How to get a Business Loan within 7 Days for Indian MSMEs
MSMEs play a crucial role in the Indian economy, contributing significantly to employment generation, GDP growth, and exports. However, they often face challenges in accessing adequate and timely credit, leading to a credit gap. Increased credit demand is anticipated because of this impending development, which Non-Banking Financial Companies (NBFCs) are well-positioned to meet.
According to a recent study by the Reserve Bank of India (RBI), NBFCs have extended more than Rs. 1 trillion in loans to MSMEs over the past five years.
NBFCs are well-poised to absorb more funding and maintain this trend since they can provide competitive and comprehensive financial products and services.
Secured business loans for MSMEs offer an excellent avenue to secure the capital necessary for expansion. These loans are supported by tangible assets like property or equipment, minimizing the lender’s risk. Consequently, they often receive expedited approval compared to unsecured loans.
This article details the process of securing a business loan with collateral in just 7 days, tailored to the needs of Indian MSMEs. It outlines the requisites for eligibility and the documentation needed for successful loan acquisition.
Business Loan for MSME in a Week
MSMEs can have strategic access to credit by pledging their property as collateral. This not only helps lower the interest rates for the loans but also gives access to credit to distressed MSMEs which have had a hit on their credit history. Based on the valuation of the collateral pledged the quantum of the credit facilitated varies which is referred to as LTV or loan-to-value ratio. LTV in secured business loans varies from 50% to 90%. A 50% LTV means that for a collateral of 2Cr, one can obtain a credit of 1 Cr.
Nevertheless, the path to securing a secured business loan for MSME within a week encompasses a sequence of strategic moves:
Lender Selection: An array of Non-Banking Financial Companies (NBFCs) in India extends secured business loan for the MSME sector. Thorough research is pivotal in identifying a lender with a reputable standing, offering competitive interest rates, and a record of accomplishment in serving the financial needs of MSMEs.
Document Compilation: The prerequisites for a secured business loan for MSME are contingent on the specific lender chosen. The documentation process necessitates the submission of a comprehensive business plan, financial statements, and personal particulars. This compilation serves as the foundation of the loan application.
Application Submission: Once the lender is selected and the requisite documentation is compiled, the application submission is a streamlined procedure. The digital platforms of most NBFCs enable swift and hassle-free applications for business loans for MSMEs.
Approval Attainment: Upon application submission, the lender embarks on a comprehensive assessment of the submitted documentation. If the application aligns with their risk criteria and regulatory prerequisites, approval is granted, paving the way for loan disbursal.
End-use of funds: The MSME must clearly define a plan to use the funds obtained from the credit facility as that is crucial for monitoring purposes for lending institutions. The lender might use their own understanding and estimates to justify the amount demanded and the purpose of the same.
Eligibility Criteria for Business Loan for MSME
The MSME must also fulfil a few eligibility prerequisites for Business loans that may vary among lenders. The requirements include:
- Legal Registration: The business seeking financial assistance must be formally registered under the governmental framework.
- Operational Tenure: To mitigate risk, lenders often stipulate a minimum operational span of two years for the applying MSME.
- Creditworthiness: A robust credit history – both on the business’s behalf and that of the business owner – significantly augments the eligibility prospects.
- Collateral Provision: MSMEs seeking secured Business loans must provide collateral, typically in the form of property deeds or equipment invoices.
- Debt Serviceability: The Lender makes a rough estimate of the business’ profitability to assess the ability to generate incremental income and repay the loan.
Document Required for MSME loans
Some commonly requested documents encompass:
Business Registration Certificate: A formal document substantiating the business’s legal registration with a mandatory Udhyam Registration Certificate.
Financial Statements: Comprehensive records of the business’s financial performance, encompassing profit and loss statements, balance sheets, and cash flow statements.
Personal Income Tax Returns: The income tax returns of the business owner, delineate their personal financial standing.
Personal Bank Statements: A record of personal banking transactions and accounts, offering insights into the applicant’s financial health.
Property Title Deeds: Documentation affirming ownership of the property being pledged as collateral.
Equipment Invoices: Invoices verifying the purchase of equipment that is being utilized as collateral.
Personal Guarantee: An assurance from the business owner, undertaking personal responsibility for the loan’s repayment.
Advantages for MSME loans from NBFC
Business loans extended by NBFCs offer several advantages, such as:
Swift Approval Process: NBFCs typically expedite loan approvals compared to traditional banks.
Competitive Interest Rates: Favourable interest rates are often a hallmark of NBFC business loans.
Flexible Repayment Options: Repayment terms can be tailored to MSMEs, including monthly or quarterly installments.
Simplified Documentation: Documentation requirements with NBFCs are less rigorous than those with banks.
Personalized Approach: NBFCs often provide a personalized touch that benefits MSMEs.
For Indian MSMEs seeking fast access to vital financing, the avenue of secured business loans for MSMEs from NBFCs proves to be an efficacious solution. By meticulously adhering to the delineated blueprint encompassing lender selection, document compilation, application submission, and approval attainment, an MSME can effectively secure much-needed funding within a remarkably short span of 7 days. In navigating these steps, the business positions itself to harness financial resources, catalyzing its expansion and contributing robustly to the Indian economy.
Hence, a secured business loan for MSME from an NBFC can be a good option for small businesses that need funding to expand their businesses or meet working capital requirements. By following the steps outlined in this blog post, you can get a secured business loan in 7 days and start growing your business.
Tips for getting a secured business loan in 7 days
Be prepared: Gather all the required documents and have a clear business plan ready.
Shop around: Compare interest rates and terms from different lenders.
Build your credit history: This will make you a more attractive borrower.
Be patient: It may take some time to get approved for a loan, but it is worth it in the end.
About Red Fort Capital
Red Fort Capital is dedicated to empowering Indian MSMEs (Micro, Small, and Medium Enterprises) on their path to business growth through customized business loans. We understand that securing a business loan in India can pose significant challenges, particularly when factors like a less-than-ideal credit score, a relatively short business history, unclear financial records, or variable cash flow come into play.
As a respected Non-Banking Financial Company (NBFC), we take pride in offering a diverse range of secured business loans, spanning from 1 to 10 Crores. What sets us apart is our remarkable ability to disburse funds fast, in just 7 days. Our financial solutions are meticulously designed to cater to a spectrum of needs, including working capital requirements, equipment and machinery purchases, invoice/bill discounting, and last-mile financing, among others.
Our true strength lies in our flexibility to structure repayment terms that align perfectly with your unique financial circumstances. Moreover, our dedicated team is unwavering in its commitment to providing hands-on guidance and support at every phase of the loan application process.