Planning your financial year in advance is crucial for any small business owner looking to establish a stable enterprise over the long term. That being said, a substantial part of creating a good financial plan is taking care of MSME loans. While crucial for business operations, MSME loans pose their own responsibilities and challenges.
Qualifying for MSME loans or unsecured business loans include certain criteria like keeping a good credit score, ability to make payments when due, among other things. Check out this content piece for insightful tips on careful financial planning.
Tips for Managing MSME Loans With Ease
Here are some tips for managing micro small and medium enterprises loans with ease.
Choose The Ideal MSME Business Loan That Fits Your Organization’s Needs
When choosing MSME loans for your business, you’ll find a range of options in the market like Mudra Loans, working capital loans, to name a few. Each of these has its own set of benefits and disadvantages. It is essential to carefully evaluate them and pick the one that best fits your business needs.
Here are some of the factors that you must consider to evaluate the available MSME loans in the market:
- Purpose of the loan
- Business loan eligibility criteria
- Cost of the loan
Draft a Detailed Business Plan
Another important need for securing a micro small and medium enterprises loan is to have a comprehensive business plan in place. A business plan covers your research area on the market as well as competition, goals, plans for your business and more. It may also include financial projections for the upcoming years.
These documents help the lending institutions get a fair idea if your business is good, can pay back the loan and is viable in the long run or not. Here are some handy tips you might find useful for preparing your business plan:
- Be clear and concise in your approach
- Avoid inconsistencies or discrepancies in paperwork
Maintain A Good Credit Score to Avail For MSME Loan
One of the essential tips for handling your MSME loans is to build a strong credit score. This implies that you must pay back your loan liabilities on time. Timely repayment of loan not only enhances your chance of getting more loans in the future in a hassle free manner, but also increases your credit worthiness.
Develop Insurance and Risk Management Plan
Having solid insurance and risk management strategies in place is important for several reasons. It protects your business against any unforeseen circumstances that could potentially hamper your business operations and in some cases might even stop you from repaying micro small and medium enterprises loans.
For instance, natural disasters could harm your business, stressing on the need for good insurance coverage to avoid the impact on business operations.
Additionally, insurance allows you to claim insurance from your respective insurance company, thus reducing the impact of the risks on your finances. This positive approach overall contributes to the long term success of your business.
Consult An Expert For MSME Loan
Seeking MSME loans for your business can be tricky and overwhelming at times, especially if you’re a new business owner. You may find it complicated to understand the terms and conditions of the loans, meet the loan requirements on time, among other things.
Hence, don’t shy away from seeking expert guidance and help from professional people such as accountants, lawyers etc. If you’re wondering how these experts can help you, read on!
Some professionals come with years of experience and have handled similar situations before. They can offer you guidance and suggestions that might help you to handle your loan situation better.
Situated in Surat, Gujarat, Gayatri Enterprises operates two restaurants namely Western Pizza and Sai Kripa in different localities of the city. They navigated challenges in adapting to changing customer preferences and attracting new customers while constantly changing the food menu and other restaurant services.
Facing a shortage of working capital funds to renovate the restaurant interiors, Mr and Ms Asnadia, the owner of Gayatri Enterprises decided to opt for restaurant loans. In the process, they discovered that Indifi provides quick loans of up to 50 lakhs to legitimate restaurant owners based on transactions with food delivery aggregators.
According to Ms Asnadia, the process of securing a loan from Indifi was quick and smooth. The financial support they received empowered them to improve their restaurants aesthetics and expand cuisine offerings.
Key Takeaway
To conclude, planning your business’s fiscal year with micro small and medium enterprises loans is crucial. Such planning will help you achieve business objectives, optimize cash flow and also help avoid potential financial challenges that may come up in future.
As you know, one of the crucial components of effective business planning is management of MSME loans, so follow the above mentioned tips to efficiently handle your MSME business loans.
FAQs
What are some of the ways to increase credit score?
Some of the steps you can take to ensure a higher credit score for your business include having a good payment history, having a low credit balance, establishing trade lines with suppliers and paying the dues on time.
How much working capital should MSMEs have?
Generally, a company should have a working capital ratio of around 1.5 to 2. The ratio reflects the liquidity of a business, calculated by dividing the total current assets by current liabilities.
What loans does the government offer to MSMEs?
Some of the loan options that the Government of India offers are Pradhan Mantri Mudra Yojana, Micro Units Development and Refinancing Agency (MUDRA) Yojana, Credit Guarantee Fund Scheme for Micro and Small Enterprises, Udyogini, etc. Know more about Mudra Loan.