Loan – MyBillBook https://mybillbook.in/blog India #1 Simple GST Billing Software Tue, 20 Sep 2022 13:11:18 +0000 en-US hourly 1 https://wordpress.org/?v=6.1.1 https://mybillbook.in/blog/wp-content/uploads/2021/02/cropped-icon-01-32x32.png Loan – MyBillBook https://mybillbook.in/blog 32 32 MUDRA Loan Interest Rate https://mybillbook.in/blog/mudra-loan-interest-rate/ Fri, 19 Aug 2022 05:48:35 +0000 https://mybillbook.in/blog/?p=5099 Banks offer MUDRA loans to aid income-generating microenterprises that require credit below Rs. 10 lakh. The PM MUDRA Yojana interest rate is one of the important factors when taking out a loan from this government program. The loan’s interest rates start at 7.30% p.a., and the repayment tenure ranges from 1 year to 7 years. […]

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Banks offer MUDRA loans to aid income-generating microenterprises that require credit below Rs. 10 lakh. The PM MUDRA Yojana interest rate is one of the important factors when taking out a loan from this government program. The loan’s interest rates start at 7.30% p.a., and the repayment tenure ranges from 1 year to 7 years.

MUDRA Loan Details

Below are the specifics of the Mudra loan:

Loan Amount: up to Rs. 10 lakh.

Rate of Interest: from 7.30% p.a.

Loan Term: 7 years or less

Service Charges: Depending on the lender

MUDRA Loan Interest Rate by Banks

Bank NameRate of InterestLoan Term
HDFC BankAs per bank policiesBased on the bank’s decision
State Bank Of India(SBI)Related to MCLR1- 5 yrs
UCO Bank8.85 % p.a. onwardsBased on the bank’s decision
IDBI BankRelated to the bank’s base rate and rating1- 5 yrs
Indian Overseas BankAs per bank policiesBased on the bank’s decision
Bank of Baroda9.65 % p.a. Based on the bank’s decision
Union Bank of India7.30% onwardsBased on the bank’s decision
Canara BankAs per bank policiesUp to 7 yrs
Central BankAs per bank policiesBased on the bank’s decision
Allahabad BankAs per bank policies1-5 yrs
Bank of IndiaRelated to MCLR1-7 yrs
Bank of Maharashtra9.25% p.a.Based on the bank’s decision
Vijaya Bank9.65% p.aBased on the bank’s decision
Tamilnad Mercantile Bank8.95% p.a onwards1-7 yrs
Oriental Bank of CommerceAs per bank policiesBased on the bank’s decision

FAQs on Mudra Loan

Is there any fee for a MUDRA loan?

The processing fees for Shishu & Kishore Category Mudra Loans are NIL.

Who can submit a Mudra Loan application?

Any Indian citizen who wants to start a non-farming business, such as manufacturing, processing, trading or providing services, and needs a loan of up to 10 lakh can go to a bank, microfinance institution or non-banking finance company to apply for a MUDRA loan.

How long does the MUDRA Scheme's loan processing take?

Shishu loans generally have a shorter processing time, usually 7-10 days. Other types of loans take longer, depending on the lender.

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Term Loan https://mybillbook.in/blog/term-loan/ Mon, 08 Aug 2022 04:50:00 +0000 https://mybillbook.in/blog/?p=4973 What is a Term Loan? A term loan is a loan that offers a business capital expenditure and expansion for 84 months.  How are Term Loans Beneficial?  A term loan gives borrowers a significant amount of money upfront in exchange for specific borrowing terms. Borrowers can agree to pay their lenders a set amount over […]

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What is a Term Loan?

A term loan is a loan that offers a business capital expenditure and expansion for 84 months. 

How are Term Loans Beneficial? 

  • A term loan gives borrowers a significant amount of money upfront in exchange for specific borrowing terms.
  • Borrowers can agree to pay their lenders a set amount over a period at a fixed or floating interest rate. It provides greater flexibility and cheaper interest rates.
  • Small firms can use term loans to purchase fixed assets such as equipment or a new building.

Factors to Consider Before Acquiring a Term Loan

  1. The five components of a term loan are the loan amount, interest rate, length, repayment schedule, and whether the loan is secured or unsecured.
  2. There is a fixed repayment value for the loan based on the type of loan chosen and the borrower’s eligibility. 
  3. The interest rate on this business loan could be fixed or variable. It is totally up to the borrower to choose a rate. 
  4. There is a fixed loan term. Throughout the loan term, the company must repay the loan amount in EMIs according to the repayment schedule.
  5. The loan requires security and a stringent approval process to limit the risk of default or nonpayment. However, if you pay up a term loan ahead of time, there are usually no penalties.

Features of Term Loans

Security

Term loans are secured loans. Assets financed by term loans serve as primary security, while the company’s other assets serve as collateral security.

Obligation

Borrowers must pay interest and repay principal on term loans. Whether the company makes a profit or not, term loans are typically repayable in instalments over a 5- to 10-year period.

Interest

Although term loans have a set interest rate, it is negotiable between the borrowers and lenders at the time of loan disbursement.

Maturity

Because it is a medium-term financing source, its maturity length ranges from 5 to 10 years, with repayment done in instalments.

Covenants Restrictive

Aside from asset security, the lender of the term loans puts extra restrictive covenants on themselves. For example, borrowers are asked to maintain a minimum asset base, not to obtain more loans or repay existing loans, and so on.

Convertibility

At the financial institution’s discretion, they may convert the term loans into equity.

Types of Term Loan

There are various types of term loans based on the factors:

  • Required funding amount
  • Borrower’s repaying capacity
  • In-hand fund availability

And the classification can be listed as follows:

Short-term Loans

A short-term loan meaning a term loan, is a loan that a bank offers for a short period of 12 to 18 months. 

  • Lenders consider the tenure to be five years to 84 months.
  • Borrowers consider the tenure to be very short.

Intermediate-Term Loans

Intermediate loans are term loans with a longer tenor of 84 months, and businesses use them for big-budget funding needs.

Long-term Loans

Long-term loans come with extended tenors, and borrowers or lenders use them for lump sum funding.

Advantages of Term Loans 

From the Borrower’s Point of View

  • Expense: It is a less expensive medium-term financing source.
  • Tax Advantage: Because interest on a term loan is a deductible item, there is a tax advantage on interest.
  • Adaptable: Term loans are loans between borrowers and lenders. As a result, the terms and circumstances of these loans are not restrictive, allowing for some flexibility.

From the Lender’s Point of View

  • Assured: Banks and other financial institutions make secure term loans in exchange for collateral.
  • Regular Income: The borrower has to pay interest and return principal regardless of financial status, ensuring the lender obtains consistent and consistent revenue.
  • Adaptation: To minimise default, financial institutions may demand borrowers convert term loans to equity. As a result, they may be responsible for the company’s affairs.

Disadvantages of Term Loans 

  • The firm is legally required to pay the fixed interest and principal amount to the lenders, failing to which could result in bankruptcy.
  • Debt financing, particularly term loans, increases the firm’s financial leverage, raising the firm’s equity cost. As a result, if inflation falls to shallow levels, the actual cost of debt will be higher than projected.

Documents required for Term Loans

You should keep the following documents handy while applying for a term loan:

  • Business registration proof
  • KYC documents 
  • Bank statement for the last six months
  • Pan card
  • Aadhaar card

Term Loans Offered by Banks

  1. Long-term loans are small amounts for a long repayment tenure, requiring similar eligibility criteria and documents to other long-term loans. Therefore, they are best suited for the urgent financial needs of customers who wish to pay in small instalments over a substantial repayment period.
  2. Small business loans are for businesses to expand, requiring credit in loans with tenure over three years.
  3. Home loans have tenure beyond three years, and the loan amount is considerable. Therefore, the person needing the loan should submit collaterals to the bank and choose between fixed and floating interest rates.
  4. Car loans have high-interest rates than home loans, with a long-term payment tenure of up to 7 years. 
  5. Personal loans have a payback term of more than three years and a not-so-low interest rate because they are unsecured.
  6. Education loans are for those wishing to go for higher studies in India and abroad for an extended period (like three years), especially for courses like engineering and medicine, which can go up to 30 years. 

FAQs on Term Loan

What exactly is a term loan?

A business obtains a term loan, typically from a bank, in which they intend to borrow an amount, and the bank defines that amount.

Why are term loans granted to businesses?

Businesses sometimes want cash for various reasons, and these loans are provided to corporations to cover their cash needs. These requirements could cover operating capital needs or fund a new project. It could also mean purchasing new machinery or constructing a new production facility.

What is an example of a term loan?

A working capital loan is an example of a term loan for businesses that want quick finance to maintain cash flow or pay day-to-day business expenditures.

Is a car loan a term loan?

Yes. A car loan is a term loan because a bank grants it for a set period, such as five, ten, or fifteen years.

What are the different forms of term loans?

1. Short term: Loans ranging from a few days to a year
2. Medium-term: loans ranging from a year to 18 months and up to 84 months
3. Long-term: loans lasting from 84 months to 25 years

Can a company get tax exemptions for money contributed toward loan repayment?

Yes, the interest component of the EMI (equated monthly payment) is tax deductible for a firm that has taken out a term loan. Your loan payment's interest component is something you can deduct as a business cost. As a result, it aids in obtaining tax exemptions for the firm because it is removed from a business's gross income, lowering taxable revenue.

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Udyogini Scheme https://mybillbook.in/blog/udyogini-scheme/ Sun, 07 Aug 2022 15:28:13 +0000 https://mybillbook.in/blog/?p=4964 What is Udyogini Scheme? The Women Development Corporation’s Udyogini Scheme provides subsidised loans to budding women entrepreneurs from rural and impoverished areas. Udyogini, “Women Entrepreneur,” is a recognised non-profit organisation dedicated to women’s economic empowerment. Udyogini Scheme spreads over 200 villages throughout five states: Rajasthan, Chhattisgarh, Jharkhand, Madhya Pradesh, and Uttarakhand. The program encourages women’s […]

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What is Udyogini Scheme?

The Women Development Corporation’s Udyogini Scheme provides subsidised loans to budding women entrepreneurs from rural and impoverished areas.

Udyogini, “Women Entrepreneur,” is a recognised non-profit organisation dedicated to women’s economic empowerment. Udyogini Scheme spreads over 200 villages throughout five states: Rajasthan, Chhattisgarh, Jharkhand, Madhya Pradesh, and Uttarakhand.

The program encourages women’s entrepreneurship, financial empowerment, and self-sufficiency by providing financial support.

The initiative intends to promote more micro-firms to emerge and contribute to the country’s overall growth.

The Udyogini Scheme’s primary goals are as follows:

  • Encouragement of women to obtain loans from banks and other financial organisations to engage in income-generating activities
  • Reduce the cost of financial assistance for women from the SC/ST or special category.
  • To make interest-free loans to qualified female beneficiaries without discrimination or bias.
  • Ensure the skill development of women beneficiaries through EDP Training.
  • Prevent women from contacting private money lenders or other financial organisations for high-interest loans.

What is the purpose of the Udyogini Scheme?

Karnataka State Women’s Development Corporation (KSWDC), Punjab and Sind Bank, Saraswat Bank and a few more private and public sector banks offer the Udyogini Scheme:

  • Providing loans with no interest to qualified women entrepreneurs in agribusiness, retail, and small business.
  • Offering three days of EDP training for the beneficiary ladies before disbursal of the loan.

Eligibility criteria for loans under the Udyogini Scheme

Loans under the Udyogini scheme are available to ambitious female entrepreneurs that meet the following criteria:

  • Age range: 25 to 65 years
  • Family income: 1.5 lakhs

The Udyogini scheme excludes women who fall into special categories such as being disabled, widowed, or poor from fulfilling the upper-income requirement.

Documents needed for Udyogini Scheme

  1. Aadhar or BPL card
  2. Income and Birth Certificates
  3. Bank Passbook’s photocopy- with details like account number, name of the account holder, name of the bank, branch, IFSC and MICR codes

Udyogini Scheme – July 2022

Let’s have a look at the Udyogini scheme interest rates for July 2022:

Details of the Udyogini Scheme 2022 - July

Karnataka State Women’s Development Corporation (KSWDC), Punjab and Sind Bank, Saraswat Bank, several other private and public sector banks, and top NBFCs are the primary providers of the Udyogini Scheme. This programme focuses on planning and implementing skill development training programmes for women and providing financial help.

How to use the Udyogini Yojana

To apply for a business loan under the Udyogini Yojana Scheme, applicants should go to their nearest bank with all the necessary documents and fill out an application form before proceeding with the bank formalities. Applicants can also apply for loans online by visiting banks’ official websites participating in the Udyogini Yojana Scheme.

List of enterprises participating in the Udyogini Yojana

Loans under the Udyogini Yojana are made available at competitive interest rates by various financial institutions, including cooperative banks, Regional Rural Banks (RRBs), and commercial banks. Only female entrepreneurs are eligible for corporation subsidies to manage their businesses. The application form for the Udyogini Yojana Scheme is available on the bank’s official website.

The following is a comprehensive list of the 88 company types available through the Udyogini Scheme:

  1. Agarbatti Manufacturing
  2. Audio & Video Cassette Parlour
  3. Bakeries
  4. Banana Tender Leaf
  5. Bangles
  6. Beauty Parlour
  7. Bedsheet & Towel Manufacturing
  8. Book Binding And Note Books Manufacturing
  9. Bottle Cap Manufacturing
  10. Cane & Bamboo Articles Manufacturing
  11. Canteen & Catering
  12. Chalk Crayon Manufacturing
  13. Chappal Manufacturing
  14. Cleaning Powder
  15. Clinic
  16. Coffee & Tea Powder
  17. Condiments
  18. Corrugated Box Manufacturing
  19. Cotton Thread Manufacturing
  20. Crèche
  21. Cut Piece Cloth Trade
  22. Dairy & Poultry Related Trade
  23. Diagnostic Lab
  24. Dry Cleaning
  25. Dry Fish Trade
  26. Eat-Outs
  27. Edible Oil Shop
  28. Energy Food
  29. Fair-Price Shop
  30. Fax Paper Manufacturing
  31. Fish Stalls
  32. Flour Mills
  33. Flower Shops
  34. Footwear Manufacturing
  35. Fuel Wood
  36. Gift Articles
  37. Gym Centre
  38. Handicrafts Manufacturing
  39. Household Articles Retail
  40. Ice Cream Parlour
  41. Ink Manufacture
  42. Jam, Jelly & Pickles Manufacturing
  43. Job Typing & Photocopying Service
  44. Jute Carpet Manufacturing
  45. Leaf Cups Manufacturing
  46. Library
  47. Mat Weaving
  48. Match Box Manufacturing
  49. Milk Booth
  50. Mutton Stalls
  51. Newspaper, Weekly & Monthly Magazine Vending
  52. Nylon Button Manufacturing
  53. Old Paper Marts
  54. Pan & Cigarette Shop
  55. Pan Leaf or Chewing Leaf Shop
  56. Papad Making
  57. Phenyl & Naphthalene Ball Manufacturing
  58. Photo Studio
  59. Plastic Articles Trade
  60. Pottery
  61. Printing & Dyeing of Clothes
  62. Quilt & Bed Manufacturing
  63. Radio & TV Servicing Stations
  64. Ragi Powder Shop
  65. Readymade Garments Trade
  66. Real Estate Agency
  67. Ribbon Making​​
  68. Sari & Embroidery Works
  69. Security Service
  70. Shikakai Powder Manufacturing
  71. Shops & Establishments
  72. Silk Thread Manufacturing
  73. Silk Weaving
  74. Silk Worm Rearing
  75. Soap Oil, Soap Powder & Detergent Cake Manufacturing
  76. Stationery Shop
  77. STD Booths
  78. Sweets Shop
  79. Tailoring
  80. Tea Stall
  81. Tender Coconut
  82. Travel Agency
  83. Tutorials
  84. Typing Institute
  85. Vegetable & Fruit Vending
  86. Vermicelli Manufacturing
  87. Wet Grinding
  88. Woollen Garments Manufacturing

FAQs of Udyogini Scheme

How much money can I borrow through the Udyogini scheme?

The maximum credit amount available to a female entrepreneur under the Udyogini Scheme is Rs. 3 lakh.

Where can I apply for a loan through the Udyogini Scheme?

Leading banking institutions provide business loans through Udyogini Scheme. Bajaj Finserv, Saraswat Bank, Punjab and Sind Bank, and Karnataka State Women's Development Corporation (KSWDC) are among the banks and NBFCs offering business loans under the Udyogini Scheme.

What exactly is the goal of the Udyogini Scheme?

The Government launched the Udyogini Scheme for the care and growth of Indian Women Entrepreneurs. This programme motivates female entrepreneurship among the underprivileged by providing financial assistance to women who want to start a business.

The scheme funds and assists women in rural and underserved communities.

What is the limit of money I can borrow under the Udyogini scheme?

The Udyogini Scheme allows you a maximum grant of Rs. 3 lakhs.

What is the minimum age to apply for the Udyogini scheme?

This loan is available to women aged 18 to 55.

Is the Udyogini Scheme loan only for people who fall into the SC/ST category?

No, this loan related to the Udyogini Scheme is available to women of all income levels.

Which companies are eligible for this loan?

The Udyogini Scheme can help up to 88 distinct enterprises. Loans are available to enterprises in the SSI sector, retailers, manufacturers, self-employed professionals, traders, etc.

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Collateral Free Loan https://mybillbook.in/blog/collateral-free-loan/ Mon, 18 Jul 2022 07:57:10 +0000 https://mybillbook.in/blog/?p=4532 What is Collateral Free Loan? Collateral is the security against which you can apply for a loan. For example, you offer the home documents as collateral when applying for a home loan. In case of non-payment, the lending institution can seize your home. Collateral is offered to reduce the risk for the lender.  A collateral […]

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What is Collateral Free Loan?

Collateral is the security against which you can apply for a loan. For example, you offer the home documents as collateral when applying for a home loan. In case of non-payment, the lending institution can seize your home. Collateral is offered to reduce the risk for the lender. 

A collateral free loan means that a bank or financial institution lends a loan without asking for any collateral or security to limit its risk. In other words, if you are a business owner applying for a loan, you do not have to pledge anything as security with the lender. This allows MSME owners to borrow money without worrying about pledging or losing the collateral.

How to apply for a Collateral Free Loan?

Applying for a collateral free loan is easy. Here are some steps you have to follow while applying for collateral free loans:

  • You have to approach the bank or financial institution from which you are planning to take a loan. You can visit their website too.
  • Check whether you are eligible for the loan. 
  • Next, you have to fill out the application form and submit the relevant documents. 
  • If everything is in order, you will be approved for the loan in a few days.

Documents required for applying for Collateral Free Loans

You will require the following documents to apply for a collateral free loan:

  • Age proof (you should be between 22 to 60 years)
  • Business vintage proof (the business should be at least three years old)
  • Previous year’s tax returns
  • The previous year’s turnover audited and approved by a CA

Who can apply for Collateral Free Loans?

There are certain requirements for applying for collateral free loans:

  • SME (Small and Medium Enterprises) and SSI (Small Scale Industries) registered private limited companies can apply for collateral free loans
  • Collateral free loans can be taken for product development, asset purchase, etc.
  • You can purchase shares and make other investments with collateral free loans.

Salient features of Collateral Free Loans

Collateral free loans offer many features to potential applicants such as:

  • Loan availability up to INR 1 crore to MSE (micro and small enterprises) according to the MSMED Act, 2006.
  • Applicants can be both new or existing MSE owners.
  • You can apply for higher loans and they will be granted on a case-to-case basis. If the loan amount is very high, you might have to pledge collateral. However, this collateral will be of a lower percentage than the collateral of regular business loans.
  • You can apply for a term loan or working capital. 
  • Depending on the applicant’s category, you can get a margin of 75%, 80%, or 85%.

Benefits of availing Collateral Free Loans

A collateral free loan has many benefits:

  • No collateral required
  • No guarantor required
  • Low interest rates
  • Flexible repayment tenures
  • Letter of credit
  • Bill for discount up to 180 days
  • No checking of track record
  • Funding for product development
  • No obligation on repayment for a certain period
  • Quick application processing
  • Easy repayment options

What is CGTMSE Scheme?

What is CGTMSE Scheme

Banks that offer Collateral Free Loans in India

These major banks provide collateral free loans:

  • Axis Bank
  • Bank of Baroda
  • Fullerton India
  • HDFC Bank
  • ICICI Bank
  • State Bank of Hyderabad
  • State Bank of India (SBI)
  • UCO Bank

Latest updates on Collateral Free Loans from GOI

The Finance Minister, Nirmala Sitharaman, mentioned that MSMEs that require equity support will get subordinate debt. The Government of India has allotted INR 20,000 crore to the subordinate debt out of which INR 4,000 crore is allotted to the CGTMSE scheme. The funds will also provide partial credit guarantee support to the lending institutions.

These guidelines have been issued to help MSEs recover from the losses incurred during the COVID-19 period. They will ensure that MSEs get a boost and their operations will not suffer due to lesser funds.

On 13th May 2020, Finance Minister, Nirmala Sitharaman also mentioned that collateral free loans were a means to help MSMEs to their feet after the nationwide lockdown had resulted in major losses. These funds are to be considered to be a relief package to assist the Indian economy. 

FAQs on Collateral Free Loan:

Who can apply for a collateral free loan?

SME/SSI registered private limited companies can apply for a collateral free loan.

What can a collateral free loan be used for?

A collateral free loan can be used for research and development of a product, purchasing intangible assets, etc.

My company stopped operations during the COVID-19 pandemic. Can I apply for the CGTMSE Scheme to get funds for resuming operations?

Yes. If you have registered as a business under the MSME scheme, you can apply for a collateral free loan under the CGTMSE scheme.

Will I be able to get a top-up on the loan amount?

You can get an extra loan on a case-to-case basis. However, you might have to pledge collateral at a lower interest rate than normal loans.

Read more

PMEGP LoanGovernment Loan SchemesGovernment Subsidy Loan for Business
Mudra LoanMSME Business LoanMSME Loan for Startup Businesses
Unsecured business loanStartup Business LoanSME Loan
Small Business LoanCash Credit LoanSIDBI Scheme
Mahila Samridhi YojanaBusiness Loan for Women

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Mahila Samridhi Yojana and How to Apply https://mybillbook.in/blog/mahila-samridhi-yojana/ Mon, 18 Jul 2022 07:44:04 +0000 https://mybillbook.in/blog/?p=4536 What is Mahila Samridhi Yojana The Indian government introduced the Mahila Samridhi Yojana (MSY) as a programme to give women working in the unorganised sector financial and social security. The government offers women entrepreneurs from socially and economically disadvantaged backgrounds microfinance. Features and benefits of Mahila Samridhi Yojana It encourages females from diverse ethnic backgrounds, […]

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What is Mahila Samridhi Yojana

The Indian government introduced the Mahila Samridhi Yojana (MSY) as a programme to give women working in the unorganised sector financial and social security. The government offers women entrepreneurs from socially and economically disadvantaged backgrounds microfinance.

Features and benefits of Mahila Samridhi Yojana

  • It encourages females from diverse ethnic backgrounds, rural areas, and lower socioeconomic backgrounds to adopt an entrepreneurial mindset.
  • The initiative helps women from oppressed groups to pursue their dreams despite prevalent social taboos in India, especially those who belong to scheduled castes or scheduled tribes.
  • It helps women who are struggling financially start their businesses or careers due to a lack of resources.

This scheme helps women to grow in the following ways:

  • Better financial conditions for women in rural areas.
  • Women under the “Below Poverty Line” (BPL) receive additional help.
  • Increases employment opportunities for marginalised communities.
  • Helps women build confidence.

Eligibility Criteria Mahila Samridhi Yojana

The eligibility criteria for the Mahila loan are as follows:

  • Only available to Self-help groups (SHGs) and women entrepreneurs from underprivileged areas.
  • The minimum age limit for women is 18 years old.
  • Available for women under the BPL category.
  • Annual income should be less than Rs. 3 lakh.
  • No prior criminal history.

Pattern of Finance

According to the plan, up to 95% of the loan amount will go to the applicant, with the remaining 5% coming from State Channelizing Agencies (SCAs) or Beneficiary Contribution. After the loan amount has been allocated, the utilisation period will last 4 months.

Bank and NBFCs Interest Rates

The National Backward Classes Finance and Development Corporation (NBCFDC) will impose a 1% interest on the loan amount on SCA, and SCA will charge a 4% interest rate on the beneficiary.

Documents required for Mahila Samridhi Yojana

These documents are necessary when applying for a Mahila loan:

  • Identity proof- Voter id, PAN card
  • Residence proof- the electricity bill
  • SHGs membership card
  • Annual Income certificate
  • Caste certificate
  • Applicant’s bank statement
  • Loan form with passport size photo

Other significant information

Self-Help Groups (SHGs): Economically compatible people collaborate to increase income through savings and project participation.

Member Ratio: The maximum number of women who can join an SHG is 20, and to qualify, an SHG must have 75% members from disadvantaged groups and 25% members from other marginalised groups, such as members of Scheduled Caste or those who are physically disabled.

Channel Partners: Channel partners are professionals who help the group with economic activities and the Mahila loan scheme.

Loan Distribution: Beneficiaries receive loans through State Channelizing Agencies (SCAs), Regional Rural Banks (RRBs), and nationalised banks.

Repayment

Borrowers must repay the loan in four quarterly payments, starting from the day it was distributed into their bank account.

FAQ about Mahila Samridhi Yojana

What is the offline application process for a Mahila loan?

The Mahila Samridhi Yojana application form is available at the candidate's nearby SCA office or bank branch.

Can I still submit my MSY loan application without an Aadhar card?

No, you need an Aadhaar card to apply for an MSY loan.

Does eligibility for a Mahila loan require BPL status?

Yes, women who apply for Mahila loans should qualify as below-poverty-line borrowers.

What is the MSY loan's usage period?

Within four months of the disbursement date, the loan must be used. The borrower must use the funds and complete all necessary paperwork.

I fulfil other eligibility requirements but belong to the general category. Can I still apply for an MSY loan?

As per the guidelines, only women from backward or scheduled castes are eligible for MSY loans.

Read more on Loans

PMEGP LoanGovernment Loan SchemesGovernment Subsidy Loan for Business
Mudra LoanMSME Business LoanMSME Loan for Startup Businesses
Unsecured business loanStartup Business LoanSME Loan
Small Business LoanCash Credit LoanSIDBI Scheme

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SIDBI Scheme: Features, Benefits and How to Apply for a SIDBI Loan https://mybillbook.in/blog/sidbi/ Mon, 18 Jul 2022 07:16:14 +0000 https://mybillbook.in/blog/?p=4527 What is SIDBI? The Small Industries Development Bank of India (SIDBI) was established in 1990 to promote, finance, and develop small-scale industries in India. It provides refinance facilities and term loans to banks and financial institutions for on-lending to micro and small enterprises.  Objective of SIDBI The main objective of SIDBI is to help the […]

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What is SIDBI?

The Small Industries Development Bank of India (SIDBI) was established in 1990 to promote, finance, and develop small-scale industries in India.

It provides refinance facilities and term loans to banks and financial institutions for on-lending to micro and small enterprises. 

Objective of SIDBI

The main objective of SIDBI is to help the MSME sector grow. SIDBI offers loans and other financial services to millions of micro, small, and medium-sized enterprises and non-profit companies throughout the country’s vast ecosystem. Their policies provide India’s economic growth, innovation, international stature, and overall progress.

Features of SIDBI

Here are a few features of SIDBI you should be aware of:

  • SIDBI assists with refinancing to MSMEs and Small Scale Industries (SSIs).
  • Supports the MSME sector with funding.
  • Encourages SSIs to pursue employment opportunities.
  • Provides financial services, including leasing, factoring, and hire purchase.
  • Provides help managing exports.
  • Women business owners and people from underprivileged backgrounds are given bank loans.
  • Offers to refinance to banks, NBFCs, small finance companies, and other financial institutions.

Benefits of SIDBI

SIDBI has played a pivotal role in the growth of the MSME sector, providing access to finance, facilitating technology and skill development, and promoting entrepreneurship.

Here are the benefits of SIDBI:

1. Access to Finance: SIDBI makes it possible for MSMEs to access financing for their establishment and expansion by customising loans to an enterprise’s needs.

2. Low-interest rates: SIDBI can obtain discounted interest rates due to its affiliations with numerous banks and foreign financial institutions. The alliances’ participants include the World Bank and the Japan International Cooperation Agency.

3. Promotes Entrepreneurship: Through a variety of programmes like Udyami Mitra, SIDBI encourages young people to become entrepreneurs.

4. Helps in the decision-making process: Relationship managers assist MSMEs by guiding them in making the best choice for the business and remain accessible throughout the loan application process.

5. No Collateral: Entrepreneurs are qualified for up to Rs. 100 lakhs without putting up collateral. To achieve this, a trust known as the Fund Trust for Micro and Small Enterprises was established (CGTMSE).

6. Equity and Venture Capital: SIDBI also provides equity and venture capital support to MSMEs through its investment arm, SIDBI Venture Capital Ltd.

7. No hidden charges: SIDBI schemes have a clearly defined structure and process. As a result, the applicant can trust the bank because there are no unexpected fees.

Functions of SIDBI

1. Indirect Lending 

Indirect Lending is when SIDBI offers loans to banks, and then banks lend money to MSMEs. SIDBI does indirect Lending to banks, Non-Banking Financial Companies(NBFCs), Small Finance Banks(SFBs) and Micro Financial Institutions(MFIs).

2. Direct Lending

SIDBI also offers direct Lending, which means financial support is directly given to MSMEs in the form of soft loans, working capital and equipment finance. Recently, SIDBI assisted MSME through its Covid Emergency response programme.

3. Promotional and Development of MSME

SIDBI aims to help MSME, and for this SIDBI scheme has its initiatives, some of which are: 

  • Sampark(customer connect)
  • It also arranges exposure visits to MSMEs for budding or emerging organisations. 
  • It also has an award system known as SIDBI-ET India MSE Award, which appreciates emerging MSMEs. 
  • SIDBI has an entrepreneurship awareness program and has partnerships with top institutes like IIM for entrepreneurship and leadership development.
  • It also has a Women Entrepreneurship Program (WEP) in collaboration with Nitti Aayog.

4. Provides a platform to help MSMEs

Udyami Mitra is an aggregator platform to provide financial and non-financial services in one place.

5. Indirect funding

SIDBI gives venture capitalists (VCs) money, and these VCs, in turn, help new startups grow without having to worry about funding.

6. Contributes to the marketing sector

It helps SSI increase the networking channels to market its products and services.

7. Helps create employment opportunities

The SIDBI scheme expands employment opportunities by supporting industries focusing on employment, particularly in semi-urban areas.

SCHEMES offered by SIDBI

Direct Loan Schemes

The SIDBI’s direct loan programmes are listed below:

  • Working Capital( Cash Credit)
  • SIDBI Make in India Soft Loan Fund for MSME (SMILE)
  • Smile Equipment Finance (SEF)
  • Loans under a partnership with OEM (Original Equipment Manufacturer)
  • SIDBI – Loan for Purchase of Equipment for Enterprise’s Development (SPEED)
  • SIDBI ASSISTANCE TO HEALTHCARE SECTOR IN WAR AGAINST SECOND WAVE OF COVID19(SHWAS)
  • SIDBI ASSISTANCE TO MSMES FOR RECOVERY & ORGANIC GROWTH DURING THE COVID19 PANDEMIC(AROG)
  • TIMELY WORKING CAPITAL ASSISTANCE TO REVITALISE INDUSTRIES IN TIMES OF CORONA CRISIS (TWARIT)
  • TOP-UP LOAN FOR IMMEDIATE PURPOSES (TULIP)
  • SIDBI-Loan for Purchase of Equipment for Enterprise’s Development Plus (SPEED PLUS)
  • SIDBI TERM-LOAN ASSISTANCE FOR ROOFTOP SOLAR PV PLANTS (STAR)

Indirect loans Schemes

SIDBI offers indirect loans to banks, NBFCs and other financial bodies. The categories of indirect loans that SIDBI has to offer are as follows:

1. Assisting NBFCs

Any company registered with the Reserve Bank of India and financing small and medium-sized companies can apply for a loan from SIDBI. The eligibility criteria will depend on the lender.

2. Refinancing Plan

Under several refinancing plans, SIDBI will give scheduled banks financial support. Schedule banks with strong financial standing are eligible for SIDBI loans.

3. Financial support for small finance banks (SFBs)

SIDBI helps banks by offering equity investments for the capitalization of SFBs to narrow the equity gap.

Other kinds of Finance and Loan Option Schemes provided by SIDBI – Venture Capital: 

Finance and Loan Option Schemes provided by SIDBI – Venture Capital

Here is a detailed list of SIDBI schemes

Loan SchemeLoan's DurationLoan AmountCriteria for Qualification
SIDBI Assistance to Facilitate Emergency Response Against Coronavirus (SAFE)5 years + a moratorium Up to Rs.50 lakhFor new customers, a two-year cash profit history and an account that is not in the SMA1/2 category. For current clients, cash profits in the most recent audited balance sheet are not in the SMA1/2 category.
SIDBI Assistance to Facilitate Emergency Response Against Coronavirus Plus (SAFE PLUS)4-month cycleUp to Rs.1 crFor new customers, a two-year cash profit history and an account that is not in the SMA1/2 category. For current clients, cash profits in the most recent audited balance sheet are not in the SMA1/2 category.
SIDBI Make in India Soft Loan Fund for MSME (SMILE)10 years, in addition to a 3-year moratoriumRs.10 lakh – Rs.25 lakhExisting or new establishments
Small Equipment Finance (SEF)72 monthsMin. Rs.10 lakhBusiness experience of 3 years
Loans under a partnership with OEM (Original Equipment Manufacturer)5 years plus a moratorium Rs.1 crBusiness experience of 3 years
Working Capital (Cash Credit)As statedSubject to the applicantSIBDI and other banks' clients
SIDBI Trader Finance Scheme (STFS)5 years plus a moratorium Rs.10 lakh – Rs.1 crBusiness experience of 3 years
SIDBI – Loan for Purchase of Equipment for Enterprise’s Development (SPEED)5 years plus moratorium of 6 monthsNew customers: Rs.1 cr Existing customers:  Rs.2 crBusiness experience of 3 years, with 2  years of profitability
SIDBI-Loan for Purchase of Equipment for Enterprise’s Development Plus (SPEED PLUS)5 years plus moratorium for 6 monthsNew customers: Rs.2 crExisting customers: Rs.3 crBusiness experience of 5 years, with 3  years of profitability
SIDBI – retail loan scheme for trade finance (RLS)5 years plus a 3-month moratorium Rs.1 crBusiness experience of 3 years
Top up loan for immediate purposes (TULIP)5 yearsMaximum of Rs.2 cr –The applicant must have good financial standing and have used a SIDBI loan for a year.
SIDBI term-loan assistance for rooftop solar PV plants (STAR)5 years plus moratorium of 6 monthsRs.2.5 cr2 years of profitable operations and acceptable financial records
Funds of Funds for start-upsDepending on the loan amount and the applicant's financial situationSubject to the applicant's financial situationStart-ups
Aspire, Fund,6 yearsDepending on the applicant's financial situationSIDBI-accredited businesses that can assist AIF
India Aspiration FundDependsDepending on the applicant's financial situationVaries
Assistance to NBFCs2 to 5 and a half years Depending on the applicant's financial situation The business must be five years old and registered with the RBI. 
Refinance Scheme5 years.Depending on the applicant's financial situation3 years of business experience, 2 years of profitability, and a solid balance sheet
Assistance to Small Finance Banks (SFBs)As specifiedDepending on the applicant's financial situationRBI-licensed and profitable for the past 2-3 years

How to submit a loan application to SIDBI

To apply for a loan from SIDBI, applicants should follow the instructions listed below:

Step 1: Go to SIBDI’s website – https://www.sidbi.in/ or https://www.udyamimitra.in/

Step 2: Select the tab labelled “Borrower’s Corner.” Select “Online Loan Application” from the menu.

Step 3: Put in your login information, such as your username and password.

Step 4: Once logged in, as an applicant, you need to enter the loan amount and select the scheme.

Step 5: The form asks for personal information such as their name, username, email address, mobile number, company address, state, and district.

Step 6: Once the details are filled in, click on Register to complete the application process.
Step 7: The bank will send an email for account verification, and the applicant must confirm it to process the application.

FAQs about SIBDI

Are MUDRA loans made available by SIDBI?

Yes, MUDRA loans are among the loan products provided by SIDBI.

What documents do I need to provide if I want to apply for a SIDBI direct loan?

For the SIBDI direct loan, applicants must provide identification and address documentation, a PAN card, business documentation and other tax-related documents.

When requesting a SIBDI loan, does the applicant's credit score come into play?

No, the credit history of the individual or the partners is not considered.

What types of financing does SIDBI provide?

SIDBI provides Micro Finance, Direct Finance, and Indirect Finance.

Does SIBDI fall under the purview of the Reserve Bank of India?

No. It is not a division of the RBI. The Central Government of India and other organisations under its control or ownership own shares of SIDBI.

How much money can you borrow at one time, and for how long can you make payments on a SIDBI loan?

SIDBI loans can be repaid over a maximum of 10 years for a maximum loan amount of Rs 2 crore.

What is SIDBI's full form, and when was it established?

The Small Industries Development Bank of India (SIDBI) is the apex bank for promoting and financing micro, small and medium-scale enterprises (MSMEs) in India. It was established in 1990 under the Small Industries Development Bank of India Act, 1989.

Read more:

PMEGP LoanGovernment Loan SchemesGovernment Subsidy Loan for Business
Mudra LoanMSME Business LoanMSME Loan for Startup Businesses
Unsecured business loanStartup Business LoanSME Loan
Small Business LoanCash Credit LoanCollateral Free Loan
Mahila Samridhi YojanaBusiness Loan for Women

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Cash Credit Loan https://mybillbook.in/blog/cash-credit-loan/ Mon, 18 Jul 2022 06:59:59 +0000 https://mybillbook.in/blog/?p=4521 What is Cash Credit Loan? A cash credit loan is a short-term loan typically used to cover business expenses. The loan is extended based on the borrower’s creditworthiness, and the funds are generally available as soon as the loan is approved. Cash credit loans can be used for various purposes, including working capital, inventory financing, […]

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What is Cash Credit Loan?

A cash credit loan is a short-term loan typically used to cover business expenses. The loan is extended based on the borrower’s creditworthiness, and the funds are generally available as soon as the loan is approved. Cash credit loans can be used for various purposes, including working capital, inventory financing, and equipment purchases. 

Features of Cash Credit Loan

When you take a cash credit loan, here are some features you can expect:

  • Rate of Interest- The Interest rate is only charged on the loan amount the borrower uses; it is not charged on the approved amount. And, the interest you pay on cash credit is tax-deductible.
  • Limit of Credit- Depending on the borrower’s creditworthiness or ability to repay, the lender sets the loan limit.
  • A minimal commitment fee- The applicant will be charged the minimum charge regardless of whether the amount to be underwritten is used or not.
  • Collateral- To obtain a cash credit loan, the borrower must offer security or collateral.
  • Term of Credit- The term for repaying cash credit loans is up to 12 months.
  • Withdrawal terms- The applicant can withdraw the required amount that the bank has authorised to cover their daily needs. The bank issues a cheque book in the company’s name, from which the latter may withdraw the necessary sum.

Eligibility for Cash Credit Loans

To be eligible for cash credit loan, here are the basic requirements an applicant needs to meet:

  • The minimum age requirement for a cash credit loan depends on the lender. A lot of lenders use 25 years as the standard minimum age.
  • A business must be at least 3 years old to qualify for a loan. However, lenders do grant loans to newly founded companies that have completed 1 year in operations.
  • When submitting a loan application, businesses must prove that they have filed their taxes for at least one year.
  • To qualify for a cash credit loan, the borrower must offer collateral like real estate properties, inventory, work-in-progress goods, raw materials, etc.
  • Working capital loans are available to proprietorship businesses, partnership businesses, publicly traded companies, limited liability companies, registered trusts and co-operative societies.

In addition to the above mentioned criteria, some lenders might have different standards. It is important to contact your lender and learn about any specific requirements they have before applying for a loan.

Documents required for Cash Credit Loans

When taking out a loan, you need to have certain information ready. Your bank will ask for a list of documents such as:

  • Income proof: bank statements from the last 6 months
  • Certificate of Business Incorporation
  • Commercial address proof
  • Ownership data: Company legal documents
  • Payment history for loans (if applicable)
  • Collateral proof
  • Completed application form and passport-sized photos
  • Business PAN card
  • Documents required for KYC include the applicant’s passport, driver’s licence, voter ID card, PAN card, Aadhar card, and utility bills (water and electricity bills).

Things to keep in mind when applying for Cash Credit Loans

When requesting a cash credit loan, the applicant should take the following factors into account:

  • The kind of collateral accepted will vary from lender to lender; hence, it’s essential to connect with the lender and confirm the details once.
  • The worth of the collateral affects how much interest is charged on these loans. The borrower can bargain for a lower interest rate on working capital loans if the collateral has a high value.
  • For working capital requirements, the majority of market lenders offer running credit. Businesses are free to take money out of their accounts whenever needed.
  • The cash credit loan is based on running credit, so receiving additional benefits requires a strong loan repayment history. Lenders review it yearly and modify the terms and conditions of the account based on the loan repayment history.
  • Businesses can use the money for any working capital needs. However, it cannot be used for other things like long-term investments or personal needs.

How to apply for loans with Cash Credit?

You need to do the following things to apply for a cash credit loan:

  • Visit the bank’s website and look for a cash credit loan application based on your company’s needs.
  • Complete the form and send the required documents mentioned on the bank’s website.
  • Before approving a cash credit limit, the bank or lender will review the application and determine the company’s current assets and liabilities. When a business has good financial standing, the approved cash credit limit is higher.

Cash Credit offered by leading Banks/NBFCs  

Cash Credit offered by leading Banks/NBFCs  

Advantages and disadvantages of Cash Credit 

There are both advantages and disadvantages to credit. It is essential to weigh your options carefully before deciding whether a credit card loan will be the best option for your business.

Advantages and disadvantages of Cash Credit 

Difference between Cash Credit and Overdraft

Two main types of short-term business financing are cash credit and overdraft. Both options provide businesses with the funds to cover expenses and keep operations running smoothly. However, companies should be aware of some critical differences between the two financing options.

Difference Between Cash Credit and Overdraft

FAQ about Cash Credit Loan

Can liquid securities be used as collateral to obtain Cash Credit Loans?

Liquid securities are acceptable as collateral by some market lenders. However, some lenders only accept inventory or real estate as collateral. Get in touch with the lender to know more about the collateral.

How long does it typically take for lenders to disburse a loan?

Some lenders offer loans in as little as 24 hours, while others process loan applications and disburse the funds in a few days.

Is it possible to get working capital loans without putting up security?

Working capital loans are typically only provided after putting up collateral. If you prefer unsecured loans, you can take a personal loan and use the money for your company's needs. On the other hand, unsecured loans have high-interest rates based on your annual income, credit score, loan amount, and repayment terms.

My company is having financial problems. Will Cash Credit loans be beneficial to me?

Cash credit loans are the best option for people who struggle to cover a business's operating costs. Additionally, seasonal businesses that only experience exponential growth in sales during a few months of the year can benefit from it.

How much will Cash Credit Loans cost me in fees and charges?

Lenders assess a processing fee on the loan amount, and you might be subject to penalties if you fail to make a payment on time. In addition, lenders may have additional costs, such as commitment, stamp duty, stock audit, conversion, check bounce, etc.

How much money can be borrowed through the Cash Credit facility?

Financial institutions' loans depend on the company's number of stocks and receivables.

Where can I use money availed by the Cash Credit limit?

You can use the funds to cover your working capital needs and business growth.

Who is eligible for this Cash Credit loan?

A cash credit loan can be applied for by any individual, manufacturer, trader, retailer, distributor, company, partnership, sole proprietorship, LLP, trust, or society.

How do business loans and Cash Credits differ from one another?

A financial institution provides a term loan with a set interest rate and predefined repayment terms. On the other hand, cash credit is a credit limit offered by a bank to a business as a short-term working capital loan.

How do banks determine the loan limit?

The applicant's profile, relationship with the bank, the enterprise's financial stability, ability to repay the loan, and credit worthiness are considered when determining the cash credit limit.

Read more

PMEGP LoanGovernment Loan SchemesGovernment Subsidy Loan for Business
Mudra LoanMSME Business LoanMSME Loan for Startup Businesses
Unsecured business loanStartup Business LoanSME Loan
Small Business LoanCollateral Free LoanSIDBI Scheme
Mahila Samridhi YojanaBusiness Loan for Women

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Business Loan for Women in India https://mybillbook.in/blog/business-loan-for-women/ Mon, 18 Jul 2022 06:52:33 +0000 https://mybillbook.in/blog/?p=4498 FinTech platforms have made it much easier to get business loans for women. Business loans for women in rural and urban India enable self-employment. Banks supporting business loans for women in India Numerous banks offer loans for women entrepreneurs only. But it’s important to make a well-informed choice by understanding all the calculations and terms […]

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FinTech platforms have made it much easier to get business loans for women. Business loans for women in rural and urban India enable self-employment.

Banks supporting business loans for women in India

Numerous banks offer loans for women entrepreneurs only. But it’s important to make a well-informed choice by understanding all the calculations and terms of banks’ different lending schemes. Some of the women entrepreneur loans in India include:

Here are some banks and other financial institutions that offer business loans for women.

Key features of the Central Bank of India Business Loan for Women

The following are the important highlights of the Central Bank of India’s business loan for women:

  • Loans of up to 1 crore rupees.
  • No requirement for a security deposit.
  • Flexible repayment tenures.
  • There is no set minimum income level.
  • There is no processing fee.

Key features of the State Bank of India Business loan for women:

The following are the important highlights of State Bank of India’s business loan:

  • Minimum required margin of ten per cent
  • No security is necessary.
  • Loan processing fees are 0.20 per cent.

Features of the Stree Shakthi Package

  • The initiative is supported by the State Bank of India (SBI)
  • Loan interest is 5% or less.
  • Up to 5 lakh rupees, no security needed.
  • A maximum amount of 25 lakh rupee loans are available.

Features of the Dena Shakti Scheme

  • Dena Bank’s scheme covers agriculture, manufacturing, and allied businesses.
  • SME loan limit raised to Rs. 50 lakh
  • No collateral is necessary for loans up to 5 lakh rupees and up to 25 lakh rupees for borrowers in excellent financial condition.
  • Up to Rs.25,000, the margin is zero; above Rs.25,000, it ranges from 15% to 25%

Features of the Cent Kalyani Scheme

  • This programme helps with capital expenses (Plant/Equipment) and day-to-day expenses (working capital).
  • The Central Bank of India offers this initiative.
  • Startup business loan for women is available.
  • This plan is meant for experienced and new entrepreneurs, self-employed, and professionals.

 Features of the Udyogini Scheme

  • Loans up to Rs.3 lakh
  • Special categories of women are eligible for interest-free loans
  • 88 Small businesses covered by the programme
  • Provides women with functional skill training.
  • 30% loan subsidy on a business loan for women

Features of the Mahila Udyam Nidhi Scheme

  • Project cost can’t exceed 10 lakh.
  • Loan limit of up to 25 per cent of project value, up to a maximum of Rs. 2.5 lakh per project is made available to eligible women entrepreneurs.
  • Loan repayment term up to 10 years, with a 5-year moratorium
  • Interest rates determined by SIDBI and given by banks may change periodically, and SIDBI will inform women entrepreneurs of such changes.
  • Banks impose 1% annual service fee on sanctioned business loans for women.

Business loans for women eligibility criteria

  • Age requirements: 18-65
  • Applicants without loan defaults are considered.
  • Individuals, MSMEs, sole proprietorships, partnerships, and LLPs involved in trading, manufacturing, and services are eligible.
  • Annual Turnover: Bank/lender-defined

Documents required for a business loan for women applications

  • Two passport-sized photographs of the applicant on the application form
  • Self-written business plan
  • Identity Documents – Driver’s License, Voter ID, PAN Card, Passport, Aadhaar, etc.
  • Evidence of income: bank statements from the last six months or bank statements
  • Certificate of Business Incorporation
  • Any additional documentation that the lender may require.

 How to apply for small business loans for women?

Some banks and lenders offer small business loans for women. These banks have online loan applications that you may fill out. Most of the time, the steps required are very simple:

  • Visit the website to apply Prime Minister Loan scheme for ladies.
  • Submit application form and documentation
  • If the bank approves the documents, the business loans for women will be transferred in 3 business days.

Advantages of small business loans for women

  • Easily available — Many top banks and financial institutions now provide women entrepreneur loans. These loans don’t require collateral, so they’re easy to get.
  • Interest rate reduction — Small business loans for women can be obtained at a lower interest rate.
  • Convenient repayments — Women entrepreneurs can settle small business loans in convenient monthly instalments (EMIs). Lenders recognise a business’s ups and downs and offer flexible repayment choices.
  • Business growth — Business loans can help women start or expand into new markets. Business loans can assist an organisation in growing by providing needed funds.

FAQs on Business loan for women

Is it necessary to bring up collateral to get a startup business loan for women in India?

Providing collateral is not required to get a small business loan, but it can cut interest rates and increase your loan amount.

My husband and I started a business. Can I get a lower interest rate for women's business loans so we can grow our business?

You can get a business loan for women with lower interest rates if you're a woman entrepreneur. To qualify, you must own 51% of the business.

I want to start a fashion boutique. Can I get a small business loan?

Yes, you can get a loan to build a fashion boutique under Prime Minister Loan scheme for ladies. Mudra loans are available for any startup business.

Can I apply for a Mudra loan at any bank?

Yes, all commercial financial institutions, RRBs, microfinance banks, NBFCs, etc., offer Mudra loans.

What are the benefits that NBFCs provide to women entrepreneurs?

An automated, unbiased procedure approves business loans with fair terms and conditions.

What documentation do women need to get a business loan?

The requirements for the document are minimal. You need proof that your business is registered, bank statements from the last 12 months, details about your PAN card, GST and IT filings, and KYC information in a digital format.

What factors determine how much I can obtain business loans for women?

The lender checks your credit score, revenue, and profitability together with business type and market conditions to approve the loan.

Do first-time borrowers have an impact on paying back a loan?

No, the lending company uses business analytics. Obtaining a business loan should be easy if your funds are in order.

Can I renew a paid-off business loan?

Yes, you can make renewal your loan by submitting the necessary paperwork to your lending institution and paying the processing fees.

How do women get small business loans?

Women who want to borrow money can visit the bank's website or visit the bank in person to fill out the necessary forms. In addition, women can access numerous options at low-interest rates when securing a business loan.

What kinds of startup business loans for women in India?

Women can apply for MSME, business, working capital, and term loans.

What is the ideal women entrepreneur loan?

With an interest rate of 7.50-7.75 per cent per annum, the Central Bank of India's Cent Kalyani loan is the best option for women entrepreneurs and MSME owners.

What kinds of loans exist for women who want to start a small business?

NBFCs, MFIs, SFBs, RRBs, Co-op Banks, etc., offer business loans or microfinance at subsidised interest rates.

What types of government loans are available to women for business startups?

Under several government loan programmes, such as Mudra Scheme, PMEGP, Startup India, CGTMSE, Standup India, psbloans in 59 minutes, etc., women entrepreneurs can apply for business loans.

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Small Business Loan https://mybillbook.in/blog/small-business-loan/ Fri, 15 Jul 2022 10:28:18 +0000 https://mybillbook.in/blog/?p=4507 Loans for small businesses are available to proprietors of businesses that need working capital to keep their businesses operational. Most of the time, the interest rates on small business loans are better than those on personal loans. The types of loans available include both secured and unsecured options. Note that your business’s credit history normally […]

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Loans for small businesses are available to proprietors of businesses that need working capital to keep their businesses operational. Most of the time, the interest rates on small business loans are better than those on personal loans. The types of loans available include both secured and unsecured options. Note that your business’s credit history normally determines the approval process.

These loans are an excellent option for newly formed small businesses and startups that require development funding but have less established business credit.

Small businesses loan eligibility

Before applying for an online loan for a small business, you are required to fulfil the following criteria

  • The borrower must be an independent professional, manufacturer, retailer, or dealer.
  • The applicant must be 21 years old to apply for a business loan.
  • The loan maturity age should be 65.
  • The borrower’s annual revenue should have been at least Rs. 10,00,000 during the previous year.
  • The person should have been operating the business for at least three years and have at least five years of experience in the business.

Documents required for small business

In contrast to banks, which require extensive documentation and strict regulations, Fintech companies rely on minimal documentation due to their liberal usage of technology. Before how to get a small business loan, you’ll need to provide the following documents

  • Proof of identity and eligibility for the business, including the proprietor’s and the organisation’s PAN and Aadhaar numbers.
  • Registrations and other legal formalities prove business existence.
  • A statement from your bank for the last six months.
  • Lender-specified documents.

Documents Required for Business loan in India

How to apply for a small business loan

  • Initiate the application process  Just put in your personal, business, and financial information to get a loan offer for your business.
  • Upload documents  The verification process requires one step uploading digital copies (electronic formats) of your documents.
  • Get sanctions  The approval of your business loan and its subsequent disbursement will be given to you within three working days.

The advantages of small business loans

Here are the advantages of getting a business loan

1. Processing is faster 

Faster processing means better credit for your organisation, exploring new horizons and capitalising on emerging opportunities. Expanding your company’s reach, increasing its efficiency, and ultimately boosting profits are all possible outcomes of a timely business loan.

2. Maintaining your property rights 

Because it’s an unsecured loan, you won’t have to lose any of your valuable assets or have to give up any of your valuable company shares as security. You may keep your firm ownership while getting the money you need for advancement through business loans.

3. Facilitates your cash flow 

Business loans provide funding and time to manage cash flow and become successful. In addition, these loans help you manage your business and organisation’s capital fund by enabling instalment-repayable investment.

4. Obtain a lower interest rate 

Typically, the interest rate will be lower than a personal loan. In contrast to many private investors, banks will grant you a loan without requiring any profit-sharing equity in return for their support. Small business loans are often convenient, readily available, and easy to access.

5. Boosting your credit score 

A loan from an NBFC is the most effective strategy to increase your business’s credit score. Companies that have recently seen their credit score drop because of unanticipated market conditions benefit particularly from obtaining a business loan.

Loan options available for small businesses in India

The following list is some of the most popular types of loans offered to small businesses. The processing and approval can take several weeks to a few months.

  • Term loans: Term loans are the most popular sources of funding for small business owners. An organisation borrows a large sum of money from a lender at once, and the money with interest is repaid to the lender over a certain number of years through several instalments. This type of loan is quite simple.
  • Small Business Administration (SBA) loans: SBA loans are government-backed bank loans. These loans are well-known for having extremely low interest rates and extended payback terms, which are advantageous for those who run small businesses.
  • Commercial mortgages: Mortgages on commercial assets provide funding for commercial assets like stores, restaurants, and offices. A commercial mortgage can also remodel or enhance an existing business property.
  • Business acquisition loans: Individuals looking to buy an established company or franchise can get assistance from business acquisition loans.
  • Business lines of credit: Entrepreneurs have access to a more flexible form of funding in the form of business lines of credit. You can use it whenever you need to, and you only have to pay interest on the money you spend.
  • Equipment financing: Small business owners can use equipment financing to buy the tools and equipment they need for their business.
  • Startup loans: Startup loans are given to new, growing businesses. Companies that are new to the market and trying to grow can get a loan to help them get started. Instead of looking at the organisation’s sustainability, the lender will consider the borrower’s personal credit history when determining the interest rates and terms of the loan.

Considerations for a small business loan application

It’s not easy to get a loan for a small business. The following are some potential obstacles that could keep you from getting the needed funding

  • Small businesses may not be able to get loans if they have poor credit or a low cash flow.
  • Look at your financial records and know what the lender expects before applying for a business loan.
  • A strong business plan increases your chances of obtaining a loan by making your business more appealing to lenders.
  • This is the most important factor when determining whether you can pay back a loan.
  • Some business owners believe they can cover all bases by simultaneously applying for small business loans. However, opening many loan applications simultaneously can raise red flags with credit bureaus.
  • When you ask for a loan for your business, the financial institution will want to see evidence that you have sought advice from experienced advisors.

FAQs on Small Business Loans

What is the best method for paying my small business loan EMIs?

- Schedule for the monthly payments to be made automatically
- Allow the financial institution to deduct the repayment amount directly from the bank accoun
- You can pay EMIs using auto-debit or net banking.
- Provide the financial institution with post-dated cheques to cover the EMIs.

Is your CIBIL score necessary to obtain a business loan?

The business's turnover is important and not credit score.
The business credit score is always considered for loan approval.

How will I get if my application for my small business loan has been successful?

You can check your loan status using your net banking account and the application reference number. In addition, after the loan is accepted, the lender will contact you by SMS or email before the loan amount is disbursed.

Can I cancel my application if the loan has already been approved?

Cancellation of the loan is possible before the loan amount is disbursed. At this stage, any fees will not be charged to you in the case of a cancellation. Most of the time, you have three days to cancel the application and get your money back. Make it clear to the lender why you're cancelling the pending application.

Is the interest rate on small business loans fixed by lenders?

No, the small business loan interest rate varies according to the lender and applicant. It is neither standard nor fixed.

I've got an idea for a business startup. Can I get a loan for my business?

As most banks prefer funding organisations that have existed for at least six months, getting a small business loan for a startup can be extremely challenging. However, there are several non-bank financial companies (NBFCs) that could give you loans based on the business idea you have. Before deciding how to get a business loan from a bank for your company, look into all the available options first. You can always arrange a personal loan and spend it to support your business strategy if you cannot obtain a loan.

What are the several ways that I can pay back the loan for my small business that I obtained?

You have three options for repaying your business loan post-dated cheques (often known as PDCs), direct debit, or electronic clearing services (ECS). The majority of lenders and borrowers favour the last two methods of repayment.

What is the maximum loan amount available for a small business loan?

The maximum amount of a loan that can be obtained as a business loan will vary depending on several factors, including the type of business, the lending institution, the applicant's credit score, etc. Therefore, the maximum amount of the loan could reach up to two crores of rupees depending on the variables.

When I apply for a small business loan, would I require any type of security or collateral?

For small business loans, numerous lenders do not require collateral, but a few do. However, collateral may assist borrowers in obtaining a larger loan amount, as it gives lenders security that they can auction the item and reclaim the loan amount in the event of default.

What is my small business loan's monthly instalment amount (EMI)?

The amount of the monthly instalment payment (EMI) will be determined by the total amount of the loan and the repayment term. The EMI Calculator allows you to determine how much your business loan will pay each month.

Is a small business loan's interest rate fixed or variable?

Most lenders will give a fixed interest rate on small business loans, implying that the interest rate will not fluctuate over the specified repayment period. In addition, a fixed interest rate enables the borrower to estimate future payments.

For what purposes are small business loans available?

Small business loans are used for several purposes, including business growth to another major city, increasing the organisation's profitability, office renovation, buying raw materials, leasing larger office spaces, developing business operations, etc.

Is the government's Mudra loan available to me if I work in the khadi industry?

Yes, Mudra loans are available for khadi activities. Mudra loans can be used for any business that profits through manufacturing, trading, or services.

What is the maximum payback period available for small business loans?

The maximum repayment period for small business loans can vary depending on the lender and the amount borrowed. However, the maximum term available from lenders is sixty months.

Can I be eligible to get a small business loan to start a fashion boutique?

Yes. A fashion boutique qualifies for a small business loan since it will increase profits.

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SME Loan Guide: Definition, Features, and Benefits https://mybillbook.in/blog/sme-loan/ Wed, 29 Jun 2022 07:16:21 +0000 https://mybillbook.in/blog/?p=4451 What is an SME Loan? An SME loan is specifically designed for small and medium-sized enterprises (SMEs). These loans help businesses expand, invest in new equipment or machinery, or cover day-to-day operating costs. For example, you are a small business owner that manufactures and sells furniture. You have been in business for a few years, […]

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What is an SME Loan?

An SME loan is specifically designed for small and medium-sized enterprises (SMEs). These loans help businesses expand, invest in new equipment or machinery, or cover day-to-day operating costs.

For example, you are a small business owner that manufactures and sells furniture. You have been in business for a few years, but you would like to expand your operation by opening a new showroom in a different city. To do this, you might need an SME loan.

However, how does a SME business loan aid in a company’s expansion? Let’s explore the factors of MSME(Micro, small, and medium enterprises) loans that support future growth.

Features of SME Loan

In order to ensure that SMEs can continue to flourish, banks and financial institutions offer SME loans with a host of features that make them inviting and affordable.

Some of the key features include:

1. Flexible repayment plans:

SME loans usually come with flexible repayment terms. This makes it easier for SMEs, small and medium-sized enterprises, to repay the loan without putting a strain on their finances.

2. Competitive interest rates: 

Small business loans have low-interest rates, with some starting as low as 7.65% p.a., making them an affordable option for owners to consider.

3. Collateral-free: 

A collateral-free loan is a loan that does not require the business to put up its assets as collateral. 

Many lenders offer collateral-free loans making it easier for businesses to get access to the funding they need.

4. Speed and convenience: 

As a business owner, you must be worried about the time required to approve a loan. Applying for an SME loan is usually quick and convenient, and the turnaround time for loan approval is relatively fast. This helps businesses get the funding they need in a timely manner.

5. Online account access:

SME loans enable business owners to check account balances and manage EMI online with just a few clicks, eliminating the need to keep a stack of paper documents.

6. Easily manageable

SME loans are much smaller in size than traditional business loans, enabling entrepreneurs to successfully manage them with less hassle.

Benefits of SME Loans

1. Puts strategy into action

You can start working on your plans within days instead of waiting for weeks for SME business loan approval.

2. Let’s you control your business assets

One of the benefits is the loan is unsecured, which means that you don’t have to give any collateral if you can’t make the payments. The company merely works together with you to grow your business to new heights!

3. Improves the company’s capital management

It’s important to have a plan in place before you apply for a loan so that you know how you’ll put the bank’s money to use. Small business loans can help you if you want to upgrade your overall cash flow or plan to buy new equipment.

4. Helps you increase credibility in the market

By putting money into the appropriate strategies, MSME/SME loans help you increase your profitability. This builds trust and credibility among the customers. 

Moreover, credit rating agencies will upgrade your company’s credit standing by noticing these changes, facilitating more investment and financing for your business.

SME Loans Fees & Interest Rates

The details regarding loan fees and interest rates are as follows:

  • Interest rate is 7.65% p.a and above
  • Loan amounts begin at INR 50,000.
  • Loan tenure  may be extended for up to 15 years.
  • Processing charge is undefined and dependent on the lender

The above specifications may change depending on the lender.

Eligibility Criteria for SME Loans

To be accepted for an MSME loan, you must meet the eligibility requirements established by your lender. The specifications will change from bank to bank, but here are some general requirements:

1. There are two types of businesses to consider when discussing investment: Manufacturing and Services 

The following business size standards apply to the manufacturing sector:

Business SizeWorking capital
Micro<25 lakhs
Small<5 cr
Medium<10 cr

For the Service sector, the size of the business is as follows:

Business SizeWorking capital
Micro<10 lakhs
Small<2 cr
Medium<5 cr

2. A well-established company that has been operating for more than six months.

3. The company should not be on any blacklists or exclusion lists.

4. The businesses’ real estate shouldn’t be on the list of undesirable locations.

5. SME business loans are not applicable for Trusts, NGOs and charitable organisations.

Documents Required for anSME Loan

A few documents are necessary for an MSME/SME loan:

  1. Identity proof: Aadhar Card, PAN card, passport and voter id
  2. Business Evidence: business registration certificate.
  3. Financial statements: profit and loss statements and balance sheets. 
  4. Personal financial statements: personal income tax returns, sales TAX return 
  5. Security proof: Photocopies of the lease deeds/ title deeds.

3 simple steps to your SME Loans

  1. Fill out and submit the application form.
  2. Upload documents for verification.
  3. Get approval from the lender within a few days.

Smart ways to use SME loans

1. Inventory management

Keeping track of inventory is imperative to running a business. If you do not have enough of an item, it could tarnish your reputation and put your business at risk of losing clients. SME loans help you purchase equipment to manage the business easily.

2. Invest in equipment

A business will rely on machinery, equipment and tools to get it off the ground. Buying these items can be a big challenge for small businesses because they often cost a lot of money – but SME loans are specifically designed to meet this challenge! 

3. Easily manage the monthly budget

A business needs money to pay its staff and carry out day-to-day operational activities. This can increase the monthly budget leaving financial stress to handle for business owners. A small business can easily utilise SME loans and manage cash flow.

4. Finance marketing

Marketing helps businesses reach out to potential customers and convince them to buy their products or services. SME loans help companies market their products or services by financing the costs of marketing campaigns, hiring marketing professionals, and managing market research costs, which is essential for understanding the needs and wants of potential customers.

Calculating an SME Loan EMI

The following formula is used to calculate the EMI for SME Loans.

E = P x I x (1+I)m/(1+I)m-1

Here,

‘E’ – EMI

‘P’ – loan amount

‘I’ – monthly interest rate

‘m’ – loan’s term

Dos and Don’ts for the Online SME Application Form

Do’s

  1. Check eligibility and the credit score before applying for an SME loan.
  2. Know the documents required, documents will vary depending on the type of loan and the lending institution. 
  3. Prepare a thorough business plan and have a clear understanding of your funding requirements.

Don’ts

  1. Don’t apply to multiple lenders because doing so will lower your credit score and turn away potential investors.
  2. Avoid defaulting on loans, making late payments, and having a history of poor credit.
  3. Pick a lender wisely – choose one that does not demand an upfront payment.

Frequently Asked Questions

What is the full form of SME loan?

The SME loan stands for Small and Medium Enterprises Loan. This loan is given to small and medium enterprises to help them grow and expand their businesses.

Are MSME and SME loans different?

MSME and SME are the same. Small and medium-sized enterprises that fall under this title are frequently abbreviated as SME.

What is the interest rate on an MSME loan?

The interest rates vary as per the lender and generally start from 7.65% p.a.

What are the benefits of an MSME loan?

MSME loans offer a number of benefits, including lower interest rates, longer repayment terms, preferential treatment in government procurement, helping you access working capital and expand your business.

Do I need to submit my income tax returns while applying for SME loan?

The document list depends upon the requirement specified by the lender. Though it is not mandatory, it is best to keep these documents handy to increase the chance of approval.

Read more:

PMEGP LoanGovernment Loan SchemesGovernment Subsidy Loan for Business
Mudra LoanMSME Business LoanMSME Loan for Startup Businesses
Unsecured business loanStartup Business LoanCollateral Free Loan
Small Business LoanCash Credit LoanSIDBI Scheme
Mahila Samridhi YojanaBusiness Loan for Women

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