Festive Season Business Growth: Get an Unsecured Loan Now

Small and medium business enterprises have seen a boost in recent times. They have shown promising growth in terms of popularity and economic significance. This growth also brought a rise in the competition with it.

More and more Small and Medium enterprises are now bringing new strategies to stand out among their contemporaries. This, in turn, has brought a flood of business loan schemes. These business loans serve as fundamental capital for a small business.

Today, SME owners can avail of a loan as a source of their capital in two forms viz the unsecured business loan and an SME loan. These loans have some differences and some similarities, but the end goal of sanctioning these loans is to satisfy the business’s demand for acquiring assets.

These business loans are advantageous for several reasons. Apart from the obvious benefits, when a business owner uses the correct skills to their advantage, these loans can significantly multiply business earnings. A crucial aspect of this skill is to time the market correctly.

Business loans, the festive season, and everything in between

The festive season is the right time to flourish in a market. This time offers some of the highest business sales and spikes up the earnings. This rise is especially beneficial to small and medium business enterprises because they can easily profit from the growing demand in the market and cash in from the sales.

But how does a business loan correlate with the festive season?

• The answer to this is simple. Small and medium businesses are the most affected by fluctuations in the market, and this effect gets magnified when the business owner has pooled all of their finances into the business. This can result in gradual capital draining for the owner. An unsecured loan and SME loan can help by providing capital aid, and even when the business suffers a downward fluctuation, the business owner is not drained from his/her assets.
• Another facet of the festive season is the spurt in demand for products and services. The rate of sale and purchase remains at an all-time high during the festive season. Owing to this higher demand, business owners try their best to increase production in the business. This increase in production shall undeniably require some additional capital for gearing the stock of equipment and the essential machinery. A business loan serves as a healthy alternative for this. With the help of an unsecured loan or SME loan, there is no need for the business owner to invest from his/her pocket.

An understanding of the relation between business loans and the festive season requires considerations about some unusual challenges that small and medium-sized enterprises face. During the festive season, SMEs often face variations in consumers’ demand for their goods and changing market conditions where financial help is most needed. SMEs are most sensitive to business cycle changes, especially when owners have invested their personal capital into the company. Low sales will cause owners to spend down on personal funds just to cover costs in operations. This eventually spirals into an unsustainable cycle for the owner, especially in case of unexpected shocks during peak seasons, such as holidays. This festive season has been an expensive affair for consumers, as most of them are indulging in unseasonal buying of gifts and also taking up seasonal offers. But the irony is that increased demand sometimes creates some troubles as well. At times, due to no fault of a business, unpredictable matters such as a disruption in their supply chain or due to a change in consumer preference affect their cash flows. It is at this juncture that unsecured loans and SME loans really help out. As the owner of an operation receives these loans to help in raising the funds needed, providing sufficient capital to manage the business, it is not their money at risk if that amount were to be lost through any operational costs. This financial cushion will allow them to continue concentrating on strategies for growth rather than just survival.
An increase in demand typically tends to compel SMES to scale up their operations. They may raise stocks, increase personnel, and replace equipment to enhance production. All these expansions attract investment, and most of the small-scale businesses cannot manage to invest without external finance. Business loans make the owners invest in the resources, but they still keep their cash flow to employ and meet the orders during the rush of the festivity. Access to capital means that SMEs will have a timely edge. While other firms are struggling just to stay in business, firms that will seize increased demand early are more likely to build up the customer base as usual. What this ultimately does is translate into improved brand loyalty or possible repeat business. Investment in the operation during peak season will help the SME get well-set up for sustained growth when the holidays have gone.
In a nutshell, business loans are the way to go for SMEs especially during the festival seasons. Essential finance support from these loans allow business organizations to go all out in terms of growing and impressing customers, thus putting it in a better position to both thrive at opportunities presented and merely deal with challenges.

Unsecured loan or SME loan? What is the difference?

Business loan means when a business secures debt funding from a financial institution, and in return repay the loan amount along with the interest consideration. An unsecured loan does not require any mortgage before sanctioning. The lending authority does not demand collateral in exchange for approving the loan when it is unsecured. An SME loan, on the other hand, is an unsecured business loan that is targeted toward Small and Medium Business enterprises. These loans are aimed to help the emerging new businesses by supporting them with the initial capital sum.

• Unsecured loan : Lenders sometimes to hedge their risk associated with lending to an applicant, ask for a collateral. This collateral usually has a value higher than the loan value. This collateral serves as a security for the lenders, i.e. in an event of default from the borrower, the lender will have the right to liquidate the collateral to recover any outstanding loan amount. The loans where such collateral is asked for are called secured business loans. As the name suggests, the loans where there is no such requirement for a collateral, such loans are called as unsecured loans. Since unsecured loans do not have a collateral attached to hedge the risk, the interest rates are usually on the higher side as compared to a secured business loan interest rate.

• SME Loan : The lenders offer certain lending products that serve the needs and requirements of a certain substrata of the borrower base. The lending terms are designed in such a way that it becomes desirable for the borrower in that demographic of the lenders, and also help the lender manage their lending risk better. As the name suggests, SME loan or small and medium enterprise loan, is a lending product designed specifically to cater the needs of small and medium enterprises. These loans have favorable terms for the borrower, as usually these loans are devoid of any stringent requirements which makes it easier for the small businesses to become eligible for borrowing, at the same time has terms and conditions which helps the lender manage their risks with lending to businesses in SME sector more manageable. 

The festive season and different SME sectors:

The effect that the festive season has on the different sectors of business is as follows:

• Retail sector: Retail sector drives its peak during the festive season as the demand for electronic gadgets and other technological products rises. Retail sector sees one of the biggest demand surge across all categories during the festive season. People usually start preparing for the season a couple weeks in advance so the buildup although is huge but is predictable for the retailers. Considering the fact that India has such a diverse population and many faiths have their festivals around the same time of the year, irrespective of the demography, the retail sector does pretty well. Demand surge for products like clothing, home decoration, lighting, gifting, etc. is quite big and expected. However, a lot of people also make bigger purchases on big ticket items like automobiles, residential or commercial properties, home renovation, etc. around the same time. So irrespective of the demographic a business is catering to, be it a small ticket item or a big ticket item, retailers see a big relative demand. Hence, it is profitable for SMEs in the retail sector to expand their production during the festive season. While bigger players in the market can go for a secured business loan, an unsecured business loan shall help the retail businesses to increase their production budget and utilize it for advertising or commercial marketing.
• E-commerce sector: This sector is perhaps the most affected by the fluctuations brought by the festive season. As the e-commerce market is a competitive one, the different online business websites offer sales and hence require a bigger production. However, E-commerce operators have come up with a plan to offer massive discounts during a certain period right before the festive season to take a piece of the big retail demand that India sees during festive season. For players listed on well known E-commerce platforms, who are selling items that have potential for a huge demand during this season, may see a big influx of orders via online sales Thus, acquiring a financial fund helps the business owner bear the expenses incurred from increased production.
• Hospitality sector: Festive season is one of the peak times for travel. A lot of people prefer taking longer holidays from work to travel to different places in India as well as abroad. This also has a lot to do with the usual decreased workflow as well as the season which makes it the perfect time to travel and explore places. Like other industries, the travel and hospitality industry also do remarkably well during this phase. Festive season brings a season of holidays for the people that, in turn, cause a marginal increase in the hotel and restaurant business. Thus, SME loans will also prove to be beneficial for this sector in supporting the increased load of customers.
• Industrial sector: As the demand in the main market takes an upward trajectory during the festive season, the wholesale market also takes a pike. There is an immediate requirement for some additional capital for coping with the higher demand. Thus, an unsecured loan will prove to be helpful in times of need, especially during the peak season like that as festivals.

Seeing the business sector trends, it becomes clear that the SME loan is the agent essential for these sectors to thrive and draw more profits during the festive season.

Unsecured Business Loan: The ideal boost for your business during this festive season!

If you are a small business owner and you are looking to expand your business’s productivity and earnings, then the festive season is the right time to shine. You can make the most of the festive season by applying for an unsecured / SME business loan.

Features of an SME/Unsecured Loan:

SME businesses are increasingly coming to the forefront among the major drivers ;of economic growth and innovation in this dynamic business environment of India. With increasing competition, especially during peak demand seasons like festive seasons, capital availability becomes really important for small and medium business’ growth potential as it helps to expand and upgrade production in response to increased consumer demand. Unsecured SME loans are, therefore, an attractive way to invest in growing the business without the hassle of producing collateral.

SME unsecured loans are actually tailored for small and medium businesses, offering just the kind of support needed with less averseness compared to traditional secured loans. Festive seasons offer unique opportunities for sales growth and customer engagement for small businesses, funding could turn out to be important in capitalizing on these windows. The lack of collateral requirement makes borrowing process really uncomplicated and easy, and provides the headspace and opportunities to the entrepreneurs to focus on efficient operation of the business while not worrying about risking their personal or business assets to secure debt funding. Business owners could better arm themselves for success by using unsecured SME loans to ensure adequate preparation to benefit from seasonal demand and to ensure long-term success.

The salient features of the SME loan are described below:

• An SME is oriented to lend financial help to small and medium business enterprises.
• An unsecured business loan often comes with a short loan repayment tenure. Most of the lending institutions, such as banks and NBFCs, offer a tenure of 2 years.
• The SME loan does not have a pre-requisite of loan collateral or mortgage for the loan’s approval.
• Several SME schemes also come with a pre-payment penalty in case a business owner wishes to return the loan amount before completing the repayment tenure. This feature may vary from one lending institution to another.
• The business owner can avail of the SME loans at the starting rate of Rs.50,000.
• The interest rates of SME loans are generally higher than the secured business loans.

Benefits of SME/Unsecured Loan during festive season:

• One of the obvious benefits of availing of the unsecured business loan is that it allows the business owner to optimize the sales during the festive season. It provides a financial umbrella for small businesses. This way, the owner can expand production without any hesitation. With a funding injection into the business, the entrepreneur can enjoy greater flexibility in operating their business especially in seasons with huge demand. This capital influx enables the entrepreneurs to efficiently manage their stock, and maintain higher inventory levels in seasons where high demand is expected.
• The SME loans also provide the business owner with some tax exemptions that can be availed on the business’s returns during the loan period. While other funding sources may not allow you to save tax, SME loans – be it business loan secured or unsecured are a great way to save tax, since as per taxation laws interest component on debt is usually tax exempted.
• Several lending authorities also offer a policy on SME loans where the business owner can enjoy additional cash benefits when he/she refers to the SME scheme offered by the lending authority to other business owners. These referral schemes benefit both lenders as well as the borrowers. For borrowers, it can be a great incentivizer to bring in more business as the borrower would get certain benefits as deemed appropriate by the lender. For lenders, it becomes really easy and cheap to expand their loan books by offering incentives to borrowers for referring other businesses.
• SME loans allow the business owner to build up their business assets by acquiring more assets or equipment and machinery. These loans are usually taken by the borrowers to better manage their working capital, however SME loans can also be leveraged to expand. Expansion in terms of both new products, and new markets. Also, SME loans help the borrowers enhance their assets and modernize their equipment and machinery which gives them an upper hand over the competitors in the market, and drive efficiency further in the business.
• Unsecured business loans relieve the business owner from the headache of mortgaging their personal or business assets for approval of the loan. A great advantage of unsecured loans over business secured loans is that the entrepreneur does not have to worry about choosing the asset they may want to give as a collateral. For small businesses, where the availability of the assets is limited, putting an asset which is already limited as a collateral may not make sense. Unsecured business loans give the entrepreneurs enough headspace to get debt funding without going through the hassle of putting a collateral as a security. 
• Such types of loans come in handy for a business to fulfill its short-term goals as these loans’ policy period is short. This is advantageous during peak seasons of business sales like the festive times. Once the entrepreneurs have business loan secured from a lender, they can use the money to enhance business processes and fulfill short term loans. A business may be presented with a challenge to operate while there are plenty of bills receivables pending. In such situations, it may become challenging to operate with an absence of enough working capital. Hnec, such types of loans come in handy to fulfill short term goals and obligations effortlessly.
• The application procedure for SME loans is short and sweet. As there is no need for collateral, these loans involve a lot less paperwork and documentation.

The procedure to apply for an Unsecured Loan or SME loan during the festive season:

Applying for an Unsecured Business loan is a hassle-free and convenient process. You can also apply online for an unsecured loan. The eligible candidate may follow the below steps for applying:

Offline Method for application:

• Head over to the office of the bank or NBFC from which you wish to avail of the business loan. Make sure you have all the information regarding the loan requirement and your business handy. 
• Fill in the loan application form. Ensure that the information you’re providing in the application form is truthful and error-free. Lenders do a background check, and in case of misrepresentation, your loan application can be rejected.
• Submit the application form with the necessary documents. Do a check on documentation requirements in advance. More often than not, entrepreneurs face a roadblock regarding unavailability of the required supporting documents. It is always advisable to be prepared beforehand to avoid any last minute hassle.
• The loan application will then go for verification and subsequent approval. Upon successful completion of application, the lenders then take the application for consideration. While considering, the lenders look for the accuracy of the information provided by the applicant, they also do a background check on the applicant and their credit history. Upon successful verification and you being eligible, the lenders then approve the loan application.

An online method for application:

• After deciding on the SME scheme best suited to your business goals, you should visit the lending authority’s official website.
• Next, select the SME scheme of choice and go ahead to complete the loan application form.
• Enter the credentials of the application form.
• Submit the application form by attaching the necessary documents required for verification.
• After submitting the application form, you can pay the additional fee for applying, and then the application proceeds further for verification.
• If the application form credentials are authentic, then the application is approved, and the loan shall be sanctioned.

Documents required for applying for SME Loan:

• Candidate’s Identification proof: Aadhaar Card, Voter ID, PAN, or Driver’s license are valid documents.
• Candidate’s residential address proof: Aadhaar Card, Voter ID, amenities bill such as electricity bill, and telephone bill are considered valid documents.

Things to consider before applying for an Unsecured Loan during the festive season:

There are some important points that the business owners should keep in mind before they consider an SME loan:

• It is important to plan out the objective of your business loan. The SME owner should determine their agenda or strategy regarding the loan’s utility in his/her business during the festive season. Keeping an idea about the end goal of the business earnings that are to be projected during the festive season helps determine the budget and the corresponding amount of loan required to fulfill it. Also, having a clear business objective and plans and goals that the entrepreneur has on radar with the debt funding injection they’re looking for. This really helps the lenders understand the requirement and the risk level associated with the lending. Objective of business loans not only helps with securing debt, but also helps the borrower put the borrowed funds to an efficient use, and thus creating value in the business.
• Next comes the correct choice of the authority from whom the loan is taken. The business owner needs to go through the complete terms and conditions of the unsecured loan scheme offered by the bank or the NBFC. These lending institutions are often strict on their eligibility criteria, which should also be kept in mind. The business owner should select that lending authority, which falls in line with their business objectives and loan requirements. Different lenders have different pros and cons. Make sure that you list down the pointers that are most important to you and are crucial for efficiently using funds for the business. For an example, let’s suppose your receivables are highly volatile in nature, in such case, the lenders offering flexible payment options should supersede your choice over lenders who may have something else as their differentiating factor.
• Business owners should also take into account the interest rates, market risks, and additional fees of the loan scheme. More often than not, due to ignorance or lack of information about the charges which are disclosed in the fine print of loan terms and conditions, applicants end up paying more than they anticipated. It’s crucial for the borrowers to understand all the risks, and charges associated with the loan and how it can impact their repayment. It is imperative to know applicable charges to avoid any future shock. Many lenders apply various charges, it is essential to know about the same like foreclosure charges, processing charges, additional surcharges, late payment fees, non-payment penalty, etc.
• The lending authorities also consider the reputation and operational efficiency of the business before sanctioning the loan. That is why the business owner needs to create a strong business profile, ensuring smooth cash flow evidence and an authentic portfolio. Lenders always make sure that their risk exposure is as low as possible while considering a loan application. Having a good business profile indicating healthy financials, and a solid business plan helps the lenders understand the actual risk associated with default. It is a great practice to have an authentic portfolio, as this makes the borrowing process easy and quick.
• A common error on the part of the entrepreneurs applying for a business loan occurs during the application process, where they fail to provide optimum documents with their application. Several loan applications get rejected because of inefficient documentation. Therefore, the business owner should keep a strict eye while submitting his/her documents.

Other ways to amp up your business during the festive season:

Although applying for an unsecured business loan is a smart and perhaps the most convenient strategy for business growth during the festive season, there are some other methods that business owners can apply to enhance their business performance.

• Layout your plan of action: For a business to enhance its performance during the festive season, it is important to have an idea about the dates and time duration of the festive season. This way, the entrepreneurs can strategize and implement those strategies well in time and be prepared.
• Festive sales and discounts: What comes as a major attraction to people during the festive season is the festive sales. They are on a hunt for cool deals and amazing discounts. Many of them even wait for the festive season to make purchases. Hence, having a sale or offering a discount on your products will help attract more customers during the festive season. As there is an increased footfall in retail and online space during festive seasons, a great way to leverage this increase in demand is by offering festive sales and discounts. These promotions help the entrepreneur cash in on the opportunities to increase revenues.
• Advertise: Popularizing your business through increased marketing during the festive season helps in drawing new clients to your business. It is smart for the business owner to seclude a separate budget for marketing and advertising at the beginning and throughout the festive season. This marketing should be done both on telecommunication as well as on social media. Advertising your proposition and offering is one of the most effective ways to increase sales. It also works well with some unique strategies. Having a solid advertising idea along with great branding can help increase sales and revenues exponentially. 
• Enhance your presentation: Today, the businesses are judged as per their presentation. Customers are more attracted to a business with an efficient appearance. Thus, during the festive season if the business owners add some festive touch to the business, which makes the store or the online website appear more inviting. Remember that the appearance of your business should reflect you and your business’s personality. It is quite common for businesses to do well if they’re able to sell themselves. In the internet age, there are no unlimited products on offer, one of the main differentiating factors is the way you’re selling apart from what you’re selling. Some smart and creative campaigns to enhance your business presentation to current and potential customers can have a long standing effect on increase in sales.

Summary

Today, SMEs have transformed and developed dramatically over the past few years, these businesses are highly competitive in the marketplace. Most SMEs find it very challenging to compete against this massive competition, so they now embrace new innovative ways and subscribe to many business loan schemes and techniques that give them major sources of capital to support their businesses run efficiently.

Generally, such festive seasons usually come with a peak demand period making it an ideal platform for SMEs to raise their sales and profit-making. However, consumer demands and market conditions do change at times, which also creates a headache for business people who have put in all their personal savings into their businesses. In this scenario, bad credit unsecured loans and SME loans are therefore considered as the lifesaver for small businesses by which owners can finance their operations without totally liquidating the personal assets.

This holiday season should be enough to solicit demand to compel SMEs to expand their enterprise. Generally speaking, this involves capital required for inventory and further staffing or equipment. Business loans will enable the firm to increase production with minimal strain on their cash inflow to serve customers. Customer loyalty and repeat business might also be achieved through access to timely funding.

While unsecured loans differ from SME loans primarily in that the former does not require some form of collateral, the latter is specific for small and medium enterprises. Certain sectors of operations wear particular marks during the festive seasons such as retail. Retail experiences booms in demands for electronics, clothing, and home goods and gathers advantages from doing pre-festive purchasing.

E-commerce: Needs to compete aggressively by lowering the prices, hence demanding more products.

Hospitality: The growing traveling necessarily calls for more rooms and also more eating.

Industrial: Highly requires more wholesales, hence demanding more money for producing.

Thus, to really cash in during the festive season, SMEs should secure business loan, they can do this by applying for unsecured or SME loans, which is a simple procedure and typically requires minimum documentation. Key considerations before submitting applications are to have a crystal clear objective in taking the loan, the right lending authority and above all a solid business profile to improve credibility.

Besides loans, there are other means to enhance business growth. Businesses can plan for sales promotion and add vigor to their marketing efforts and presentations that will fetch more customers.

Grow Your Small Business This Festive Season with an Unsecured Business Loan FAQs: