Recent studies suggest that the small and medium business alone employ around 120 million individuals and contribute about 37% of India’s GDP.
For the benefit of such an influential sector, the government and different private lenders provide financial schemes like merchant finance.
Such Financing Schemes can be utilized to initiate a business or to expand an already existing enterprise.
A few Financing Schemes are as follows
Government Initiatives –
MUDRA loans
One of the most important initiatives taken by the government is the MUDRA loans, which is a part of Pradhan Mantri MUDRA Yojana. An entrepreneur belonging to the MSME sector can avail such advances with ease.
Depending on the enterprise size, this scheme is divided into 3 categories, and among them, Kishore can be availed by entrepreneurs who aim to expand their business. As per this business loan, an entrepreneur who can meet a few eligibility criteria and furnish a set of documents can avail up to Rs.5 lakh.
Standup India
This scheme is governed by SIDBI or Small Industries Development Bank of India. This scheme came into being to provide financial assistance to individuals belonging to the SC/ST category and women of any segment. An individual engaged in a Greenfield enterprise can avail up to Rs.1 crore.
SIDBI Make in India Soft Loan Fund for MSMEs
SMILE or SIDBI Make in India Soft Loan Fund for MSMEs rolled out in 2015 and is governed by SIDBI. This scheme provides loans to different MSMEs to meet the adequate debt-equity ratio. Such soft loans can be utilised to initiate an enterprise or for its growth.
Private Initiatives
Merchant finance
Merchant finance or merchant cash advance is a type of short-term credit facility offered especially to retailers.
With this facility, repayment of the loan is made based on the PoS sales. The lender charges a specific percentage on the total PoS sales of the retailer after the end of business hours.
Invoice financing
Invoice financing is also a type of short-term advance. A business availing invoice finance can use its outstanding invoices as collateral to avail a loan.
Working capital loan
Other than merchant finance, one beneficial scheme rendered by private lenders is a working capital loan. This scheme facilitates an enterprise to meet the daily or short-term expenses of a business.
Such Financing Schemes can prepare a business to take-up bulk orders as it boosts steady cash flow. Such types of loans can be utilized to expand your business.
Different usage of working capital loan are as follows –
- Buy inventory,
- Procure raw material,
- Pay for costs like rent, electricity,
- Pay suppliers in advance,
- Maintain a healthy cash flow.
NBFCs like Bajaj Finserv provide Business Loans to help firms in several ways, even increasing their working capital.
The company also brings pre-approved offers to simplify the process of availing financing. Such offers are available on business loans, home loans, personal loans, and a host of other financial products.
Supply chain finance
Supply chain finance is an umbrella that includes supplier financing and reverses factoring. These are also short-term credits offered to businesses with the sole objective of improving or optimizing their supply chain.
By applying for government Financing Schemes or ones like merchant finance and business loans, an entrepreneur can easily avail required funds to expand their enterprise. They must check their requirements first to choose the right option.
