SMEs or Small and Medium Enterprises are popularly touted as “engines of growth.” It contributes nearly 8% of the Indian Gross Domestic Product. SMEs are also an integral part of the supply chain, contributing up to 40% of the total exports.
However, despite the significant growth, SMEs often lack financial and infrastructural support. An SME loan is a business loan that encourages emerging entrepreneurs to start or leverage their existing businesses to impact overall economic growth.
Uses of an SME loan
Here are the top 7 pointers that make an SME loan an important part for every budding entrepreneur.
- Hire additional employees
Growing business means increasing workload. Thus, recruiting a new workforce is important. This increases the overall productivity, leading to on-time goods or service delivery. Thus, increasing client satisfaction and improving customer experience.
Using an SME loan will ease the tension of paying and training the new employees efficiently, leading one’s business to grow fast.
- Rent a bigger office premise
With the increasing workforce, individuals require a bigger working space. Hence, renting bigger office premises becomes the need of the hour. However, this requires a huge financial investment.
An SME loan helps to finance the rent and additional expenses without any roadblocks. One can also renovate the existing office. An SME can cover the expenses, including adding new desks, office cabinets etc.
- Boosts working capital
A substantial proportion of working capital in a business is essential to maintain daily business operations. This includes paying off the rent to restocking new products. An SME loan help individuals access liquid cash to meet these short-term financial requirements and focus on long-term business goals.
- Install or upgrade existing machinery
Investment in machinery is essential for efficient business operations. However, installing or upgrading existing machinery involves heavy expenses. Hence, one can select a high-value business loan to cover such costs.
Selected NBFCs like Bajaj Finserv extend unsecured business loans at a nominal interest rate. Moreover, it provides pre-approved offers, which further streamlines the process. These offers are also applicable to other financial products to make the borrowing experience hassle-free. Check your pre-approved offer by submitting your name and contact details.
- Manage stocks
Inventory management is an integral part of a retail supply chain. Use the SME loan to optimise the supply chain and increase the revenue. For example, one may use the credit to manage seasonal fluctuations, restocking current or purchase new products for sale.
- Consolidate outstanding debts
A business owner may likely face a situation when he has not received the due receivables from their clients, interrupting business operations. This may include the inability to pay salaries to not being able to continue production. Hence, taking a loan becomes inevitable, adding a financial burden.
In that case, an SME loan helps to consolidate the business debts. Successful repayment of outstanding dues will also help an entrepreneur build a good credit history. It will allow one to negotiate for an extension of repayment tenor or affordable interest rates in future.
- Expand business operations
Every budding entrepreneur aims to expand its business reach. For instance, opening a new store nearby or other geographical location. It also includes marketing endeavours. It multiplies the clientele base and also increases credibility in the market.
But a marketing effort both offline and online requires huge investment. Hence, allocating one’s existing asset may not suffice. Therefore, an SME loan is beneficial to cover such high-ticket expenses without compromising the existing capital.
Thus, besides knowing what is SME loan, knowledge about its importance is also essential. An SME loan helps entrepreneurs to take the best foot forward in their respective business industries.
The Indian Government also aims to increase its investment to boost the sector’s growth, implying a continued positive expansion in future.