All things you need to know about SME business loans for manufacturers

All things you need to know about SME business loans for manufacturers

Steady cash flow determines the state and situation of the business. In order, to cope up with the growing costs that may trump revenue, small businesses seek SME loans. Situations can somehow be more grave when it comes to SMEs that are into manufacturing goods. In a Manufacturing SME, the profits earned can be high but so is the risk involved. While the potential to increase the revenue generated in a good manufacturing SME will grow exponentially, lack of proper machinery and manpower may prove to be a hindrance. For a manufacturing business, a lack of business funds can lead to ceasing operations or closing down a plant.

SME finance plays a big role when it comes to financially support small businesses in the manufacturing industry.

Here are a few sources through which a manufacturing SME can secure loans

  1. Banks: This is probably the most traditional way when it comes to securing loans. However, as an SME, your credit score needs to be very impressive to fall into the bank’s eligibility criteria. It has been observed that more and more banks have been refusing a business loan to small firms over the years. Even if you do manage to get loan approval, it requires tons of documentation and a whole lot of patience as you would be receiving the funds in a month or two after all the verification and other formalities are concluded.
  2. Selling off equity: You may sell off a few of your company’s stakes to investors in exchange for a loan. The bright side is that you won’t be pressurized into paying off your installments or be burdened by heavy interests. However, having a stake in your company means that investors hold the right to challenge your decisions and make new ones on their own keeping the company’s profits in focus. Selling off equity also means that you will be giving away a slice of your own and the role of the only decision maker and influencer in the company.
  3. Non-banking financial institutes: If you are tired of having your loan application rejected over and over again by all the major banks, you still have hope to get an unsecured loan through a non-banking financial lender. Fintech lenders are more relaxed with documentation and they do provide unsecured business loans which mean you don’t require to submit any collateral. Financing through non-banking financial sectors is quicker as they provide you with instant business loans.

Unsecured business loans are also expected to be paid back in a short duration.

When it comes to getting a business loan, different situations call for different approaches. Validate your assets and capabilities before deciding on whom or where to go for a loan.

Category Finance