What are the Pros & Cons Of MSME in India

The MSME sector has suddenly witnessed a boom in its expansion. Now, it has become the first choice of the common man of India. In times of unpredictability, these enterprises are working as the support stick for the faltering state of the Indian economy. Today, it is contributing approximately 30 percent to the GDP because it has become straightforward to operate an MSME in terms of legal paperwork, risk, and especially funding. Arrangement of funds has become much easier as several banks are providing business loans at a cheaper interest rate.

Moreover, numerous government schemes have been launched to help budding enterprises. However, this is not the full picture; there is the other side to this cheap funding as well.

There are disadvantages also associated with the loans provided to such businesses or industries. These demerits are raising a question as to the usefulness of the loans provided by different organizations. To conclude, let us evaluate both sides and then decide whether the loans should be granted or not.

Advantages of MSME loans

Here we have discussed on what are the MSME benefits and it is adding value to business owners. Also included the disadvantages of MSME loans –

1. Easy Arrangement of funds

The first and foremost advantage of loans is the easy Arrangement of loans. Easy it is because MSME enterprises effortlessly satisfy the eligibility criteria for the same. Banks are also happy to provide loans because they are generally willing to associate themselves with new ventures. Also, the recovery of the loan amount is assured as the ventures usually are less risky and profitable compared to the other types of businesses.

Also Read: All About Numbers And Targets For MSMEs In India

2. Low-interest rates

These types of loans are not preferred because of guarantee and convenience only. They are also preferred because they are cheap. The interest rate associated with these loans is generally in the range of 10 to 15 percent, which makes it quite affordable and easy to repay.

3. Flexibility

Another advantage associated with it is flexibility. It allows one to borrow and repay on flexible terms. Part payments can be made without paying the penalty.

Also Read: MSME Loans: The Optimum Choice For Small Industries

4. Tax Benefits

MSME loan provides an extra tax benefit as well. It reduces the taxable income of the enterprises, which eventually leads to low taxes.

5. Different types of loans available

Different kinds of MSME loans are available in the market today. One can choose as per one’s capital requirement, risk appetite, and tenure. Loans are also provided on the basis that if one is trying to start an enterprise or looking for an expansion. In any case, it gives freedom to choose the amount and other specifications instead of going for the single package which is designed as per general needs.

Also Read: Best Government Business Loan Schemes For MSMEs In India

6. Sustaining at the perilous times

A business never always runs on profit. At some periods of time, gains are made whereas, at some points of time, massive losses are incurred. Then, these loans help a business sustain itself in the market, especially in the initial years of the business. These funds boost confidence by providing a sense of security to the entrepreneur.

7. Total Control

There is no sharing of control like in the cases when funds are arranged from venture capitalists and other such sources. All the decisions are made solely by the entrepreneur only, and the owner exercises total control. This leads to fast decision-making and clear roles & lines of responsibility.

8. Increase in the number of registrations

To avail the facility of a bank loan, one needs to register the enterprise with the government under the law. It leads to a decrease in the number of unregulated enterprises and hence helps the government in keeping a tab on the number of regulated ones.

Despite many advantages, this is not always considered a viable option for funding because of the demerits associated with it, which are explained below.

Also Read: Best Government Business Loan Schemes For MSMEs In India

By indifi

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