SME finance is the process of providing or arranging for money to enterprises that are small and don’t have the backing of a large capital. In case of such medium or small sized enterprises, the capital is supplied or acquired through price and costing. This form of finance helps such small enterprises so that they have less hassle in their process of production. When choosing a bank or NFBC for your SME business, you have to make sure that the lender you are choosing is extremely reliable. The reliability and overall reputation of the lender is extremely important.
Things to remember before choosing a bank for SME finance:
Here are certain things that you need to remember before you opt for SME finance.
Be aware of the kind of account that your enterprise needs: SME finance comes in various forms and thus you need to be aware of the type of account that your company needs to ensure proper support and finance. For example, you might need a simple account that can be used as a separate company account, or you might need a complex account with a line of credit. What suits your company best is for you to realize.
Keep in mind future aspirations – When you go for an SME loan for your company you should be sure that the bank is in support of the future aspirations of your company. SME loans in India have tie-ups with local community lenders that provide loans to small enterprises. You should make sure that you have established a proper relationship with the lender you are choosing for SME finance. You should make them aware of not only the present situation at your company but also the potential factors of growth and production in the near future. It is always advisable to expect to be in the market for the next few years when you’re opting for an SME loan from a bank/NBFC.
Choose the right bank or NBFC – Before you opt for an SME loan be aware of the fact that there is more than one type of bank/NBFC that provides SME finance. It is always advisable to compare them before you choose. You can use the internet for this purpose. Moreover, you should be precise about what you need and look for financial institutions that provide you with the same. You can always look up for the services that they provide in your area of interest. Plus, you can call them up and talk about the specific information you need. While opting for SME loans you can look up online lenders as they will provide you direct and detailed information about the services they provide. A local branch is always advisable in case you want swift transactions and a familiar environment.
Fees – Often online lenders charge fees for SME loans to companies, even though they don’t charge individuals. Some of them are relatively higher than others. It is always advisable to go for the one that has affordable fee structure and adequate reliability.
SME loans without collateral – Normally SME finance does not allow loans without collateral. However, in case you are in need of one, it is always advisable to take an unsecured loan. To get an unsecured loan, the first thing that you have to do is show that you have a consistency in your profit maximization and have a clean credit history. Further, you have to be very persuasive of your business plan. Once you are done convincing you should always be careful of the market situation. Normally loans without collateral come with a higher interest rate and a shorter tenure. However, it offers a greater peace of mind as your assets are safe. It is always advisable to keep the credit score high if you are opting for an unsecured SME loan. Try to pay off your debts as soon as possible and more so in time. Your credit card expenditure should be at its minimal whilst you are on loan. This is sure to improve your image and relationship with your lender.