What are the key advantages offered by SME Loans

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SME loans are loans to small medium enterprises that are a slightly smaller than big corporate companies. These firms boost the economy of the country and are major revenue bringers. They also create huge demand for jobs and their existence is beneficial to a majority of people. That is one of the main reasons why banks offer attractive loan schemes because they make a lot of profit.

The sector of small enterprises is huge and ever growing in size. These small business loans  are called SME loans and they have various benefits. It is more advantageous for an expanding firm irrespective of the field of business to take this type of loan from the bank. The advantages are as follows:

 Lack of ownership in business –

When people want to expand their existing businesses, they need financial backing. Either they can take an SME loan from a bank or go into partnership with another entity who will supply the money. Going into partnership with someone is not the best option, because once an entity becomes a partner he or she have an executive say in the running of a business. Whereas when you take a loan from the bank, you still remain an autonomous company. Bank owners or officials do not interfere or meddle in the day to day running of the company. All they are concerned is with receiving the EMI on time throughout the tenure and once you have repaid their loans, your business relation with the bank is terminated unless you apply for a loan again.

Tax deduction –

As per the income tax laws, the borrower is not liable to pay a tax on a loan taken for business purposes. Moreover, if the rate of interest is fixed throughout the tenure; owners of SME find it easier to plan and budget. They know the amount of their EMI and so they can plan their investments and execute their plans for expansion accordingly. Due to some event if the interest rate is changed, a simple use of spreadsheet assists them in calculating the amount of EMI to be paid in the near future.

Lesser interest rates –

The interest rates offered by the bank are comparatively lower than other lending agencies or private companies. With a low interest rate, your monthly EMI also comes down which is absolutely beneficial in the long run. It is a smart business decision.

Reliability –

Banks are long term running money lending institutions and are formally recognised. They are a more reliable source of obtaining money for SMEs than private money lending institution or another entity, because they can turn their back on you any time.

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