Yes, MSME loans for traders are available in India; many lenders offer credit services to traders. They play a vital role in the production, selling, and distribution of products. They are the link between the manufacturers of goods & services and consumers. By selling the manufactured goods, traders make a profit that fulfill their business needs.
However, a trader has his share of pros and cons. The increasing gap in demand and supply, delay in payments by the purchasers, and such other foreseen events might hinder the growth of the trader. To sustain the business, the trader looks for a financial boost in these situations. So, an MSME loan is an appropriate option.
A trader can wish to avail an MSME loan from a bank or an NBFC. Read on to comprehend which is a better option.
Bank Loan for Traders
Numerous banks offer overdraft facilities and loans to traders to help them expand their business. However, they have a long process which sometimes extends to more than a month. Their procedure for a business loan is very thorough and is a lot of hassle for an applicant. It sometimes also leads the borrower to miss his business.
The requirement of collateral is another issue. Banks require collateral to back the loan amount. Also, the eligibility for MSME loans is stringent that not every trader can meet.
NBFC Business Loans
Non-Banking Financial Companies (NBFC) also offer MSME loans to traders for business expansion and growth. NBFC business loans are very easy and convenient to get sanctioned. NBFCs take lesser time in approval, and sometimes the loan is approved and disbursed in just a few working days. Also, the loan application procedure is carried out online. The applicant can upload documents online without visiting the lender’s office.
NBFCs offer an MSME loan without collateral, i.e., the borrower is not required to pledge security to avail a loan. Their business loan requirements include business turnover of more than 5 lakh, ITR of Rs. 2.5 lakh, and business vintage of more than two years. Additionally, a trader can repay the loan for business without security in easy monthly EMIs.
Bank VS NBCS: Which is the Best Option?
Traders are undoubtedly one of the major contributors to the country’s GDP. And to increase GDP and ease of doing business, timely credit is necessary for the traders. Indeed, banks and NBFCs offer the much needed financial support to traders. But they both differ in the procedure for a business loan and rates of interest.
Generally, banks have a lengthy loan application process. They require collateral as well, which may cause discomfort for the traders while applying for a loan for business. Also, banks take some time in processing and sanctioning loans. This delay can lead to severe loss to the traders. NBFCs, on the other hand, have a hassle-free loan application process, and they do not require collateral. So, it can be concluded that an NBFC is the best option for an MSME loan for traders than a bank.