Posted by Ankit Shrivastava on July 3rd, 2017

All business units, small or large, require funds to maintain and expand their business. SME loans are finance given to small and medium enterprises, which helps these businesses expand or run business operations. Certain NBFCs provide working capital loans which are tailor made to suit the requirement of SMEs. The funds received from these loans- can be used for various purposes, such as business expansion, marketing of products, new product launch, etc. and can be repaid after a certain term along with interest. Generally, SMEs prefer short term unsecured loans i.e. loans that are borrowed for a short span and do not have any security attached to it. Loans that are for a short term, say one or two years, are rarely backed by any collateral when compared to long term loans -. The loan amounts for long-term loans are also larger in comparison to short term loans. Another important aspect is that SMEs do not always have security to provide as collateral to lenders. The lack of collateral can prove to be a severe impediment for availing finance. However, with the emergence of certain NBFCs, SMEs are now able to access finance with greater ease, as these loans are provided without the demand for collateral.

SME segments are very vital for countries that focus on indigenous production and for nations that have a high dependency on the service industry. In India, SMEs contribute to about 8% of the GDP, out of which 45% comes from manufacturing and 40% from service sector & export aligned products. The funding given to SME’s is as under:




Small Enterprises

Rs 25.00 lacs to Rs 500.00 lacs

Rs 10.00 Lacs to Rs 200.00 lacs

Medium Enterprises

Above 500.00 lacs to Rs 1000.00 lacs

Above 200.00 lacs to Rs 500.00 Lacs.

* In few cases one can take loans up to Rs 700 Lacs involving various banks, subject to sound financials

What is eligibility for availing Business Loan?

To be eligible for a business loan, an applicant must represent one of the following:

  • Sole Proprietor

  • Partnership Firm

  • Private Limited Companies

In addition to the above mentioned points, the business must fulfill following basic eligibility criteria to avail a loan:

  • Business should be 3 years old.

  • Should have 2 years audited balance sheet

  • Should have 2 years of profitable business

  • Previous 6 months’ track record

  • Higher Credit Score

How to avail SME Loan?

In order to avail a loan, the applicant must submit various documents to the lender.  The documents required may differ from bank to bank depending upon the legal structure of the enterprise i.e. whether it is Proprietorship, Partnership Firm and Private Limited and according to the specific need of the business.

Following is the list of documentation that is usually required by lenders:This is a compilation of various documents required by banks to process loan requests of various SMEs. There might be some variation on a case to case basis, as these loans may be tailored as per the applicant’s requirement. Extra documentation might be requested for by the lender, as this depends on the lender.


Partnership Firms

Private Limited

Firm Documents

Partners Documents

Company Details

Directors Documents

  • Photo

  • KYC documents of the Proprietor

  • Last 3 years ITR with all Financials

  • Last 6 months Bank Statement

  • Loan Statements on Proprietor with sanction letters if any

  • Partnership Deed

  • Pan Card

  • Office Ownership Proof

  • Service Tax Payment receipt and Service tax return or VAT whichever is applicable

  • Incorporation Certificate

  • Financial of 3 years including Audit Report and all annexure

  • Bank Statements of the firm

  • Sanction letters of all existing loans and closure certificate if any.

  • Debtors and Creditors list

  • Photos of all Partners

  • KYC documents of all Partners

  • Bank Statements of all Partners.

  • Financials of all Partners

  • ITR of all Partners

  • Loan Statements on Partners with sanction letters if any

  • Memorandum of Association

  • Articles of Association

  • Incorporation Certificate

  • Pan Card of the entity

  • ITR of last 3 year

  • Bank Statement of the Entity

  • List of Directors and their Share Holding Patter on Company Letter Head and on Company’s CA’s Letterhead

  • Audited Financials of last 3 years

  • Office Address Proof

  • Sanction Letter of all existing loans and closure certificate if any

  • Service Tax or VAT registration copy and returns whichever is applicable

  • Debtors and Creditors List

  • Photos of all Directors

  • KYC documents of all Directors

  • Bank Statements of all Directors

  • Financials of all Directors

  • ITR of all Directors

  • Loan Statements on Directors with sanction letters if any


Early last year, RBI included loans to medium enterprises in the definition of priority sector lending. Banks have a dedicated processing cell for faster and easier disbursement of such loans. Thus if every enterprise maintains a clear financial record, then processing of the loan can be quick and hassle-free.

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Ankit Shrivastava

About the Author

Ankit Shrivastava
Joined: March 29th, 2017
Articles Posted: 5

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