SMEs or Small and Medium-sized Enterprises in India have been the propellers of economic growth in the country. Their presence across industries and sectors as well as in all regions of the nation remarks their dominant presence. The consistent support from the Central and the State Governments only makes these enterprises more flourishing. And why not; SMEs’ output contribution today account for a significant chunk of the country’s GDP.
In this scenario, it is only called for that sufficient financing available as SME loan is provided to the growing small and medium-sized businesses. However, when it comes to SME financing, the challenges related to scope of operation, scale, and financing need remain highlighted. Thus, to fulfil these varying requirements, financial institutions provide business loans to SMEs tailored for different purposes, scale, and business operating needs. We will take a look at them one by one.
SME loans can be identified under different categories based on the following aspects.
Business loans for SMEs can be sub-divided into 2 types based on their needs for collateral.
Business loans for SMEs can also be classified as term loans with varying tenure based on the period for which they are available. The 3 prime funding categories under term loans include –
While this was the detailed term loan categorisation, it does not indicate a hard and fast tenure determination. One should thus expect tenure flexibility and classification based on the lending institution selected for an SME loan.
SMEs can also avail loans and advances that are provided for customised expenditure needs of business. Some of them include the following. A lender may also provide other customised business loans based on the SME’s requirements.
Apart from these, SMEs also benefit from various government-aided schemes for benefitted financing. When availing an SME loan under the categories mentioned above, make sure to compare interest rates and features of the advance for convenient business funding.
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