MSME refers to micro, small, and medium businesses. MSMEs are identified on the basis of their annual turnover and equipment investment capabilities in plant, equipment, or machinery. A business qualifies as a micro-enterprise, if it invests about ₹1 crore in plants or equipment and has around ₹5 crore turnover. Small enterprises make investments up to ₹10 crore and have about ₹50 crore turnover. Medium enterprises generally make ₹50 crore investments and have turnovers of ₹250 crore approximately.

MSME loans are specially designed for these enterprises to help them accelerate their growth. The loan may be secured (requiring the borrower to submit collateral) or unsecured (does not require collateral from the borrower), depending on the product policies of a lender and the business profile of a borrower.

MSME loans can help your business in various ways:

 

1) Managing Working Capital Needs

MSME loans can be utilized to fund the day-to-day requirements of a business. These generally comprise rent, utilities, employees’ salaries, or accounts payables. This ensures smooth business operations and avoids disruptions caused by cash flow shortages.
 

2) Purchasing Equipment and Raw Materials

MSME loans are extremely beneficial for buying raw materials or new equipment that are necessary to meet business goals. Having enough inventory enables a business to function continuously and make timely deliveries with minimal delays. With the funds, borrowers can invest in top-grade machinery and technology that adhere to the best industry standards.Investing in premium quality equipment can potentially accelerate business operations thereby contributing to better revenue.

 

3) Acquiring Land/ Commercial Real Estate/ Industrial Properties

MSME loans can help borrowers acquire new land, commercial real estate or industrial properties. Identifying suitable locations can significantly help their businesses grow. By selecting the ideal location of a property, a company can broaden its market reach. It can also help the company to gain access to its target audience and customers. This ultimately helps the company gain long-term capital growth.
 

4) Expanding Business Operations

The loan plays a vital role in expanding business operations by funding new projects and technology. With an MSME loan, a borrower can recruit more staff members and professionals to enhance the productivity of the business. The loan can also be utilized to invest in effective research initiatives for developing the latest products and services in the competitive industry. The borrower can even establish new branches in different regions to expand geographically.
 

5) Covering Unforeseen Expenses

An MSME loan provides sufficient funds to cover unforeseen expenses that may obstruct the regular functioning of a company. The funds can be beneficial during seasonal fluctuations or when there’s a downturn. The loan can be used in tackling situations that may require additional funds for uninterrupted business operations.
 

6) Funding Marketing Campaigns

Borrowers can leverage the loan to fund marketing campaigns and advertising costs. Marketing campaigns and promotions can significantly enhance brand awareness and recognition. The increased brand visibility leaves a positive impression on consumers, boosting sales and revenue.Brand promotions can help strengthen connections with existing customers that could, in turn, secure long term benefits.
 

7) Settling Existing Debts

The funds can be used for debt consolidation. This helps a borrower refinance his existing debts. Handling the repayment of multiple loans can be troublesome. Debt consolidation allows borrowers to simplify the repayment terms into a single monthly repayment plan. By consolidating all the existing debts, borrowers can clear off the loans and maintain a good credit score. Moreover, focusing on a single loan can help borrowers track the monthly interest rate better than multiple interest rates of different loans. MSMEs can also consolidate high yield unsecured loans by getting a secured loan at lower rates and higher tenure.

An MSME loan can help borrowers grow their companies in numerous ways. From addressing daily operational needs to fulfilling long-term business goals, MSME loans have come a long way to help borrowers prosper in the competitive market.

At Arka, our MSME financial solutions are designed to help businesses address their needs and realize their goals. We not only ensure fast processing of loans with minimal documentation but also provide MSME loans at favourable interest rates and repayment terms. Our customized MSME loans are designed to help you get ahead in the competitive commercial market.