SME Loan

Small & Medium Enterprise (SME) units play an important role in the development of modern business & keeping the supply chain intact. However, SMEs are most vulnerable during an economic turndown. This makes it quite challenging for them to get access to funds from lenders. This is more evident when getting a Business Loan for MSME, for which the approval process also gets demanding. 

But you can overcome these challenges and get MSME Loan approved at attractive terms by understanding the below-mentioned key factors. These factors play a pivotal role in the loan approval process.

Useful Tips to Get Your SME Loan Approved Easily

Here are some useful tips that you can follow to make the loan application process easier:

  • Create a Solid Business Plan

Borrower can submit a business plan as a part of the loan application process to lender. This will assist them in evaluating the borrower in a much better manner. 

So, before you apply for a Business Loan for MSME, make sure you chalk out a strong business plan outlining your business plans and ideas. The plan should also focus on how you are planning to use the funds. Lending institutions trust applicants with a solid business plan more than the ones who don’t have a business plan ready. 

  • Improve Your Business Credit Score

Before sanctioning an MSME Loan, lenders consider your business’s credit score. It is a measure of a company’s reliability and ability to repay its debts. Lenders are more likely to trust a business with a good credit score to repay Business Loans. So, it is advisable to maintain a credit score of 750 and above as it is preferred by most lenders. 

And if your credit score is below this range, make sure you improve it. You can do so by paying your debts on time and maintaining a credit utilization ratio below 30%. 

  • Reduce Your Debt-To-Income Ratio

This is one of the most useful tips that you can follow to make your loan application process easier. The debt-to-income ratio (DTI) is a financial metric that compares the debt amount with your income. The lower your DTI ratio, the better since it indicates that your income can sufficiently cover all your existing debts. Lenders generally prefer borrowers with DTI ratios below 1 or less.

So, if your DTI ratio is on the higher side, it may be a good practice to bring it down before you apply for a Business Loan for MSME. Doing this may increase your chances of getting loan approval faster. 

  • Manage Cash Flows Efficiently

Every lender that offers a Business Loan for MSME will analyze the liquidity position of your business to ensure timely repayments before giving loan approval. Therefore, the liquidity position of your business must be stable so that lenders can consider your loan application. Before you apply for a loan, study your liquidity and the cash ratio you have available for loan repayment. To improve your liquidity, try to eliminate all unnecessary expenses and enforce better cash management discipline. 

  • Make a Solid Repayment Strategy

Before approving your loan application, the lender would want to know your loan repayment ability. Therefore, you should have a clear repayment plan for how you are going to fully repay the loan within the specified timelines. It helps in building trust with the SME business owner. 

You can also use a Business Loan emi calculator to determine your EMI based on tenure and loan amount. You can also calculate the EMI amount that you’ll be able to comfortably repay without disturbing your business’s cash flow. 

  • Gather the Required Documents

Ensure all the required documents like business ownership proof, address proof, financial documents, etc. are ready before applying for a loan. This will save you precious time and make the loan application process go smoothly.

  • Know the Lender’s Eligibility Criteria

The eligibility criteria of Business Loan lenders may vary from one financial institution to another. Therefore, it is important to first ascertain the eligibility requirements of a lender before applying for a loan. You can also use a Business Loan eligibility calculator to determine your eligibility.

This can help prevent your loan application from getting rejected due to non-satisfaction with the laid-out eligibility requirements. Proceed with your loan application only after ensuring that you have fulfilled every single eligibility criterion of the lender. 


By following the aforementioned tips, you can significantly make your loan application process easier and smoother. Research different lenders and compare them based on the interest rates, charges, loan terms & conditions, etc. before applying for a Business Loan for MSME. Doing this will help you in determining the one that suits your business requirements better.