"Nothing ever goes away until it has taught us what we need to know."
- Pema Chodron
India is a developing nation that is making economic progress at a very faster rate. Thanks to the larger number of businesses in micro-scale, small scale, and medium scale. These enterprises indeed fuel the outstanding growth of the nation. This sector of enterprises today contributes to around 40 % of the total GDP of India. It is also one of the major sources of employment for the newer generations of the country. Being so, this sector needs good financial support so as to progress in their respective businesses. Right after the demonetization decision of the government of India, fresh schemes and advance loan facilities were introduced for the small business owners in India.
Types of Small Business Loans-
1.Business Loans for MSME
These business loans were introduced exclusively for the growth of the MSME sector in India. They were introduced in the year 2018 for the benefit of new as well as existing businesses in this category. Under this scheme, the businesses get a maximum loan amount of Rs. 1 crore. The rate of interest may vary as per the nature of the business, and credit rating. There are two types of interest rates that the business owner may choose to go for, namely: Diminishing rate of interest and a flat rate of interest. Considering the pros and cons of both types, the borrower must make a wise choice as per the financial status of the business.
Read:- BIG IDEAS FOR SMALL STARTUPS
2.The MUDRA Yojana Loans
The loans under the MUDRA scheme gained enormous support and popularity from the Indian masses. The name MUDRA is an acronym of the Micro-units Development and Refinance Agency. The main objective of MUDRA is to fund the businesses that are left behind unfunded. Under the scheme, the government of India has introduced the concept of low-cost credit. The MUDRA loans are divided into three categories namely: Shishu Loans, Kishor Loans, and Tarun Loans.
- Shishu Loans- The maximum loan amount is up to Rs. 50000/- and the rate of interest is 12% per annum.
- Kishor Loans- Starting from Rs. 50000/-, the maximum loan amount is up to Rs. 500000/- and the rate of interest varies from bank to bank and the credit history of the borrower.
- Tarun Loans- Starting from Rs. 500000/-, the maximum loan amount is up to Rs. 1000000/- and the rate of interest varies from bank to bank and the credit history of the borrower.
3.National Small Industries Corporation Subsidy
The NSIC Subsidy offers small business owners with the financial benefits for raw material and marketing. The raw materials covered under this scheme include indigenous and imported goods and materials required for the businesses. Funds are raised for branding and market competitiveness of small businesses. The interest rate for this subsidy ranges from 10.50% to 12% per annum.
4.Credit Link Capital Subsidy for Technology Upgradation
Under this scheme, the businesses are allowed to upgrade their systems and processes so that there is maximum throughput and hence maximum profit. Using the financial assistance of this scheme, processes like manufacturing, marketing, and supply chain can be enhanced. This scheme offers a capital subsidy of 15% for the eligible businesses. The maximum loan amount under this scheme is limited to Rs. 15 lakh.
5.Bank Specific Loan Schemes
Summing up the overall activities and efforts involved in the above-mentioned loan schemes, the lead time of government-sponsored schemes is pretty high. In order to provide instant support to the business owners, many private banks have recently come up with their customized loan schemes. Keeping the maximum tenure of business loans, it gives you a helping hand by providing good loan schemes. Most schemes are quicker than the government schemes and demand the business financial statement and proof of well being of the financial status of the business. The loan repayment methods and loan repayment structures are also quite flexible and practically easier to pursue for the small business owners.
Apart from these new private banks’ loan schemes, hard money loans have been used in recent times. Quick cash loan online applications are seen to be trending in India’s small scale business world.
Before you select a loan scheme for your small scale business, remember:
- To check the structure and the suitability of the loan scheme to your business type
- To keep your next year’s sales forecast handy, researched and verified while taking the loans
- To know your business and market well
- To know the pros and cons, advantages and disadvantages of the loan scheme you are opting to pursue
- To trust the certified and well-to-do banks only
- To conduct extensive research of the schemes you plan to opt for
With these guidelines for Business Loan Interest Rates For Small Businesses, you are now ready to take your next step towards your dream business, aren’t you?
All the best!