They are young, vibrant with heads firmly on their shoulders- the young gen of India. And this generation does not believe in working for others, they believe in being their own masters. So, if you too are planning to start up and want to know about the various financing schemes for small and medium-sized business loans, you will find this write- up very engaging. SME finance, the funding of small and mid-size businesses forms a major chunk of the business finance market. Here are 10 things you should know about small and medium sized enterprise funds-

  1. Business finance market get capital in the form of bank loans and overdraft facility, leasing and hire purchase arrangements, equity/ corporate bond issues, venture capital or private equity, and asset based finance such as factoring and invoice discounting.
  2. The Union Budget, 2017 -18 has reduced the income tax rate to 25 percent from 30 percent, for the companied with revenues of less than 50 crores. It should be noted here that around 96 percent of the Indian companies fall under this category.
  3. There is also a reduction of 2 percent in the presumptive taxation rate. Earlier, companies with an annual turnover of less than 2 crore were required to pay income tax under presumptive rate of 8 percent. Now with this announcement, they will be entitled to pay income tax under presumptive rate of 6 percent.
  4.  Not only this, the startups will now pay income tax for only three years, out of seven years tenure and that too only if they make profits. This is a welcome news for all the budding startups throughout the country to operate freely without any unwanted financial stress. However, this benefit is applicable only to the DIPP (Department of Industrial Policy and Promotion) recognized businesses.
  5. Also, to tap companies that make high profits but do not pay any tax due to exemptions, deduction, and incentives, MAT (Minimum Alternate Tax) has been introduced. MAT will ensure that all companies pay a minimumamount of tax. It is applicable on all companies, except those which are associated with power or infrastructure sector.
  6. Currently, the carry forward of losses in business is allowed up to 8 years, per the Income Tax Act. Now with startups, the condition of continuous holding of 51 percent voting rights has been relaxed subject to the condition that the holding of the original promoter/ promoters continues.
  7. The budget also emphasizes on strengthening the infrastructure of different sectors of the economy so that the small and medium sized enterprises can invest themselves in different types of works and grow sustainably.
  8. To access the credit risk of micro, small, and medium enterprises (MSMEs), TransUnion CIBIL has recently launched a ranking for these firms.This credit risk ranking will help the banks and other lending institutions to evaluate their credit decisions better.  The ranking will also enable the financial institutions to understand the historical credit behavior of their borrowers of SME loans, MSMEloans, and business loans, while predicting their behavior in the near future.
  9. There are many government programs that provide funding to the SMEs. 10,000 crore startup fund, bank of ideas and innovations, and MUDRA (Pradhan Mantri Micro Development Units Development and Redefining Agency Limited are some of the examples of such initiatives that promote the growth and development of micro, small, and medium enterprises.
  10. Business loans are typically of two types. The first one is where you have the option of borrowing a lump sum amount and then repay it with the interest component. The other option is a revolving line of credit which lets you pay interest on the balance of the line and you can continue to repeat it once you finish paying it off. Both these types have pros and cons, depending on the purpose of taking it.You can choose from commercial banks, non-banking financial corporation (NFBC), region specific lenders, and micro and alternative lenders.

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