Small and medium business enterprises have seen a boost during recent times. They have shown promising growth in terms of popularity and economic significance. This growth also brought a rise in the competition with it.
More and more Small and Medium enterprises are now bringing new strategies to stand out among their contemporaries. This, in turn, has brought a flood of business loan schemes. These business loans serve as a fundamental capital for a small business.
Today, SME owners can avail of a loan as a source of their capital in two forms viz the unsecured business loan and an SME loan. These loans have some differences and some similarities, but the end goal of sanctioning these loans is to satisfy the business’s demand for acquiring assets.
These business loans are advantageous for several reasons. Apart from the obvious benefits, when a business owner uses the correct skills to their advantage, these loans can significantly multiply business earnings. A crucial aspect of this skill is to time the market correctly.
Business loan, the festive season, and everything in between
The festive season is the right time to flourish in a market. This time offers some of the highest business sales and spikes up the earnings. This rise is especially beneficial to small and medium business enterprises because they can easily profit from the growing demand in the market and cash in from the sales.
But how does a business loan correlate with the festive season?
- The answer to this is simple. The small and medium businesses are the most affected by fluctuations in the market, and this effect gets magnified when the business owner has pooled in all of their finances into the business. This can result in the gradual capital draining for the owner. An unsecured loan and SME loan can help by providing capital aid, and even when the business suffers a downward fluctuation, the business owner is not drained from his/her assets.
- Another facet of the festive season is the spurt in demand for products and services. The rate of sale and purchase remains at an all-time high during the festive season. Owing to this higher demand, business owners try their best to increase production in the business. This increase in the production shall undeniably require some additional capital for gearing the stock of equipment and the essential machinery. A business loan serves as a healthy alternative for this. With the help of an unsecured loan or SME loan, there is no need for the business owner to invest from his/her pocket.
Unsecured loan or SME loan? What is the difference?
An unsecured loan does not require any mortgage before sanctioning. The lending authority does not demand collateral in exchange for approving the loan when it is unsecured. An SME loan, on the other hand, is an unsecured business loan that is targeted towards Small and Medium Business enterprises. These loans are aimed to help the emerging new businesses by supporting them with the initial capital sum.
The festive season and different SME sectors:
The effect that the festive season has on the different sectors in business is as follows:
- Retail sector: Retail sector drives its peak during the festive season as the demand for electronic gadgets and other technological products rises. Hence, it is profitable for SMEs in the retail sector to expand its production during the festive season. An unsecured business loan shall help the retail businesses to increase their production budget and utilize it for advertising or commercial marketing.
- E-commerce sector: This sector is perhaps the most affected by the fluctuations brought by the festive season. As the e-commerce market is a competitive one, the different online business websites offer sales and hence require a bigger production. Thus, acquiring a financial fund helps the business owner bear the expenses incurred from increased production.
- Hospitality sector: Festive season brings a season of holidays for the people that, in turn, causes a marginal increase in the hotel and restaurant business. Thus, SME loans will also prove to be beneficial for this sector in supporting the increased load of customers.
- Industrial sector: As the demand in the main market takes an upward trajectory during the festive season, the wholesale market also takes a pike. There is an immediate requirement for some additional capital for coping with the higher demand. Thus, an unsecured loan will prove to be helpful in the time of need, especially during the peak season like that of festivals.
Seeing the business sector trends, it becomes clear that the SME loan is the agent essential for these sectors to thrive and draw more profits during the festive season.
Unsecured Business Loan: The ideal boost for your business during this festive season!
If you are a small business owner and you are looking to expand your business’s productivity and earnings, then the festive season is the right time to shine. You can make the most of the festive season by applying for an unsecured / SME business loan.
Features of an SME/Unsecured Loan:
The salient features of the SME loan are described below:
- An SME is oriented to lend financial help to the small and medium business enterprises.
- An unsecured business loan often comes with a short loan repayment tenure. Most of the lending institutions, such as banks and NBFCs, offer tenure of 2 years.
- The SME loan does not have a pre-requisite of loan collateral or mortgage for the loan’s approval.
- Several SME schemes also come with a pre-payment penalty in case a business owner wishes to return the loan amount before completing the repayment tenure. This feature may vary from one lending institution to another.
- The business owner can avail of the SME loans at the starting rate of Rs.50,000.
- The interest rates of SME loans are generally higher than the secured business loans.
Benefits of SME/Unsecured Loan during festive season:
- One of the obvious benefits of availing the unsecured business loan is that it allows the business owner to optimize the sales during the festive season. It provides a financial umbrella for the small business. This way, the owner can expand production without any hesitation.
- The SME loans also provide the business owner with some tax exemptions that can be availed on the business’s returns during the loan period.
- Several lending authorities also offer a policy on SME loans where the business owner can enjoy additional cash benefits when he/she refers to the SME scheme offered by the lending authority to other business owners.
- SME loans allow the business owner to build up their business assets by acquiring more assets or equipment and machinery.
- Unsecured business loans relieve the business owner from the headache of mortgaging their personal or business assets for approval of the loan.
- Such type of loans come in handy for a business to fulfill its short-term goals as these loans’ policy period is short. This is advantageous during peak seasons of business sales like the festive times.
- The application procedure for SME loans is short and sweet. As there is no need for collateral, these loans involve a lot less paperwork and documentation.
The procedure to apply for an Unsecured Loan or SME loan during the festive season:
Applying for an Unsecured Business loan is a hassle-free and convenient process. You can also apply online for an unsecured loan. The eligible candidate may follow the below steps for applying:
Offline Method for application:
- Head over to the office of the bank or NBFC from which you wish to avail of the business loan.
- Fill in the loan application form.
- Submit the application form with the necessary documents.
- The loan application will then go for verification and subsequent approval.
An online method for application:
- After deciding the SME scheme best suited to your business goals, you should visit the lending authority’s official website.
- Next, select the SME scheme of choice and go-ahead to complete the loan application form.
- Enter the credentials of the application form.
- Submit the application form by attaching the necessary documents required for verification.
- After submitting the application form, you can pay the additional fee for applying, and then the application proceeds further for verification.
- If the application form credentials are authentic, then the application is approved, and the loan shall be sanctioned.
Documents required for applying for SME Loan:
- Candidate’s Identification proof: Aadhaar Card, Voter ID, PAN, or Driver’s license are valid documents.
- Candidate’s residential address proof: Aadhaar Card, Voter ID, amenities bill such as electricity bill, and telephone bill are considered valid documents.
Things to consider before applying for an Unsecured Loan during the festive season:
There are some important points that the business owners should keep in mind before they consider an SME loan:
- It is important to plan out the objective of your business loan. The SME owner should determine their agenda or strategy regarding the loan’s utility in his/her business during the festive season. Keeping an idea about the end goal of the business earnings that are to be projected during the festive season helps determine the budget and the corresponding amount of loan required to fulfill it.
- Next comes the correct choice of the authority from whom the loan is taken. The business owner needs to go through the complete terms and conditions of the unsecured loan scheme offered by the bank or the NBFC. These lending institutions are often strict on their eligibility criteria, which should also be kept in mind. The business owner should select that lending authority, which falls in line with their business objectives and loan requirements.
- Business owners should also take into account the interest rates, market risks, and additional fees of the loan scheme.
- The lending authorities also consider the reputation and operational efficiency of the business before sanctioning the loan. That is why the business owner needs to create a strong business profile, ensuring smooth cashflow evidence and an authentic portfolio.
- A common error on the part of the entrepreneurs applying for a business loan occurs during the application process, where they fail to provide optimum documents with their application. Several loan applications get rejected because of inefficient documentation. Therefore, the business owner should keep a strict eye while submitting his/her documents.
Other ways to amp up your business during the festive season:
Although applying for an unsecured business loan is a smart and perhaps the most convenient strategy for business growth during the festive season, there are some other methods that a business owner can apply to enhance their business performance.
- Layout your plan of action: For a business to enhance its performance during the festive season, it is important to have an idea about the dates and time duration of the festive season. This way, the entrepreneurs can strategize and implement those strategies well in-time and be prepared.
- Festive sales and discounts: What comes as a major attraction to people during the festive season is the festive sales. They are on a hunt for cool deals and amazing discounts. Many of them even wait for the festive season to make purchases. Hence, having a sale or offering a discount on your products will help attract more customers during the festive season.
- Advertise: Popularizing your business through increased marketing during the festive season helps in drawing new clients to your business. It is smart for the business owner to seclude a separate budget for marketing and advertising at the beginning and throughout the festive season. This marketing should be done both on telecommunication as well as on social media.
- Enhance your presentation: Today, the businesses are judged as per their presentation. The customers are more attracted to a business with an efficient appearance. Thus, during the festive season if the business owners add some festive touch to the business, which makes the store or the online website appear more inviting. Remember that the appearance of your business should reflect you and your business’s personality.