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4 Ways to Secure A MSME Loan Without Collateral

Published on Aug 17, 2023Updated on Oct 11, 2023

4 Ways to Secure A MSME Loan Without Collateral

MSME’s, which stand for micro, small, and medium enterprises, are vital to the growth of India's economy and play an important role in its expansion. These businesses have a sizable impact on the Gross Domestic Product (GDP) of the nation since they are responsible for the creation of a large number of jobs and for contributing to the nation's exports. However, gaining access to sufficient capital continues to be one of the primary obstacles that MSME’s confront. For example, getting SME loans that don't require collateral can frequently feel like an insurmountable challenge.

There are now several feasible options available to assist MSMEs in securing financing without providing collateral. Mentioned below are five ways that can make it possible for micro, small, and medium-sized businesses to obtain loans without pledging any collateral, thereby contributing to their expansion and continued success.

1. Leveraging Government-Backed Schemes

The Indian government, fully aware of the significant contribution that MSMEs make to the economy, has implemented several programs that make it simpler to obtain loans. A program known as the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is an example of one of these highly acclaimed initiatives.

SME loans can be obtained under the conditions of this plan without the requirement of pledging any collateral. The annual interest rate on the loans that can be received under this program can reach as high as INR 2 crore, which represents a sizable financial backing for companies looking to expand their operations.

2. Unsecured Business Loans from Lending Institutions

Numerous financial institutions like SMFG India Credit provide MSME loans without collateral as a solution to the expanding need for easier access to credit among these enterprises. These loans are granted mostly based on the creditworthiness of the borrower, which is determined by analysing the borrower's company in terms of its profitability, the viability of its business plan, and its track record of generating revenue.

Nevertheless, it is essential for micro, small, and medium-sized enterprises (MSME’s) who are interested in acquiring such loans to maintain a solid credit history and demonstrate a steady revenue stream.

3. Opting for Loans from NBFCs

Many micro, small, and medium-sized enterprises (MSME’s) now look to non-banking financial companies (NBFCs) as their primary source of loans. Non-banking financial institutes, such as SMFG India Credit, provide loans to MSME businesses in the absence of a requirement for collateral. Non-banking financial institutes, as opposed to traditional lenders, often have lending criteria that are more flexible and could speed the process of loan approval and distribution.

These financial institutions provide loans of up to INR 50 lakhs* and do so after considering a variety of parameters. These factors include the success of the business, the credit score of the owner of the business, and the standing of the business in the market.

4. Utilizing Crowdfunding Platforms

Crowdfunding is a modern and innovative method for obtaining unsecured financing for small and medium enterprises. Crowdfunding platforms connect businesses with individuals who are interested in investing in promising business concepts. On these platforms, micro, small, and medium-sized enterprises (MSME’s) can share their business proposals and solicit funding from many individuals who contribute relatively modest amounts.

Must Read: MSME Loan: Turnover Limit For Small Scale Industries In India

Conclusion

In conclusion, numerous options exist today to obtain MSMEs loans without collateral. Government-backed programs and unsecured business financing are examples of conventional approaches. Simultaneously, lending institutions such as SMFG India Credit are transforming the landscape by providing more accessible and flexible financing options that do not require collateral.

With SMFG India Credit, the likelihood of obtaining a SME loan without collateral is greater than ever before. Small and medium-sized enterprises (SME) can secure the necessary financing to flourish and contribute effectively to the nation's economy if they evaluate these options thoroughly and exercise due diligence.

* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us

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