SME (Small and Medium Business) gets bank and NBFC business loans. While a start-up receives funds through investors. This is a fundamental difference between start-up and SME.
- Why is this difference?
- What is a start-up?
- What is an SME?
Table of Contents
What is a Start-up?
The start-up is a new concept in India including all over the world. It is a little different from traditional business and matches it to some extent. Yes, it has both qualities. The concept of a start-up is based on the foundation of innovation & newness. The goal of a start-up is to establish a product in the market for a long time.
Understand it in easy language that when a business is started on a new idea, it is called a start-up. The new idea means that the idea of doing business should be unique so that the consumer gets the best experience. Also, it is expected from a start-up that the business idea should not be copied.
What is an SME?
SME or Full Form is Small Medium Enterprises. SMEs have traditionally run the service sector and manufacturing sector business. Business in the SME sector is primarily started to make a profit. Small Medium Enterprises (SME) can be profitable from the very first day of commencement.
There is no innovation approach behind the SME business, rather the business is started based on the need of the market and the number of customers. Small Medium Enterprises (SME) is commonly referred to as Small Business, Medium Business, etc.
What Is The Difference Between A Start-up and SME?
As mentioned at the beginning of this article, ‘Start-up’ is a new term of business, which is based on innovation and aims to meet the needs of the people in a new way. For example, let us tell you that the successful start-up of the FinTech sector is ZipLoan. ZipLoan offers business loans up to Rs 7.5 lakh to MSME and SME traders in just 3 days * without any pledge.
SME is a traditionally run business to make a pure profit. The SME business can be a businessman running a grocery shop in your street and also an entrepreneur for melting steel and making steel utensils. At the same time, there are a lot of differences between start-ups and SMEs. Let’s understand
Definition of Start-up and SME
A definite definition has been created by the Government of India for all businesses run in India. Based on the definition created, businesses are taxed and government plans are formulated. According to the Government of India, the definitions set for start-ups and SMEs are as follows:
Definition of Start-up
A start-up is a unit of business, a company will be considered a start-up for 10 years from its registration. Any technology is a start-up in the direction of innovation, development, processing (business), or commercialization (business) of new products or services inspired by technology or intellectual property. Turnover of the financial year does not exceed 100 crores’.
Definition of Small Medium Enterprises (SME)
There are 2 businesses under SME. Small Enterprise and Medium Enterprise. The definition of MSME was changed at the time of lockdown. The definition of enterprise covered under SME is as follows:
- Definition of Small Enterprise: An industry that has an investment of up to Rs 10 crore and an annual turnover of up to Rs 50 crore is considered a small unit enterprise. This definition is valid for both the manufacturing and service sectors.
- Definition of Medium Enterprise: An industry that has an investment of up to Rs 30 crore and an annual turnover of up to Rs 100 crore is considered a medium enterprise. This definition is valid for both the manufacturing and service sectors.
Profit Difference Between Start-up and SME
One major difference between small-medium enterprises (SME) and start-ups are profits. A start-up is first established to bring a new business idea into existence. The new concept is conceived for business. Business is established in the market and then major thoughts are given about profits. Whereas small-medium enterprises (SME) are established for profit only. SMEs range from setting up a shop to set up a medium level power plant. The purpose behind establishing all these is that profits should start from the very first day and this happens also. Whereas to expect profit from the start of a start-up is like watering one’s expectations.
Main Power Difference in Start-up and SME
As mentioned, a start-up embodies a new business idea. It is a very labor-intensive and joint work done by many people. Running a start-up requires a lot of people simultaneously.
However, this is not the case with Small Medium Enterprises (SME). Because in SME one shop can come in and also a medium level factory. As here as per the requirement, the main power is exerted. However, in SME, a person can also work alone and can make profits according to his needs. While this is not possible with a start-up. Because a start-up is not a shop but can be a shop in SME.
Fundraising Gap Between Start-up and SME
Whether it is a Small Medium Enterprises (SME) or a start-up, both require money to run where start-ups receive money through investors. Along with this, government-run Start-up India is also available. On the other hand, Small Medium Enterprises (SME) is started with its funds. Though the loan is provided through the Mudra Loan Scheme run by the government, to start a business, most of the money has to be invested by itself.
Yes, with SMEs, it is very easy to get business loans from many financial institutions when the business needs to expand. For the information, let us know that the country’s leading non-banking financial company ‘ZipLoan’ gives a business loan of up to Rs 7.5 lakh to MSME and SME traders to expand their business, without pledging anything, in just 3 days. The business loan offered by ZipLoan is pre-payment charges free after 6 months.