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Suresh opened a bakery shop a few years ago and served his customers with lip smacking and mouth-watering pastries and cakes! As the word grew about Suresh’s bakery shop, many bakery shops opened up near Suresh’s bakery shop. While some had a glitzy look, others offered nice ambience and some were better at home delivery and organizing birthday parties. Gradually, Suresh’s revenues started dwindling and the footfall decreased exponentially. Suresh realized that just opening up a bakery shop and selling cakes would not help, he would need to expand his operations and he would need money for the expansion. He needed a quick and easy business loan with a transparent process and which involved less paperwork. He approached a lot of public and private sector banks for the same but was rejected by them while citing one reason or the other. Finally, Prest Loans – www.prestloans.com – a new age online lending NBFC understood his requirements and disbursed him a loan with least paperwork and in a timely manner! 

A few years ago there was a void in the Indian economy. Banks were not comfortable lending money to small enterprises as they perceived it to be quite risky. Instead, they provided financing to formal, medium-sized enterprises that were less of a risk. As a consequence, Indian Micro, Small and Medium Enterprise (MSME) sector suffered from dearth of easy finances and proper credit instruments. Furthermore, banks mostly offer credit against a collateral, and MSMEs, particularly micro and small exporters, are not in a position to do so, depriving them of access to the formal credit market.

Considering that MSME play a pivotal role in Indian economy, a number of Non-Banking Financial Companies (NBFCs) were set up like www.prestloans.com, and as they were a bit more local, they helped provide financing to smaller entities and filled the credit void. The closing of the credit gap has led to the fast growth of India's MSME sector. To a large extent, the fast growth of the sector can be attributed to the various government policies being put in place to provide these enterprises with credit, and safeguard their interests. Today, these initiatives have made it easier for MSME owners to procure finance for their firms.

Key Features of Business Loans for SMEs

Government has relaxed several policies and frameworks in disbursing loans for this sector paving the way for disbursing quick & easy loans. Following are the salient features:

1. Collateral free loans: Under the Credit Guarantee Fund Trust Scheme for Micro and Small Enterprises (CGTMSME Scheme), banks and NBFCs like www.prestloans.com; are provided with a framework to sanction loans worth Rs 1 crore to micro and small enterprises, without any collateral security. These loans can be term loans, or working capital loans, but the money acquired cannot be used for marketing or technology and development. With an unsecured loan, start ups don't have to put up their valuable assets as security. Unfortunately, due to the unsecure nature of the loan, creditors are quite selective about sanctioning these types of loans, and only few start ups actually get approval on their applications. If you do not wish to avail of a loan under this scheme, many banks and financial institutions provide collateral-free loans, but of a lesser value. Mostly, you can get a loan up to Rs. 30 lakhs without putting up any collateral or having to provide a guarantor for the loan.
2. Flexible Pay Back Option Loans: You can choose to avail of a flexible loan that offers certain added benefits over an existing term loan. Many financial institutions provide flexible pay back options, allowing you to pre-pay the loan with idle funds without an additional penalty fee or cost. It also allows you to re-avail the pre-paid amount within the drop-line facility at any time within the loan tenure, without any additional documentation. Depending on the creditor you choose, you might even be able to pay for only 5% of the utilized loan amount every month, with interest being charged only on the outstanding amount, reducing the financial burden on your start up.
3. Online Applications: Almost every bank and financial institution that offers business loans will allow you to apply for the loan directly from their website. This allows you to complete the application from the comfort of your home and prevents you from having to make several trips to the lender's office to fill out forms and submit all the necessary documentation. www.prestloans.com is one such NBFCs which is a pioneer in providing, Business Loans, SME Loans (Long & Short term).  
4. Instant Approvals: Depending on the amount of your loan, the kind of business you deal in, and the urgency of your loan application, it is possible to apply online for a loan, and even get instant approvals for the same.
5. Longer tenure: As per recent RBI directions to support MSMEs, the Banks and NBFCs are allowed a time period of 180 days (as against 90 days earlier for NPA provisioning purposes) to “square up their accounts”. This goes a long way in removing hurdles for disbursing new loans to MSME sector.

For instance, government has initiated the Pradhan Mantri Mudra Yojana for development and refinancing activities relating to micro industrial units. The purpose of Micro Units Development and Refinance Agency (MUDRA) is to provide funding to the non-corporate small business sector. (Read more at our blog: Transforming lives of the poor hard working Indian class through PMMY at http://prestloans.com/BlogDetail/%20Transforming%20lives%20of%20the%20poor%20hard%20working%20Indian%20class%20through%20PMMY?id=18)

Things to keep in mind while applying for loan

When you apply for a loan, there is a small chance that your application could get rejected. Primarily there are two reasons why this could happen.

Firstly, your credit history might not be very good, so the bank might not think of you as a safe option. Interestingly, even if you haven't availed a loan ever you CIBIL score might be negative. This is because banks do not have any historical data to depend on. But do not despair it's fairly easy to maintain a decent CIBIL Score, and you can even get a loan despite negative CIBIL Score, see our blog for further details

(https://prestloans.com/BlogDetail/How%20to%20get%20a%20loan%20despite%20Negative%20CIBIL%20score?id=17)

Secondly, your business plan could be weak, and the creditor might assume that you will be unable to repay the loan at a later stage. Before applying for a loan, it's always a good idea to check your credit history and make sure it is up to date. Then, formulate a concrete business plan, and attach it with your application. Ensure that you have all the documents the creditor asked for in the loan application, and this will increase the chances of your loan getting approved.

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