Which is the best kind of loan for MSME?

Posted on Friday, December 23rd, 2022 | By IndusInd Bank

Expanding your small-scale business or setting up a new one requires well-structured financial assistance. Business expansion involves hiring employees, setting up new franchises, increasing marketing efforts, offering new products & services and producing the existing ones in a bigger volume. All of this requires a regular flow of funds. This is where MSME loans enter the picture.

The MSME loans help business owners, small to medium enterprises, and start-ups to avail credit that can help  support their business operations. MSME loans are fairly flexible and usually collateral-free up to a certain amount. You can use the funds for expansion of business operations, fixing cash flow problems, or for the purchase of new production machinery. The interest rate, loan tenure and the maximum loan amount will depend on the creditworthiness, financial stability, business size, and repayment capability of your enterprise.

Types of MSME Loans

There are multiple types of loan products available for MSMEs engaged in manufacturing, trading or service operations. These loan products vary from each other on the basis of tenure of the loan, rate of interest, collateral requirement, urgency of the funds, etc. The various types of loan products offered to the MSME sector include:

• Term loans
• Line of credit/ overdraft facility
• Pradhan Mantri Mudra Yojana
• Asset-backed loans
• Customised business loans

Which is the best kind of MSME loan?

While selecting an MSME loan that meets your businesses’ requirements, it is important to take time and go through what various lenders have to offer. Here are three critical things you should check and compare to see which loan best matches your business goals.

1. Rate of interest – You do not want to pay more than you borrow. Hence, the rate of interest on your MSME loan that you wish to avail should be such that you do not feel burdened with huge interest payments. The rate of interest on the MSME loans depends on many factors like your credit score, tenure of the loan, amount of loan, lender guidelines, etc.

2. Loan tenure – The tenure of MSME loans usually starts from a minimum period of 12 months and can be extended up to several years depending upon the lender. Before selecting a tenure and an EMI option of your MSME loan, it is important to take your business growth trajectory and repayment capacity into account. Choosing a rigid tenure can create chronic financial stress and may lead to defaulting on payments. For stress-free credit, opt for IndusInd Bank’s MSME loan and enjoy flexible tenure that matches your repayment goals.

3. Processing charges – Processing fee is charged as a percentage of the loan amount and is deducted during the disbursal of the loan. Several banks charge a high processing fee on MSME loans which results in reduced funds for your business expansion. IndusInd Bank understands the value of your business and offers one of the lowest processing fee in the industry. 

IndusInd Bank MSME loans – the right choice for your enterprise’s banking needs

MSME Loans by IndusInd Bank cover the financial needs of your enterprise without any collateral. Apart from a flexible loan tenure, you can even opt for a desired repayment frequency (weekly, fortnightly and monthly) to repay loan as per your convenience. The doorstep banking services and seamless internet banking services make IndusInd Bank MSME loans the best-in-class loan for MSME businesses. To help your enterprise manage its finances better, IndusInd Bank also offers multiple money-managing solutions on its current accounts like dynamic cash deposit limits, smart cash management services and grouping of related accounts.

It’s time to expand your business with IndusInd MSME loan, apply now!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision.  IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.