Running a small business takes a lot of work. You have to manage daily expenses like employee salaries, taxes, inventory purchases, etc. At the same time, growth requires investments – buying new machines, opening another branch office, and launching additional products.
For all this, the small business owner relies on their personal savings, which rarely suffice! This is where availing suitable business loans at the right time becomes critical.
Many owners depend on one type of financing, such as an overdraft facility. This covers daily costs but not major expansion plans. That is why integrating MSME loans with business loans tailored to different needs is vital to the financial plan. Read on to learn more about MSME loans and Business loans.
Understanding MSME and Business Loans
MSME loans help small companies manage regular operational expenses like employee costs, inventory purchases, utilities, etc. Their loan amounts are generally smaller.
On the other hand, business loans fund significant investments involving more extensive credit facilities, such as technology upgrades, capacity expansion, new product launches, etc.
Banks provide both loan types, but early-stage small firms can find it challenging to secure bigger business loans due to factors like low credit ratings.
MSME loan eligibility norms are relatively more relaxed. The government also encourages banks to promote such loans for small enterprises through various policies.
Once the firm has operated successfully for some years and established credibility, qualifying for large business loans at better rates becomes easier. Strategically combining MSME and business loans enables financial flexibility to grow the company.
Integrating MSME Loans
MSME loans should be the first choice when starting. Their eligibility criteria are more relaxed than those for regular business loans. Small companies have limited credit histories and assets—MSME loans understand this!
The government also offers schemes where banks provide MSME Loans at special low interest rates—some even start at just around 9-10%. Owners must check eligibility under MUDRA, PMEGP, CGTMSE, etc.
These loans cover expenses like paying employees, buying raw materials, and paying shop rent. Their easy availability allows the company to operate without frequent cash crunches.
Integrating Business Loans
After the firm’s credit score improves, it can apply for bigger business loans from banks. These loans fund major investments, such as buying advanced machines, building another factory, or launching a new product line.
However, such loans require suitable proof of income, assets to mortgage, a stable company profile, etc. New small firms generally don’t qualify. This is where the combined approach helps. You can start small with MSME Loans to manage day-to-day costs without hiccups. Steadily build your reputation with good sales and repayments to make getting large business loans easier later!
Combine Wisely
Banks offer custom combinations of MSME loans and Business loans for entrepreneurs. Don’t save all big plans for later. If there is an exciting growth avenue, use business loans immediately to invest and seize it! Mix available financing options wisely for smooth operations plus planned expansions.
Integrated financial planning aligns suitable loans with the company’s evolving needs. This helps small businesses focus on progressing from startup to growth to expansion phase without constant money worries!
Conclusion
MSME loans empower small businesses to meet regular working capital requirements, while business loans enable them to fund significant upgrades and expansions to unlock their growth potential. Strategically integrating suitable products from lenders like Karnataka Bank Limited helps small enterprises navigate different phases of their entrepreneurial journey to build sustainable companies.
