Working capital solutions and MSME loans

Purpose-Specific Loan. Typically, a Working Capital Loan is designed specifically to meet the short-term operational expenses of businesses, such as purchasing raw materials, managing payroll, or covering inventory costs.

Repayment tenure of a Working Capital Loan usually ranges from 6 months to 3 years, depending on the business needs and lender policies.

It can be secured (against collateral like inventory, accounts receivables, or property) or unsecured (based on business creditworthiness).

Availability of Flexible Loan Amount. It however will depend on the business turnover, financial history, and lender evaluation, ranging from a few lakhs to several crores

Quick Disbursement of this loan is the reality. Usually, they are processed and disbursed quickly to address urgent financial needs, sometimes within 48-72 hours.

Improved Cash Flow Management. It provides businesses with the necessary funds to manage day-to-day operations, such as paying employees, purchasing inventory, or covering rent.
No Collateral Required. Usually, many working capital loans are unsecured, meaning businesses can access funds without pledging assets
Quick Access to Funds. Working capital loans are often approved and disbursed faster than traditional loans.
Encourages Flexibility in Usage. These loans can be used for various purposes, such as inventory purchases, marketing campaigns, equipment maintenance, or covering temporary cash shortages.
Helps Enhance Business Growth. It does so by addressing short-term cash flow gaps, businesses can focus on growth strategies, such as expanding operations, launching new products, or entering new markets.

Sole proprietors, partnerships, private limited companies, and limited companies are eligible. Meanwhile, startups and established businesses can apply, depending on the lender’s specific criteria.
Usually, businesses need to have been in operation for at least 1-2 years. Startups may be eligible depending on their business model and the lender’s discretion
A minimum annual turnover of ₹10 lakh to ₹1 crore or more is required by a business. The exact turnover requirement depends on the loan amount and type of business.
A business should ideally be profitable or showing consistent growth in revenues. As a result , lender’s may look at the company’s financial statements, including profit and loss, balance sheets, and tax returns.
A good credit score (usually 650 and above) is required for approval. Typically, a low score may lead to rejection or higher interest rates.

KYC Documents: Aadhar card, Passport, Voter ID, and Driver’s License
Address Proof: Utility bills (electricity, water, gas), passport, Rent Agreement, and Bank statement
Business Registration Proof: Certificate of Incorporation (for Pvt. Ltd. And Ltd. Companies), Partnership Deed (for partnership firms), GST Registration Certificate, and Shop Act License
Financial Documents: Bank Statements, Income Tax Returns (ITR), Balance Sheet. Profit & Loss Statement, and Tax Audit Report
Other Documents: Letter of Credit or Sales Order, Details of Existing Loans/Debts, Director’s/Partner’s PAN Cards, and Personal Guarantee

The MSME loans can range from a few lakhs to several crores, depending on the size and nature of the business. It is generally determined based on the working capital needs, business performance, and repayment capacity of the MSME.
A MSME loan is designed specifically to be easily accessible with minimal documentation, especially for businesses with a good track record
Usually, repayment terms for MSME loans are flexible, typically ranging from 1 to 5 years.
Interest rates on MSME loans are competitive and hence typically lower than unsecured loans, as they are targeted to promote business growth.
MSME loans you can either get it secured or unsecured.

Generally, MSME loans provide quick access to funds, enabling businesses to address their immediate financial needs such as working capital, machinery purchase, or raw material procurement
A MSME loan is ideal for funding business expansion, including increasing production capacity, expanding operations, or opening new outlets.
Interest rates on MSME loans are often more favorable compared to personal or business loans, as they are curated to support small businesses.
A MSME Loan under government schemes like MUDRA, do not require collateral, making them accessible to businesses without significant assets.
Usually, a MSME loan offers flexible repayment options, with loan tenures ranging from 1 to 5 years or more.

A CIBIL score of 650 or higher is generally preferred. Although, some lenders may consider businesses with lower scores, especially if they have other strong financial indicators.
MSME loans are typically available for businesses that meet the turnover criteria as per the MSME classification. They include: Micro Enterprises, Small Enterprises, and Medium Enterprises.
Most lenders require the business to have been operational for at least 1-2 years to ensure it has a stable financial track record.
Usually, MSME loans are available to various types of business entities. They are: Sole proprietorships, partnerships, private limited companies, and Limited liability partnerships (LLPs).
MSME Loan lenders typically assess the financial health of the business by reviewing the last 2-3 years of financial statements, such as: Profit and Loss Statement, Balance Sheet, Income Tax Returns (ITR) for the last 2-3 years, and GST Returns (for businesses registered under GST).

Documents:

KYC Documents: Aadhar Card, Passport, Voter ID, and Driver’s License
Address Proof: Utility bills (electricity, water, gas), Passport, Rent Agreement. and Bank Statement
Business Registration Certificate: Certificate of Incorporation (for Pvt. Ltd. Or Ltd. Companies),Partnership Deed (for partnerships),GST Registration Certificate, and Shop and Establishment License
Financial Documents: Income Tax Returns (ITR), GST Returns, Bank Statements, Profit & Loss Statement, Balance Sheet, and Tax Audit Report.

· Additional Documents: Letter of Credit or Sales, Details of Key Contracts/Orders, and personal Guarantee.