Types of MSME and SME business loans

For small businesses, MSME and SME business loans are essential in expanding operations, expanding their area of service, recovering from loss, and much more.

In this blog post, we will gonna discuss different types of business loans that MSME and SMEs can avail of. 

Term loan

As clear from the name itself, these types of business loans are short term loans and usually taken by small businesses to purchase the products, raw materials, inventory, transportation, etc. 

The term period of this loan somewhere lies between 1 to 5 years and is returned in the form of EMI, either on monthly, quarterly half-yearly, etc. 

Vistaar Finance is a leading finance company which provides such term loans for small business. 

Project Financing

These are long term loans and usually sanctioned to the business that is going to invest in a large asset, whether setting up a new factory, machinery, real estate projects, etc. The term of these loans is longer than the usual loan type, somewhere between 5 to 25 years. 

 

Balloon Loans

These types of loans are pretty much similar to term loans, the only difference lies in their returns. As in term loan, the loan is paid on a regular EMI basis is consists of loan principle and it’s interest as well, whereas in ‘Balloon Loans’ the interest amount is paid consistently in the tenure of loan and the rest principle amount is paid after the completion of the tenure. 

Working capital Loans

Working capital is mostly needed by manufacturing businesses. In the process form buying the raw material to selling it to vendors, a good amount of capital is invested, which comes under working capital. Many private financial organizations and banks provide such loans under ‘Working capital Loans’  

There are different types of facility, which are provided under such a loan scheme.

• Cash Credit: Under this, funds are provided against inventories and receivables. Normally is tenure is less than 1 year. 

• Overdraft Facility: If the credit score of the borrower is good, financial organizations provide some overdraft facility rather than the main amount sanctioned. Such overdraft amount can be secured against FD through which it’s tenure can be increased else in under unsecured overdraft facility is tenure 1 month or less than that. 

• Bill Purchase and Bill Discounting: Financial organization over the bill of exchange provides the fund to the businesses.

SME Collateral Free Loan

These unsecured loans are provided to SMEs to start or expand the business. Many startups and small businesses benefit from such type of schemes. Vistaar Finance also provides such types of SME business loans.

Government Schemes

Many central government schemes continuously run which provides loans to the businesses, such as ‘PM Mudra Yojana’  and many state government schemes also provide many different of business loans. 

Construction Equipment loan

As mane suggests these types of loans are provided for buying construction equipment. Its tenure is somewhere between 1 to 5 years. 

Commercial Vehicle Loans

Such loans are provided by financial institutions for the loanee to buy commercial vehicles, like buses, trucks, cranes, etc.

Other Type of loans 

Many other types of loans can be taken by businesses which are also common with personal loans, such as:

• Loan Against Property

• Lease Rental Discounting (LRD)

• Gold Loan

• Loan Against Security (FD, Mutual Funds)

• Unsecured Loan Against Company, Balance Sheet, Credit Score, etc. 

These are the main types of business loan which are common in India. If you want to learn more about loans or looking for a shop loan, then you can visit www.vistaarfinance.com.