It is a simple fact that the more resources you have for your business, the more success, profitability and growth you will achieve, and an instant business loan is the ideal choice to provide capital for your company. You can get sufficient funds for working capital, keeping the business steady and handling everyday expenditures, such as paying for the infrastructure and wages with the help of business loans. The rise of FinTech (Financial Technology) has made it easier and faster to get a loan. Want to understand why it is beneficial to apply for a business loan? Read on.
Why take a loan for a small business?
The backbone of every company’s success is good finance, and this is particularly true for small businesses. In order to purchase equipment, restock inventory, extend operations and raise working capital, small businesses need funds. These days, there are tailor-made loans for small business owners known as MSME loans. They are preferred most amongst various other funding options available for securing a business loan.
Eligibility criteria and documents required to avail of an MSME loan
The company for which the loan is availed of should be operating in the retail, services or production sector. Investments must not surpass Rs. 10 crore in the manufacturing sector and Rs. 5 crore in the services sector. If the fund is lent for business growth, the company should have been in operation for more than 2 years. The company set-up should not fall under the blacklisted category.
To take advantage of MSME loans, the borrower needs to meet certain paperwork requirements. These include:
- Evidence of identity (Personal KYC): Aadhaar, PAN, Voter ID, driving license or passport.
- Address proof (Business and personal): Service bills such as bills for power, water, Government IDs and rental agreements.
- Financial proof: ITR papers, profit and loss accounts, banking statements or copies of passbooks over the last two years.
- Company-related documents: Certificates of firm registration, GST certificate, Udyam Registration, Company PAN, applicable, the Memorandum of Partnerships and other documents depending on the business.
Always keep in mind that the eligibility criteria and documentation requirements can differ from lender to lender.
You should keep the following points in mind before you apply for a business loan:
- It is of utmost importance to get your enterprise registered. You can complete the online registration form under the Udyam Registration system to get the registry completed. Registration for small businesses is quick, and you do not have to pay any amount.
- Cash flow is another important aspect that cannot be ignored. You must have a growth plan in place before applying for a loan.
- Understand the responsibilities that taking a loan brings, you must never miss an EMI payment as it has consequences on your credit score.
Small businesses need fast access to capital from time to time, whether to relieve seasonal pauses or to hire more workers. Reputed NBFCs like Kinara Capital are here to support you and your small business. They envision a financially inclusive world where every entrepreneur has equal access to capital by providing fast and flexible loans. Perhaps you’ve heard the proverb that you have to invest money to make money, and that is true. You have to invest in growth costs, such as inventory, labour, and premises if you want your business to expand.