Business Tips For Young Entrepreneurs – To run a successful small and medium business in India, you need more than just patience and dedication. A healthy positive cash flow is an integral part of a successful business. The nature of small and medium business is such that there are uncertain times that you will have to face. It can be due to an unexpected increase in demand, a delay in payments, or an increase in costs. The bottom line is that as an MSME business owner, you need to be able to manage overhead costs to keep the show running.
We always hear that the ability to sell, market and brand a business are the core competencies needed to survive in the market, but being able to manage cash flow effectively is one of the most underrated abilities possible. make or break. business.
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Gone are the days when you had to rely on the informal sector to meet your fund needs. You don’t need to pay unrealistic interest rates and rely on unknown money lenders to achieve your business goals. There are many loan options available to the MSME business owner today.
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This is how you, as an MSME business owner or a young entrepreneur, can use the loans to manage your overhead costs.
An MSME loan is a type of business loan specially designed keeping in mind the needs of a small business. The MSME loans can be taken as a business loan for start-ups, expansion of an existing business, Business Loan for women or for any specific need in business. As MSME loans are extended without any collateral and are designed with attractive interest rates, it is a helpful small business loan that can help you establish or expand your business in its early days.
The MSME loans are guaranteed by the government under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. Government of India launched this scheme with Reserve Bank of India and Small Industries Development Bank of India (SIDBI) to promote MSME loans in India. Some financial institutions provide loans to small businesses under this scheme without the need for any land or property ownership to support the loan.
According to the conditions of this scheme, the business owner should give importance to the viability of the project and he/she must meet the eligibility criteria as mentioned in the scheme to avail the benefits.
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MSME loan in India has several advantages. The biggest advantage is that you don’t need any collateral to take an MSME loan. This is helpful for business owners who are struggling with financial needs but do not or do not want to risk their assets on loan. Some women, especially in rural areas, are starting their own businesses, employing other women and contributing to the economy. the development of the micro-economy concerned. In such cases, a Business Loan for women can help a lot, by helping the MSMEs run by these women and helping the enterprises achieve scale.
One of the biggest advantages of an MSME loan is that you don’t have to risk your business or personal assets to get a loan to expand your business. The loan is extended based on the performance of the company, the viability of the project, and the profile of the management. More importantly, you do not need any collateral to back up the loan application. As MSME loans are designed to help support small and medium-sized businesses in the country, as you do not need to submit any land or property papers as security for the loan, it is a great source of funds.
MSME loans are generally taken to manage overhead costs for a short period. These loans are designed in such a way that their tenure is lower than other loans. This allows you to quickly handle your cash flow challenges and avoid the long cycle of debt.
It is an advantage for these businesses that SMEs have the option of accessing additional funds to expand their existing business or enter new territories. The process of getting an MSME loan has been simplified even by financial institutions and you can get an MSME loan with minimal documentation and ease. For example, Poonawalla Fincorp offers business loans to MSMEs after a complete online process. Compared to the situation a few years ago when MSMEs had to provide a lot of documents to get an MSME loan, the industry has changed drastically in making these loans accessible to these businesses. In addition, some lenders have also started adapting Business Loans. for women, making it easier for women-led enterprises to access funds for growth and expansion.
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The interest rate on any loan is one of the most important factors to consider. MSME loan interest rate is competitive compared to other categories. Financial institutions charge a processing fee, prepayment charge, and late fee fees. You should also consider these while taking an MSME loan, along with the interest rate.
The Indian small and medium business owner plays a key role in nation building and is a vital component of the Indian economy. According to the Brand Equity Foundation of India, Indian MSMEs contribute more than 29% to the country’s GDP. With MSMEs contributing significantly to the nation’s economy, it is no wonder that many financial institutions have started offering loan options to these companies.
Due to the increase in global competition and the need for continuous innovation, it is evident that MSME businesses need funds to manage their overheads and maintain a positive cash flow. The MSME loans can be used to expand business or to manage your current commitments.
In the traditional business ecosystem, banks were not very strict in lending to SMEs due to the uncertain business cycle and lack of any collateral. However, with the new-age lenders like Poonawalla Fincorp entering the picture, you can access additional funds quickly today, without any collateral, and meet the business requirements. women to meet specific needs.
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There are some important tips that you should consider while trying to take an MSME loan.
Here are the top 5 loan tips to manage MSME and young entrepreneur overhead costs in India:
You should always check the MSME loan eligibility criteria thoroughly before applying. You can check the eligibility criteria for MSME loan on the individual websites of the financial institutions you are considering. You can also check the third party platforms where you can compare the eligibility criteria of different companies. It is best to do an eligibility check yourself before applying.
After you apply for an MSME loan, the lender will check your credit score and credit profile. It is not good to have too many inquiries for a credit check profile in a short period of time. Too many loan inquiries in a short period of time are seen as a warning sign to lenders and can also affect your credit score.
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Each lender will have different criteria about eligibility and the maximum loan amount you can get. If you check these conditions in advance, you would apply only to the companies that would meet your needs. In case of MSME loan, there would be conditions like minimum years of operation, minimum turnover, GST returns, location of the business, etc. You should consider all these factors carefully and decide to file applications with a few lenders to. get the loan.
Apart from the eligibility criteria, it is important to check the required documents with the shortlisted lenders. Although the list of paperwork requirements has decreased in recent years, there are still important papers that you need to provide. You should check the required documents so that you can match the available documents. In a typical loan application process, the required documents can be divided into the following categories:
KYC Documents: This would include documents like PAN, Aadhaar, Passport, Voter ID, or any other related document that would help establish your identity and serve as proof of your address.
Business documents: Since the loan is being taken for your business, you would need to submit documents like Business PAN, business income tax returns, rent agreement/utility bills, and bank statements.
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Licenses: Some lenders also ask you to submit a copy of the licenses that apply to your business. For example, to work in a food business, you need a license from FSSAI. As the loan being applied for is an MSME loan, lenders also ask for Udyam Registration certificate. It is a government issued identification number for small and medium enterprises issued by the Ministry of MSME.
Even before applying for a loan, it is important to define the purpose of the loan. This would help you clarify why you are taking a loan. This would also ensure that you spend the loan amount towards the purpose. In the MSME ecosystem where the
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