Business Spotlight

Various Reasons For NRIs To Opt For SME Loans And How To Avail Of Them

SME loans can come in both collateral backed and collateral-free forms and are offered on easy terms and conditions. They provide NRIs with the required funds to set up their business in India and gives financial assistance. An NRI business loan can be easy to avail of if you fulfil the eligibility criteria, have the required documents, and present a solid plan.

Various reasons for NRIs to opt for SME loans and how to avail of them

A vibrant economy coupled with favorable government policies, such as production-linked investment schemes, has made India a dream destination for Non-Resident Indians (NRIs) to start their business. With effect from 1 April 2021, NRIs can form one-person companies in India. That said, funds play a crucial role in setting up a business, and the easy availability of SME loans can help you, as an NRI, shape your venture.

Offered by banks at competitive interest rates, SME loans cater to the needs of small and medium enterprises. These loans help you set up your business, you can also use them to meet financial assistance, undertake expansion, buy equipment, etc.

So, how can this loan help, and what do you need to do to obtain it to kickstart your business in India? Let’s understand.

How can an SME loan help?

An SME loan provides the required capital to set up your venture on flexible terms & conditions and gives financial assistance to business. -. You can use the funds received to buy/rent office space, build the required infrastructure, make vendor payments, etc.

While the loan quantum varies across banks, it can go from a few lakhs to even crores. You can secure an amount as per your business needs.
NRI business loan - the prerequisites

Before availing of an NRI loan, there are certain things you need to be mindful of. Taking care of them will smoothen the SME loan process. These include -

  • Strong business proposal

A business proposal serves as the blueprint of the goals you want to achieve through your business. It’s one of the foremost prerequisites for availing an SME loan. Banks gauge the earning potential of your venture, utilisation of funds, and your ability to repay the loan through this proposal.

Some essential elements to include in the proposal are -

  • Purpose of your venture
  • Company’s description
  • Management team and their expertise
  • Financial forecast
  • Organization goals
  • Market analysis and research

Once drafted, go through it for any potential loopholes. Get it reviewed by someone with legal knowledge to make it foolproof.

General documents for loan applications

Documentation plays a vital role in the SME loan application process. Without proper documents, banks may reject your loan application. Today, almost all banks outline the required documents on their websites.

The common NRI loan documents that you need to produce along with the application form include -

  • Passport and visa copy
  • Income proof that could include Indian and international bank account statements that could range from three to six months
  • Copy of business incorporation
  • Copy of Aadhaar and PAN card
  • Passport-size photographs
  • Any other document as required by the bank

Note that the list of documents may vary across banks. So, after you zero in on the bank from where you want to apply for an SME loan, confirm the documents you need to produce along with the loan application form.

  • Opening an NRI account

Banks expect loan repayment through normal banking channels, including remittances from outside India. There are mainly two types of NRI bank accounts, namely -

  • A non-resident external (NRE) account
  • A non-resident ordinary (NRO) account

While an NRE account allows you to save and transfer foreign earnings in Indian currency hassle-free, you can use an NRO account to save income earned in India. Most banks offer these accounts as a service to NRIs. It’s a good idea to open the account you need from the bank where you wish to obtain your SME loan. It can expedite the loan process significantly, with the bank maintaining an NRE/NRO account at its branch, facilitating repayment.

  • NRI loan eligibility

Before availing of an SME loan, understand the loan eligibility criteria. Generally, the eligibility criteria are the same for NRIs and resident Indians. While individual criteria may differ across banks, some common ones include -

  • Minimum 21 years of age and maximum 65 years at the time of loan application
  • A credit score of at least 750 or more

Transfer funds seamlessly with IDFC FIRST Bank NRI Savings Account

An IDFC FIRST Bank NRI Savings Account allows you to seamlessly transfer the money you earn from your business in India to your overseas account and vice versa. NRI Savings Accounts comprise an NRE Account , an NRO Savings Account, and Seafarer Savings Account. You can choose the one that best suits your requirements.

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