A business loan is a necessity. It can be used for several purposes. With an expanding economy, it is the prerogative of the business owner to take advantages of the opportunities coming his or her way. Introducing new technology, restructuring debt, remodelling the business et al requires money, which most MSMEs do not have. This is when an MSME loan comes as a saviour. Moreover, Government has also launched schemes like CGTMSE loan scheme in the interest of such budding entrepreneurs, so that they do not utilise their personal savings and take benefit from such schemes.
However, due to a lack of awareness or rush for funds, business owners, more often than not, end up spending from their savings account. While this may help in the short term, the long term may prove to be disastrous.
Here are 5 benefits of an MSME loan over savings:
- The primary function of a savings account is to protect against uncertainty. There may be emergencies that arise out of nowhere. To overcome these sudden challenges, everyone needs to have a sufficient amount of money in their accounts as savings. To use them for business is not considered financially prudent. One can always avail of an MSME loan to use it for the betterment of the business. MSME loans allow the applicant to push their businesses up and not use their savings.
- Availing of an MSME loan is not a struggle any more. Numerous financial organisations offer loans at competitive prices. If the public sector institutions have a complex and long-drawn loan approval process, one can always avail loans from Non-Banking Financial Companies. NBFCs like Ziploan have a straight forward process of approving loans and do not make the customers wait for a long period. In such an environment, it is not a great idea to jeopardise savings and use for business purposes. There are online methods of applying for loans too. One can get an MSME loan approved by sitting within the comfort of their homes.
Ziploan has come up with business loan apply online from their website facility, and for a more seamless experience, an applicant can try using their mobile loan app, which can easily be installed from a Google play store. All they ask for is minimal and basic documentation, and once when you submit all the required PDFs online, you’re good to go. Moreover, they also provide an attractive and competitive business loan interest rate.
- As mentioned earlier, a savings account as the name suggests is meant to save money. A savings account also fetches an interest from the said bank. This interest rate varies from bank to bank. This interest rate can be used to pay off the EMIs of the MSME loan. Using the savings to pay for the business is not just an ill found move but can be potentially dangerous too. If the business fails, then there will no back up to fall too. An MSME loan is designed in a manner to help the business grow. Moreover, when a business owner, avails an MSME loan, he/she can also get some relaxation and benefits in tax as well.
- A good credit score goes a long way in allowing a business to establish a great working relationship with the lender. Once the MSME loan is paid off, the applicant can apply for a business loan once again and looking at his record of timely EMI payments, will be eligible for one. This financial cycle is beneficial for the loan seeker. Not only does he or she have access to funds for the benefit of the business but in return is also able to establish a good credit score. This will not be possible if the savings account is used.
- An MSME loan provides full control to the applicant. In times of economic uncertainties, the business owner will be able to make decisions based on his or her access to the funds. A savings account is also under the full control of the account holder; however, it will be used as a personal source of sustenance. The business will be looked after by the MSME loan.
Lastly, it is not recommended for the business owner to use the savings account as the source of funds for the business. The main purpose of the savings bank account is to protect the future of the account holder. There may umpteen emergencies that may arise and will have to be taken care of. The amount kept as the savings of the individual will help in getting over such challenges. Therefore, for business-related funds, an MSME loan is the best way to go forward.