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How do Small Business Loans Work & What are the Benefits?

Clix May 24, 2021

 

Small businesses are a crucial part of the Indian economy. According to the 2019 annual report from MSME Ministry, India has 6.33 crore MSMEs. Out of these, 6.30 crore are micro-units and 3.31 lakhs are small businesses. Despite such a huge contribution of small businesses towards the economy, many of them require funds to run their daily operations smoothly. To help these businesses meet their financial requirements, many NBFCs offer small business loans to cater to their needs.

Find out what these loans are and how they can benefit the borrowers.

What are Small Business Loans?

Small business loans are meant for small and medium enterprises, which is why they are also called SME loans. These are credit facilities offered to SMEs for their financial requirements related to working capital, long-term expenses, expansion, and growth.

Why Do SMEs Need Small Business Loans?

SMEs require finance at different phases of their growth and sustenance. These phases include expansion of the business, start of a new project, funds to operate while they recover from a loss, or building capital. Since SMEs have limited resources within, entrepreneurs need to find ways with which they can make the best use of the available funds in all possible ways. Such loans can be of great help when you need to finance the purchase of inventory or new equipment, establish a new workplace, expand your business location, or spend on business marketing.

Why is a Small Business Loan Beneficial for an Entrepreneur?

To make things easier for small businesses, NBFCs have simple requirements for their business loans that any entrepreneur can meet easily. These are some SME loan benefits:

No Security Required

Small business loans are collateral-free loans for which you do not need to pledge any security. As a business owner, you don’t need to mortgage your business equipment or submit your property documents to get the required funds. Your business loan approval is based on your eligibility, documents, and credit score.

Ample Loan Amount

Lenders like Clix Capital offer ample loan amount between ₹ 5 to 50 lakhs, which you are free to use as per your business requirements and goals. If you meet the eligibility conditions and have the required documents ready, you can start by applying

Easy Eligibility Conditions

For Clix Capital’s business loan, you have to meet the following conditions only:

    • Minimum 21 years of age at the time of loan application
    • Maximum 65 years of age at the time of loan term end
    • Any of the following types of business:
    • Proprietorship
    • Private limited company
    • A partnership firm in services, trading, or manufacturing
    • Closely-held non-listed company
    • Minimum turnover of ₹ 1 crore
    • Minimum 3 years of business history in the current work area
    • The majority of business routed via the banking system, reporting audited financial statement for the last 2 years, or capturing turnover in the last year through GST returns

If you meet these conditions, you are good to go with your loan application.

Low Documentation Requirements

One of the biggest benefits of small business loans is their low documentation requirements. Basic documents like identity and address proof, proof of ownership, bank statements, and income tax returns are often enough to get approval for a small business loan. For Clix Capital’s business loan, these are the only documents that you need to show:

    • Completed loan application form
    • Passport size photograph
    • Identity Proof, which may be your Aadhaar Card, PAN card, or government ID if you are a government employee
    • Address Proof, which can be your Aadhaar Card, passport, driving license, voter ID card, or utility bills for the last 2 months
    • Proof of Ownership
    • Financial Documents, which include the following:
    • PAN Card for a firm, company, or individual
    • GSTIN
    • 6-months bank statement
    • Copy of the most recent Income Tax Return form
    • Computation of income, audited balance sheet, and profit & loss account for the last 2 years
    • Proof of continuity of the business of 3 years, which can be your sales tax certificate, establishment, ITR, or trade license

Competitive Interest Rates

Since small businesses are specifically meant to help SMEs financially, their interest rates are affordable to ensure a fair deal.

Flexible Repayment and Loan Tenure

The duration and repayment terms of these loans can also be fixed based on the entrepreneur’s comfort level. Many loans are short-term, ranging from 12 to 36 months (maximum time granted up to 48 months for self-employed professionals). You may use a to calculate your EMIs and see which loan term best suits your budget and repayment capacity.

A small business loan can serve as a great source of funds to an SME. If you are considering expanding your business or need funds to meet your day-to-day expenses, apply for a small business loan from Clix Capital now and take advantage of our competitive interest rates, flexible loan tenure, and hassle-free application and approval procedures.

For any queries, find us on Facebook, Instagram, LinkedIn, Twitter, or WhatsApp

You can also reach out to us at hello@clix.capital or call us at 1800 200 9898

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