The term ‘SME’ represents small and medium enterprises with regard to business. They add to 40% of India’s exports and stand close to agriculture as the second most preferred occupation. SMEs have been contributing greatly to the nation’s economy. A firm is distinguished as an SME on the basis of investments and annual turnover. The table beneath gives further distinction.
| Investment | Annual Turnover | |
| Small Enterprises | Up to Rs.10 crore | Up to Rs.50 crore |
| Medium Enterprises | Up to Rs.50 crore | Up to Rs.250 crore |
An SME loan, which is a type of business finance, is intended for people who want to expand their business. Such credit offerings make it simpler for promoting and supporting local and small enterprises, and by and large, the overall financial development of India.
If you take an SME Loan, you have to repay the loan amount in the form of monthly installments at a fixed interest rate. These loans are fit for small business owners and entrepreneurs who want to start or expand their businesses. Various lending institutions are offering Business Loans for micro, small, and medium enterprises (MSMEs).
Further, there are various types of SME loans available in the market such as Working Capital Loans, Term Loans, and Machinery Loans. These loans are unsecured and can be availed online with minimal documentation and quick disbursal.
What are the advantages of taking an SME Loan?
Business finance options have evolved over the years and now come with attractive features and benefits. Small business owners and entrepreneurs can leverage these features while availing of funds. Some of the advantages of SME Loans include:
- Flexible repayment tenure that ranges between 12 to 60 months.
- These loans are collateral-free, meaning you don’t have to submit your assets as security.
- Lenders are offering quick and easy-to-access online applications for SME Loans. You can apply online from anywhere.
- You only require minimal documentation for your SME Loan application.
Below is the list of documents required for a Business Loan for MSMEs.
| Documents | Requirement |
| KYC documents | Company PAN card, Director/Proprietor/Partner PAN card/ Aadhaar Card/PassportProprietor/Director/Partner PAN card/Aadhaar card, Electricity bill, Rent agreement, Passport. Personal documents- all individual/Partner/Director PAN cards and official documents along with proof of address Business registration and address proof |
| Business address proof | Lenders accept your utility bills/ rent agreement as business address proof |
| Financial documents | You are required to submit the bank account statement for the past 6 months |
SME Loan eligibility criteria
| Criteria | Requirement |
| Age | The applicant should be 24 years old at the time of loan origin and 65 years old (maximum) at the time of loan maturity |
| Business Vintage | The applicant’s business should have a business vintage of at least 2 years |
| Annual Turnover | The applicant’s business should have a minimum annual turnover of ₹6 Lakh |
Business Loan EMI calculator
As you know, any amount that has been borrowed needs to be repaid. To make the repayment process easier and simpler, you can use a Business Loan calculator to determine your monthly payments. In case you are opting for a high loan amount, the EMI amount will also be higher. The EMI amount also depends on the loan tenure you choose.
For instance, if you choose a longer loan tenure, you will have to pay a lower EMI amount. Similarly, if you choose a short loan tenure, your EMI amount will be higher. Before applying for a loan, it is better to keep a check on your budget and finances to gain better control over your finances in the long run.
Missing out on EMI payments can result in default. In addition to this, it negatively impacts your bureau score. Hence, calculating your monthly payments beforehand will give you an idea of how much money you have to keep aside for your EMI payments.
You can use an online Business Loan EMI calculator to calculate your monthly payments. These tools are easily available online. Enter your loan amount, loan tenure, and the interest rate.
The tool will give out an automated response which is your approximate monthly EMI. However, make sure that you do not rely on this figure as it is just an approximation of your monthly payments and not the real amount.
