What are SME loan interest rates?

Posted by HeroFincorp on June 7th, 2018

Small and medium enterprises are forms of business that have a limited amount of revenue and a limited number of employees. Small businesses exist across the country and they offer a number of products and services for the consumers. In order to meet their needs of financing, Banks and financial institutions offer loans which are tailor-made to suit their needs. Whether you are looking to start a new business or to grow an existing one, the SME loans will help you turn your dream into a reality. In order to grow your business, you might have to push more funds and this could mean spending all your savings into the business. You no longer need to do that. You can achieve the potential of your business by borrowing funds from financial institutions. The SME loan will help you meet all your business needs and achieve the goals.

You need to begin with determining the purpose of the loan. If you are clear behind the reason for raising the finance, you will be able to approach the financial institution with the detailed information about the amount and the tenure. Your loan amount will be based on the purpose of the loan. Do you want a loan for the working capital? Do you want to purchase new machinery? Do you want to the loan to expand into new geographical markets? Or do you want to the loan for changing the infrastructure of the office? Based on the purpose of the loan, you can decide on the loan amount you need.

Small businesses including an individual, private company, public company, proprietorship or self-employed can apply for the loan. The business should be in existence for a minimum period of three years and the business should be profitable as per the industry norms. The documentation required for the small business loan includes the profiles and KYC documents of the Partners and the Director. It also requires the company constitution and registration documents along with the qualification documents of the director. Further, audited financial statements for the last three years along with the projected statements for the coming years are required. The audited financial statements and the projected statements provide information about the financial health of the company and allow the lender to determine whether the applicant has the ability to repay the loan in time.

Small business loans are structured in a different manner as compared to other loans. There is a limit on the amount that the lender can sanction for the loan. However, it will depend on the applicant’s profile and the ability to pay the loan on time. Holding a positive credit score helps in the processing and approval of the loan. The loan is usually approved within 10-15 days. Every business requires funds from time to time and a small business is no different. SME loan interest rate varies from one lender to another and it also varies from time to time. You need to scout the market and look for lenders that offer consumer friendly terms and conditions. Choose a lender that offers you the lowest SME loan interest rate since it will be easier for you to repay the loan. The interest rates start at 12% per annum and they change from time to time. It also depends on the amount of loan and the tenure of the loan. Hence, when you make a loan application, you need to be very clear about the loan amount you seek and the tenure within which you will be able to repay the dues in equal monthly installments.