Similar to how borrowers choose between unsecured and secured loans to meet their financial requirements, business owners have the liberty to select a suitable financing option for their company. Owing to the popularity of the small and medium industry sector, financial institutions now extend MSME loans alongside traditional business loans to aid entrepreneurs.
Nevertheless, irrespective of being a mode of credit, these two are distinct from each other as well. Following are some prominent differences –
- Type of business and purpose
Already established firms with a strong financial foothold, and credit score can easily avail an instant business loan to meet an array of requirements. On the other hand, loans for MSMEs are better suited to smaller firms and start-ups who are looking to begin their journey.
Moreover, with credit for business, one can meet the requirements of business expansion. Whereas, with MSME loans, the focus is on small scale expenses like funding working capital.
- Loan amount and tenor
Since well-established businesses have better repayment capacity, they are likely to secure a higher amount as a business loan when compared to an MSME loan.
- Credit history
Also, credit history is another point of consideration here. Typically, for unsecured business loans, borrowers need to meet stringent requirements regarding credit repayment history and rating. Whereas, for MSME loans, this parameter is more lenient.
MSME loans are tailor-made to extend required funds to the entrepreneurs and help them meet a series of different expenses. You can also get bajaj finance flexi loan at low interest rates.