6 Benefits of MSME Loans for Small Businesses

Micro Small and Medium Enterprises (MSMEs) are the back of economies around the world. India is no exception, with 27% of the GDP contribution and 50% of total exports coming from MSMEs. However, these big numbers are only half the picture. According to Government data, only one-third of MSMEs make it beyond the first year. Failure to sustain business operation beyond the first year really comes down to a lack of funds. 

Small businesses face an uphill battle when it come to securing adequate working capital, expanding operations, buying new machinery, or purchasing raw materials to build inventory. Without an adequate source of funds, it’s near impossible to continue operations. While traditional loans are can be a good source of funds, banks and financial institutions hesitate to lend money to businesses without a strong history of credit.

This is where an MSME loan can be of huge help. The micro, small and medium enterprises loan provides much-needed financial help for small businesses to carry out operations without the fear of running out of money.

Top 6 benefits of MSME loans for small businesses

Easy to access

Adequate a timely funds are the lifeblood of MSMEs. When a small enterprise receives an order, they need to manufacture and build an inventory of products to meet their client’s requirement. This entire process requires funds to meet the delivery of products at every stage. An MSME loan provides easy access to finances that helps businesses plan and execute their business orders with ease. 

Thanks primarily to technological inclusions in the world of finance, most private lenders are able to disburse loans quickly. Small businesses need to provide minimal documentation along with an online form to receive their loan within 24 to 48 hours. Access to quick funds is one of the biggest benefits of an MSME loan.

Zero collateral required 

Another benefit that MSME loans offer businesses is the lack of collateral needed to acquire a loan. Small businesses often struggle to get off the ground and do no have access to property or assets to use as collateral. This makes it an ideal solution to keep their funds flowing without the need for collateral.   

Lenders primarily check credit history, business standing and overall financial health of small businesses. Once the numbers are satisfactory, an MSME loan can be acquired without the need for collateral.

Having full control of operations

One of the best things about taking out a loan, as opposed to getting outside investor/s, is that it gives business owners complete control over their business. As observed by the spate of hostile takeovers in recent times, handing over the keys of your business to an angel investor or venture capitalist is not an ideal situation. 

Outside influence can result in business owner’s losing control to outside parties that are primarily looking to make a quick buck. A loan circumvents this problem by allowing the business owner to have complete control at all times. 

Attractive rates of interest

MSME loans are meant for small businesses; therefore, their interest rates are affordable and competitive. These loans are also not too risky, because they don’t deal with high values. Therefore, you can benefit hugely from these loans, as you use almost the majority of the loan amount for the purpose intended.

Easy and customised repayment options

Some businesses need loans for a short tenure, as they are confident of repaying the same within that period. Some others, however, may need a longer tenure to repay their loans. Irrespective of your requirements, you can opt for MSME loans, as the lenders give you multiple repayment options to choose from.

Today, with many types of MSME lenders in the market (fintech companies, private lending companies, individual moneylenders, etc.), you can expect to get customised loans at reasonable interest rates and flexible repayment options from them.

Reduced taxable income

You can qualify for attractive tax benefits when you apply for MSME loans to grow/expand your small business. Every year, you are expected to file your taxes at a particular time. All you need to do is submit your MSME loan report along with your tax filing. 

The tax authorities will check the same and considerably reduce your taxable amount to the extent of the loan you have taken. This reduction in your taxable income will automatically result in a deduction in your tax liability as well.

Conclusion

With so many types of business loans and lenders available in the market, it may be a challenge to choose the one that is right for you. But TallyCapital enables you to sail through the business loan process successfully. With our streamlined lending process and strategic partnerships, this puts you in a position where you can easily access the financial support you need, while keeping you on what you do best – growing your business.