India has surged forward as a hotbed for start-ups in recent years, boasting one of the highest numbers globally. In this direction, MSME schemes have become a popular tool to tackle the capital needs of small and medium enterprises. This is because of easy MSME loan eligibility and the increasing participation of entrepreneurs.
However, with every business term loan, including MSME loans, comes the burden of EMIs. Usually, MSME loan interest rates are between 8-10% which may go up to ₹1 lakh per month. Reduction in this EMI burden holds the key to empowering emerging entrepreneurs with a significant financial advantage. Let’s discuss how you can smartly reduce the EMI burden on MSME schemes.
Tips to Reduce EMI Burden on MSME Loans
MSME loans require entrepreneurs to pay regular EMI to repay the loan amount. Since it is usually a short-term loan, the EMI sometimes may be higher. So, if you get to cut on the EMI burden even by a small percentage, it can be a huge relief. Here are some tips on how you can reduce the EMI load:
- Know Your Loan
Any decision regarding your business must be well-researched. To make an informed decision about a loan, make sure you know all about it. Some loan schemes may have hidden costs or process fees. Calculating these costs may give you a clearer idea of the exact financial burden you may have to bear.
- Take a Calculative Decision
As a small or medium enterprise, loan requirements can be a continuous process for a few years. So, whenever it comes to seeking a loan or overdraft facility, make sure to calculate the needs of your business. Calculative decisions keep you from borrowing extra loans for which you eventually end up repaying higher.
- Compare Before Purchasing
The market is full of lenders who are willing to financially aid small and medium businesses. So, before you finalise your lender, make sure to compare the potential lenders for your business. Be it a business or overdraft loan, the one offering the most competitive interest rates may be your ideal deal.
- Do Not Skip EMIs
Skipping EMIs may not be a good idea. So, one must refrain from doing so. Also, to reduce EMI, you may pay extra when the business is earning good returns. Repaying extra when you have some surplus cash can help in quick repayment and reduce future EMIs.
- Investment for EMIs
Some entrepreneurs may choose to invest/deposit a part of their loan amount to earn interest on it. This interest can be utilised to pay the EMI of the business term loan.
- Longer Repayment Tenure
The longer you choose the repayment tenure, the lesser the EMI burden. You must also know that with a longer tenure, you also end up with a higher repayment amount in total. However, if the goal is to reduce the EMI burden as of now, choosing a longer tenure can be an idea.
Conclusion
The market size and trustworthiness of lenders on small and medium enterprises have expanded gradually over the last few years. So, securing an MSME loan is no more a hunt. Also, the procedure for MSME loan apply online is quite simple and easy to understand. Try reducing the EMI burden so you can direct saved capital towards business growth.
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