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Overview of Loans for Small and Medium Enterprises in India

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Small and medium enterprises are a vital component of India’s social and economic development. They are the biggest provider of employment in India after the agriculture sector. SMEs play a crucial role in creating employment for the low-income groups in the country and in creating jobs. Small and medium enterprises foster economic growth, social vitality and stability, and also contribute to the development of the country’s private sector.

A small business loan features many attractive incentives for small and medium enterprises to fund their requirements for growth. There are many unique business loan features for small and medium enterprises that have been crafted keeping in mind the needs of small and medium enterprises.

The SME sector in India comprises the following categories.

  1. Micro Enterprises

For manufacturing enterprises, these are entities that have invested up to Rs 25 lakh in plants and machinery. For entities operating in the service sector, these comprise those that have invested up to Rs 10 lakh in equipment.

  1. Small Enterprises

For manufacturing enterprises, these are entities that have invested between Rs 25 lakh to Rs 500 lakh in plants and machinery. For entities operating in the service sector, these comprise those that have invested between Rs 10 lakh and Rs 200 lakh in equipment.

  1. Medium Enterprises

For manufacturing enterprises, these are entities that have invested between Rs 500 lakh to Rs 1000 lakh in plants and machinery. For entities operating in the service sector, these comprise those that have invested between Rs 200 lakh and Rs 500 lakh in equipment.

SME Loans in India

There are various lenders, including banks and NBFCs, that are working hard to provide loans to small businesses. An SME loan features tailor-made solutions designed for small and medium enterprises.

An SME loan features policies that have been framed to fulfil the following objectives.

  1. To increase the flow of credit to the SME sector.
  2. Formulate policies for the SME sector that ensures that the SME sector has access to timely and adequate credit.
  3. SME loan policies have guidelines that provide a sort of blueprint to the bank and other lending branches that provide credit to the SME sector.
  4. To create an organizational structure that is capable of handling the SME credit portfolio of the country in a focused and professional manner.

For small and medium enterprises, access to capital is extremely important if they are to survive and thrive in today’s economy. A small business loan ensures that the small businesses can access this vital credit and grow to their full potential without a shortage of finance.

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