Non-banking financial companies (NBFCs) serve both urban and rural businesses and contribute to financial inclusion. These lending institutions provide the much-needed market flexibility by diversifying risks and increasing liquidity, thereby increasing market efficiency and fostering financial stability.
MSMEs in India often experience cash flow problems due to a variety of factors such as a lack of funds, requirement of post-dated cheques, late payments, and so on. The sector has enormous growth potential; however, funding is needed for any MSME to function smoothly. Unfortunately, the number of restrictions placed by banks is making it difficult for the sector to obtain funding. NBFCs, on the other hand, offer collateral-free loans for MSMEs to solve their need for working capital and steady cash flow.
Why should MSMEs always ensure adequate cash flow?
- Unforeseen circumstances – When faced with disruption, companies must ensure that they have sufficient funds on hand to keep operations running.
- Regular operations – Organizations must maintain business continuity, even in difficult situations, while keeping costs and working capital under control so that the production and delivery runs smoothly.
- Whether running in good financial shape, struggling for profitability, or facing low cash reserves, all small to mid-sized businesses can become vulnerable to cash-flow instability. This has become especially acute in the wake of the pandemic.
How to avail of collateral free loans?
If you own a small business and require money to finance your day-to-day functions, you should apply for a working capital loan. These loans are not generally used to purchase long-term properties but rather fund the borrowers’ short-term operating needs. Payroll, raw material sourcing, and other costs are examples of such needs.
NBFCs like Kinara Capital offer collateral-free loans for MSMEs across India.
Before applying for any loan, be prepared with all the documentation to have no chances of rejection. For instance, get your Udyam registration done.
Once you are eligible to apply, you can do so online on the websites of various NBFCs for collateral-free loans for MSMEs. You can complete the preliminary stage of the eligibility check, and then you can get connected to their loan officer or an executive, and they will guide you further.
The process of taking a loan from NBFCs is far easier and quicker as compared to that of banks. The process is simple, and it does not require extensive documentation. Moreover, NBFCs put less emphasis on credit scores.
Why working capital loans are a boon for MSMEs
To run their day-to-day operations smoothly and efficiently, MSMEs need adequate working capital. By allowing improved cash-flow management, working capital loans assist SMEs in reducing operating risks and rising profit margins. Working capital is needed at every stage of production in small manufacturing companies, from the purchase of raw materials or inventory to the disbursement of finished products.
SMEs may require a loan for a variety of reasons. Businesses face many different obstacles. However, before applying for a loan, you must first determine how you will use the money, how much you will need to have access to, and how long you will need to repay your debt.
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