Micro, Small, and Medium Enterprises are known as MSMEs. They often find it challenging to raise funds from external sources. While there are several options available in the market, not all options are the best for the MSMEs. In common scenarios, the loan lenders ask to hypothecate an asset to get the business loan application sanctioned. However, not every small business owner can afford to provide security. Even if one pledges, it is a big risk.
Banks generally don’t entertain these loan applications; it is common for a business owner to move towards the informal lending sector. The informal sector includes raising funds from relatives or other individuals. However, this again is a problem as they may not ask for collateral but high-interest rates. So, this is where Non-Banking Financial Companies come into play. Many popular NBFCs in India offer flexible business loans that are offered without security, and their interest rates are also not high.
The flexible business loans are offered at reasonable interest rates. They are a perfect solution for an MSME looking for an alternate source of funding. The loan eligibility and document requirement for Flexi loans are a lot less complicated when compared to other lending options. It allows the business owner to concentrate more on the business rather than spending time on getting the paperwork for loan ready.
Eligibility Criteria for Flexible Business Loan
- Minimum turnover of Rs. 5 lakhs in the previous year.
- Income tax filed in the previous year should be at least Rs. 1.5 lakhs.
- The applicant should be the owner of his business premise or the house.
- The business premise and residential place should be separate.
- The business should be in operations for at least two years.
Documents Required for Flexi Business Loans
- Bank statement for the previous nine months
- Income tax return of the previous 1-2 years
- PAN card/ Aadhar card
- Address proof of the business and residential place
All the points mentioned above are basic and easy to meet. Thus, they will not make the loan-seeker scratch his head when applying for a loan. Now let’s take a look at the advantages of availing Flexi business loans:
Minimal Documentation: Getting the Flexi loan approved is hassle-free. Very basic documents are required to initiate the business loan process; it ensures fast loan application process.
Collateral-free Loans: The best part about flexible loans is that they are unsecured loans. It means the applicant is not required to pledge security to get the application sanctioned. In other cases, the applicant has to pledge collateral to get the application approved. It is a task in itself and requires a lot of paperwork. It is also a risky task as if the applicant fails to pay the amount; the lender has the right to seize the collateral.
Receive Funds Shortly: once the application is approved, the business owner does not have to wait for the funds to get credited in his account. The funds will be credited within a few working days. It is an advantage for people looking for instant cash support.
All the points mentioned above make flexible business loans a good alternative for the business owners looking for short-term financial support. So, it can be concluded that flexible business loans are the way to growth for MSMEs.