

  • Multiple Loan Options

    Many advertisements of different banks who try to lure the entrepreneurs come up with several schemes and charge interests on the loans which they provide.

  • Convenient

    Banks are always convenient to use as they are accessible and within the reach of a common man. As we use banks for depositing or withdrawing money regularly hence it becomes really familiar to use and becomes our first choice while thinking of getting a loan.

  • Non Profit sharing

    Other sources of getting loans than the banks offer a particular amount of some part ownership however the banks are only interested in getting the interest amount in lieu of the loan provided.

  • Lower Rates of Interests

    Banks provide loans at a much lower rate than some other lending sources for example credit cards, though it’s a little difficult to get.

  • Tax Benefits

    You can always avail the benefits from tax in case of getting a loan from a bank.

Eligibility Criteria for SME Loan

  • Sole proprietorship firms

  • Partnership firm

  • Private limited companies

  • Public limited companies

  • Manufacturing, trading and service units

  • Profits in the last 2 years

  • Must be defined under MSMED Act and by the Reserve Bank of India.

Tips for SME Loan

It’s a clear fact that the small scale industries can face a real hard time in order to get themselves some sort of funds. So, if you are an entrepreneur looking out for a loan on your new venture, you must first be clear of the facts which can maximize the chances of getting you a loan. Let’s take a look at the below points which can help getting you some additional funds for your business.

  1. Explain how you generate a steady cash flow

    For any money lender, it is supposed to be a primary concern to understand whether you would be able to pay back the money lent out to you in addition to some interest. You need to demonstrate successfully the constant and sufficient cash flow to increase the prospects. You can do this easily by showing the tax returns, your bank statements, and financial transactions. You should always prepare yourself well beforehand for explanations to some tricky questions like what if the cash flow dipped due to recession or some loss in the business.

  2. A positive and clear payment history

    For a financer, it is of prime importance to be able to see a clean bank statement history of your start up which would clearly indicate as to how capable your venture is of paying all the debts. Adding up some references including the contact information of the person you deal with at your bank or may be the trade supplier. A financer will always ensure if there is a timely payment made against all the debts (if taken) which certainly will increase the chances of you getting a loan.

  3. Prove business judgment

    The financial lenders need to be able to understand that you are capable enough to face all the challenges which might come up while you start up a new venture and that you have an action plan ready for that. You should try and build a business plan which you can show to the financers. You must emphasize of two conclusions- how your start up will turn in case you get approved for financing and how it will perform in case you don’t get approved for financing.

  4. Keep looking for options

    Do not think that only one bank or any financial lender will be the best for you. Explore all the options available to you by comparing the rates, options, and fees. You must always go for only established financial providers.

Benefits of SME Loan





  5. YES Bank

  6. State Bank of India

  7. Bank of Baroda

  8. Standard Chartered Bank

  9. India Bulls Finance

  10. Aditya Birla

  11. DBS

  12. Kotak Bank

  13. Edelwise

  14. DHFL

  15. PNB Hosing Finance

  16. Tata Housing

So, we hope that you have got an ample amount of information regarding SME Loans.