MSME loans have quickly emerged as a dependable funding source for small entrepreneurs. The loan's borrower-centric features and ease of online accessibility make it a viable option to meet business requirements.
Regardless, first-time borrowers often find the task of applying for a loan for business overwhelming. So, if you plan to inject working capital into your company through an MSME loan but have no idea where to start, here's your cue.
Follow these steps to apply for an MSME loan and simplify your borrowing experience.
8 Steps to Take Out an MSME Loan for Business
Step 1: Know your business requirements
Having a clear idea about how much capital your business requires helps plan the borrowing process better. This ensures that you neither overborrow nor take out a loan amount lower than your needs. In turn, it helps meet business expenses easily and enables better management of funds.
Step 2: Check loan eligibility
Before taking out a loan, it is essential to check qualifying criteria’s to avoid the risk of getting the application rejected and lowering the CIBIL score. So as your next step, check loan eligibility to understand how likely you are to get an approval.
Most NBFCs set simple qualifying criteria’s to help small businesses access loans without any hassle. For instance, SBFC requires entrepreneurs to meet these criteria’s to qualify for an MSME loan:
You may also use an online loan eligibility calculator to determine the approximate amount you are likely to qualify for when applying for an MSME loan.
Step 3: Check repayment capability
Once you have checked your loan eligibility, proceed to determine your repayment capacity. This can be done by simply using an MSME loan EMI calculator online and comparing the repayment amount with your monthly obligation. Based on your monthly income, you can opt for a high EMI amount or a longer tenure and repay the debt at your pace.
Step 4: Choose a lender
Choosing the right lender is crucial to ensure you have a hassle-free borrowing experience and avail timely assistance. To ensure a less cumbersome experience, it is better to not select a lender solely because of the loan interest they charge. Instead, look for the features they offer and the repayment terms they set up for a smooth experience.
Step 5: Find out the required documents
Documentation is crucial to take out an MSME loan, especially when they back up your eligibility. Therefore, before you apply for credit, make it a point to find out the entire set of required documents to keep the verification process smooth.
Typically, when you apply for an MSME loan at SBFC, you will need to submit documents that prove your identity, income, and address. Additionally, you will have to furnish documents that serve as proof of your business vintage or employment status and relevant property documents, among others. Make sure to find out the complete list in advance to arrange the same in due time.
Step 6: Check applicable charges
Most borrowers tend to apply for a loan with the lowest interest rate. However, borrowers should consider several factors, including additional charges, when applying for any loan. While a low-interest rate can make borrowing cost-effective, high additional charges and poor loan features can defeat the purpose altogether.
This is why, check the rate of borrowing and accompanying charges such as processing fee, prepayment charge, foreclosure charges, late fee, etc. to get a clear picture of the overall cost of borrowing (and repayment).
Step 7: Find out about the disbursal process and repayment tenure
Accessing funds at the earliest is crucial to address urgent business requirements. To ensure the same, make it a point to find out how much time your choice of lender takes to disburse the sanctioned loan amount.
Additionally, determine whether the lender extends a flexible repayment tenure and manage debt accordingly. For instance, SBFC disburses the sanctioned MSME loan amount within 7 days. It also offers a flexible repayment tenure of up to 15 years. This helps borrowers access funds quickly and repay at their own pace.
Step 8: Check the application process
After the basic loan requirements, proceed to find out how to take out an MSME loan. Lenders now extend both online and offline application facilities, thus giving borrowers the leeway to choose the most convenient method.
Conclusion
Apply for an MSME loan and cater to your business requirements right away after figuring out these requisites. Notably, with the sanctioned loan amount, you can easily account for any financial need and expand your business as per your targeted goals and objectives.
BACK TO BLOG
