MSME (Micro, Small, and Medium Enterprise) sector is a giant contributor to India’s economy. The government has offered several relaxations to MSMEs in the country. As a result, young entrepreneurs are provided with a hospitable market environment to grow. Business loans are perhaps the most helpful among all the benefits for MSMEs. However, MSMEs often face a shortage of funds and require money urgently. In such a case, a reputed lender like Fullerton India can offer business loans to MSMEs. However, there are certain challenges associated with business loans for MSMEs. A responsible business owner must be aware of the MSME business loans. Read on to understand the challenges associated with MSME business loans in India.
1. Lack of trust in funding an MSME
An MSME loan is unsecured, which means there is no collateral involved. Since there is no collateral, the lender will have to trust the borrower to repay timely. However, lenders rely on credit analysis to determine the repayment capacity of an MSME. Sometimes, MSMEs do not even have a credit history. A new business that has been operational only for months might not have a credit history. In such a case, the lender might be reluctant to fund the MSME. It is because there is a risk of default involved with MSME business loans.
Lenders often have strict eligibility criteria for business loans. MSMEs that are operational and generate substantial revenue might be selected for business loans. An enterprise running in loss for the past few years might find it difficult to secure a business loan. MSMEs do not have to search extensively for a reliable business loan provider. Fullerton India offers MSME business loans up to 50 lakhs with easy eligibility criteria. With a limited turnover, micro-enterprises can also qualify for business loans.
2. The collateral policy of lenders
A large organisation might have assets to use as collateral and secure funding. However, a new business might not have collateral to secure funding from lenders. These businesses might not be ready to hand out stakes in the company to investors. Since they do not have collateral and hesitate to hand out ownership of the company to investors, funding becomes difficult. The government has taken many steps to make funding available for MSMEs. Despite all the policies, some lenders have a strict collateral policy for business loans.
Don’t go for lenders applying high business loan interest rates without collateral. Fullerton India is the apt choice for MSMEs wanting business loans without collateral. The creditworthiness of an MSME will be judged based on its past payments. Even new MSMEs can acquire a business loan with Fullerton India.
3. High interests
Some lenders apply high interest on business loans, thus making them inaccessible for MSMEs. An MSME might not have substantial revenue to pay more interest charges. Some lenders apply more interest charges on MSMEs even if the repayment period is short. They also increase the interest charge significantly when an MSME does not have a credit history. Since MSMEs cannot pledge collateral, they end up accepting the lender’s terms. Fullerton India offers the minimum business loan interest rates in the market for MSMEs.
4. Lack of knowledge on how to acquire business loans
Even though MSME owners are running a business, they might not know how to acquire business loans. Most MSMEs believe they have to visit lenders with several documents to secure a business loan. Some think they have to wait for weeks to get a business loan. Contrary to these beliefs, business loans can be acquired easily with the help of MSMEs.
5. Time required for business loan approval
Some lenders might take multiple days for credit analysis before offering a business loan. The lender will also verify some documents before offering an MSME loan. With Fullerton India, MSMEs can submit loan applications online. An MSME will get funds quickly via a business loan during a financial emergency.
Conclusion
MSMEs often require funding to remain competitive in the market. A business loan can help an MSME regain financial stability. By paying EMIs timely, the MSME can become debt-free quickly. Fullerton India has the best business loan plans for MSMEs that require immediate funding. Apply for an MSME business loan right away!
