Humaare Sharmaji Ke Kaamyab Business Ka Doguna Raaz Kya Hai?

Jan. 18, 2021

By Xtracap India

Aaye, Let’s find out.

Sharmaji runs a grocery store in a middle class neighbourhood with one of the first shops in the main market. A very nice, helpful person, he takes care of his customers and his family alike. In spite of a good location of his shop  Sharmaji was once struggling to maintain his business. But today is a different story, he has finally managed to run his shop successfully, with his store fully stocked and crowded with customers. At our question, he smilingly gives his first tip: business loan. Sharmaji took his first MSME loan from Bridge2Capital. Okay! But firstly, what are MSME loans?

Well, MSME loans are debt capital offered by banks and other financial agencies to Micro, Small and Medium Enterprises (MSME) - businesses which make or sell goods and services. (As per June 2020 government rule, Micro businesses are those with turnover not more than 5 crores. Small businesses are those with turnover not more than 50 crores while Medium businesses are those with turnover not more than 250 crores.)

Leave alone crores, Sharmaji then needed couple of lakhs to pay his suppliers; to keep his shop filled with inventory as per customers’ need. Earlier, credit from suppliers meant no timely delivery, stocks received were not as per the order and since his grocery shop is his livelihood and the only means to fulfil the dreams of his family, supplier credit wasn’t enough. Few were willing to help him with capital to run his small shop and moneylenders who were willing to lend money, charged very high interest. As Sharmaji searched for support, one of his friends suggested to apply for MSME loan. Why? His friend replied because MSME loans are generally given via bank or financial agencies, regulated by Reserve Bank of India (RBI). So you receive MSME loans at reasonable interest rates and you are protected under the customers protection guidelines of RBI. Also, it is always beneficial to have a good credit score with CIBIL, which means you should avail credit from RBI licensed financial entities and make timely repayments towards the loans.  

Confidently, Sharmaji went looking for a MSME loan and then got fully confused. Why?

There are so many types of MSME loans on offer for traders. Sharmaji’s business may not have been doing well due to lack of working capital, but he remembers one advise of his father very clearly, never get into anything before you can understand the same. So, Sharmaji went around understanding the meaning of the different types of loans

Term Loan: Term loan is a loan approved and disbursed by a bank or NBFC for a fixed amount that shall be repaid in regular payments, such as Equated Monthly Instalments (EMIs) over a defined period of time. Term loans can be offered in both fixed and floating rate of interest. The repayment of term loan are generally from 12 months to up to 10 years.

Business Loan: Terms MSME loans specifically taken for the purpose of business are called business loans. Banks have targets to provide MSME loans. The repayment tenure of business MSME loan is usually between 12 months to 60 months and the interest rates are generally lower than personal loans .

Personal Loan: Team loans specifically taken for personal use example for medical emergency, personal consumption to purchase some household item or pay for children’s school fees, etc. are personal loans. The tenure of personal loan can be higher but it generally comes at a higher interest cost. Personal loans are generally taken by people who have predictable cash flows like a salaried employee.

Working Capital Loan: Small MSME loans are allotted to run daily business. The working capital loans may have a short tenure than a term loan. The Working Capital loans are given for the purpose of supporting small business to purchase raw material, pay for recurring expenses and generally available for businesses with established track records with proper financial documents. 

Loan Against Property: MSME loans for business which do not have established business track record do not get unsecured credit for more than Rs 5 Lacs. In case of an MSME loan of more than Rs 5 Lacs, customers are required to provide a dispute free/ lien free property which could be either land or house.

Invoice Financing Loans: GST invoices raised to big companies can be discounted against the receivable, the lenders generally finance up to 80% - 90% of value of the invoice for a period of 30-180 days. 100% of the payment has to be made on the due date.  

Equipment Financing: Small business can avail financing for purchase of capital equipments, means that the equipment will have a longer life span. For example, if Sharmaji wants to buy a refrigerator for the shop then the Banks will give an MSME loans by keeping the purchased machinery as a collateral.

Overdraft (OD): Bank overdraft is like a cash advance from the Bank. Only Banks are allowed to provide OD. This loan is given by providing a security or collateral to Bank and only interest has to be serviced every month, which is calculated on the actual amount availed as credit from the total amount.

Business Credit Card: They are like personal credit cards. If the repayment is made on the due date there will be no interest charged but if only the minimum amount due is paid then on the balance outstanding, interest is charged. It should be noted that the interest rate charged  is higher.

Business MSME Loan for Women: Specifically for businesses owned and managed by women, these MSME loans are a good option. The banks are encouraged to disburse MSME loans to women. Generally small merchants open business in name of their wife and avail this facility. Such practices are not correct.

Now, Sharmaji wondered which is the best MSME loan for his business and from whom? He listed his requirements: he wanted a short-term loan, with no collaterals, which could help him pay his suppliers on time, and where he could make easy repayments. Also post his COVID-19 lockdown experience, he wanted an online solution. From the MSME loan list he shortlisted Working Capital Loan, Invoice Financing and Overdraft which could be of help to him. But being a smart businessperson, Sharmaji wondered if he could find a way of getting the benefits of these three types of MSME loans. And there, Sharmaji’s eyes twinkle with this second tip: Bridge2Capital.

While enquiring about MSME loans, Sharmaji was watching news on YouTube when he got to know about Bridge2Capital, a fintech company which provides short-term MSME loans. Being new to taking business loan from an unknown source, Sharmaji was extra cautious. He had his list of questions when the company representative called him. To Sharmaji’s delight in Bridge2Capital he found his go-to solution. He simply had to download their app onto his smartphone, upload his Aadhaar and PAN card. Within minutes Sharmaji’s credit account was opened and cash limit of 100,000 was received. Chutki mein MSME loan mila! All he had to do now was to add his GST suppliers, upload his supplier’s bills. Bridge2Capital through their partner bank paid his supplier while he repaid his MSME loan in easy weekly/fortnightly instalments.

These days Sharmaji happily tells other business owners the advantages of taking a MSME loan from Bridge2Capital:

  • Convenient: Sitting in the comfort of your shops or home, you can easily transact your business online through Bridge2Capital mobile app, anytime.
  • 100% Digital: Bridge2Capital’s entire MSME loan process is digital. So no hassles of waiting in queue or any troublesome documentation.
  • Timely supplier payment: Your supplier bills are paid on time, which ensures timely stock deliveries.
  • Purchase more as you as you repay: This MSME loan is a rolling loan, whenever you repay, the amount of principal repaid is available to purchase more inventory .
  • Lesser interest rate: Weekly/fortnightly repayments on-time lead to lesser interest on the remaining principal amount of your MSME loan.
  • Complete transparency: All transactions are available to check. More, importantly there are no hidden costs. You pay what you see.
  • RBI regulated: Bridge2Capital is a technology company and its partners with financial institutions licensed by Reserve Bank of India (RBI) which means all their operations are thoroughly checked for legality and security. Also, the name of the Bank or NBFC providing the loan is transparently mentioned in the app

Now that you know the twin secret behind Sharmaji’s successful business. Wait no more, just click here to get same MSME loan benefits from Bridge2Capital.