Many great ideas could not survive the fierce competition that the market poses. Entrepreneurs who had the potential of changing the very dynamics of Indian economics gave up on their dreams owing to lack of funds. This hour demands innovation, design thinking and things beyond imagination. For all of these, you need to experiment, and that requires investment. Be it a fresh idea or a regular business; initial funding is crucial for both. But is it a good idea to invest money from your pocket in a new venture?
Business Loans are available, but why to take a debt if you are capable of investing the working capital from your savings? There are numerous benefits to choosing a business loan, especially SME (Small Medium Enterprises) loans. The money you saved should be used for the needs of the people you love. Risking the amount in the hope of success of a new venture is not wrong. But one must understand that risk management is as crucial as risk-taking in business.
What are the benefits that an SME offer?
- Quick disbursal
The time taken by the bank to release this loan is negligible. This means you can take the credit even when stuck in a bottleneck situation, provided you fulfil the eligibility criteria.
- No need to put your assets at stake.
SME loans do not require you to secure the amount by giving an equally valuable asset of yours to the organisation offering the credit.
- Short tenure
More extended the period, higher will be the amount paid as interest. If the loan is to be repaid in a shorter span, you can plan your budget accordingly and get rid of the stress of having a long-term liability. SME’s flexibility allows you to manage your capital more conveniently.
- Opportunity to increase your credit rating
SME loans do not require a high credit score. These loans being unsecured will instead offer you a chance to improve your rating by paying the amount back in due time. Doing this will increase the probability of getting a loan (higher value) from other organisations.
- No restrictions on financing
As long as the fund is invested in the business, there is no limitation on unsecured Business Loans.
- Low interest rates
If you do not want your credit to become a burden on you, SME is the right type of loan you should avail. The low rate of interest makes this option favourable to the borrowers.
- No documents required
A KYC and a couple of other papers are all you need to get an SME loan.
- Minimum eligibility
Since the documentation is minimum for SME loans, proving your eligibility if you are between 25 to 55 years of age is not difficult. If you are running a business for three years or more, you will be welcomed for an SME loan. The eligibility criteria can be fulfilled merely by showing a tax return document duly signed by a CA.
For the desired growth in business, SME loans are a preferred option over investing your savings. There are benefits from the government like relaxation on taxes which make this loan the ideal investment option for small and medium scale industry.
Why should one refrain from investing the savings as working capital?
In the moment of crisis, you will be left with no other option.
The point mentioned above means a complete disaster. If you do not have the necessary funds and your credit rating is low, you will not find affordable loan options. Instead of gambling on chances, work in a planned manner and ensure that your focus always remains on attaining the goals.
SME loans are evidently better than investing the savings you spent years to collect. But you can avail this loan only for business investment. If you were supposed to receive a payment, and it has been delayed, you can take the help of SME loan to look after the expense and pay for it when you receive the payment. If you are thinking of constructing a new structure in your office or business expansion is on your mind, SME loan can offer you all the help you need. Not only your credit score will improve with it, but you also receive the tax benefits. If you need both a long-term and short-term loan, you should apply for a Business Loan like this. The option to earn interest on your savings, by investing it in fixed deposits or other avenues will be an additional benefit of opting for a loan instead of liquidating your savings. In business, credit and debit will walk hand-in-hand. You cannot fulfil all your business related needs with your savings, so better invest than spend.
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