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Complementing the growing popularity of SME and MSME sector, adequate financing is being provided to boost its growth. While these sectors continue to contribute substantially to India’s GDP, more and more entrepreneurs are leaning towards starting their business venture in the same. The ease of availability of MSME loan and a hefty amount provided by these credits makes them an efficient financial solution for such enterprises.

Keeping the convenience of potential entrepreneurs in mind, the procedure of setting up an MSME unit has been kept comparatively simple and hassle-free. All that borrowers need to do is follow a simplified procedure.

Prospective MSME entrepreneurs need to first settle upon the product and services to be offered, and then opt to hire or purchase machinery. This is followed by the arrangement of funds via the various loan schemes that cater specifically to the MSME requirements. 

Subsequently, with adequate funds, individuals can now develop a working space unit in a suitable location, and obtain clearances of products, environment and pollution, and tax-based. This is followed by acquiring quality certification that helps gain positive repute in the product market and hence increase its sales.

Following these steps, and providing relevant paperwork helps entrepreneurs to set up their MSME businesses conveniently. Considering that setting up this seed-business requires the availability of ample funds, multiple government endeavours are being made via loans of up to Rs. 10 Lakh that cater specifically to the financial requirements of these sectors. 

However, for the new entrepreneurs, this sum may often fall short considering the impending expenditure. Under such circumstances, availing business loans from reputed NBFCs ensure that they have convenient access to a high-value credit amount of up to Rs. 30 Lakh. Availing this sanctioned amount is comparatively easy considering the easy-to-meet eligibility criteria and minimum documentation. Additional Read: What is Capital in Business? A Guide For your Small Enterprise

Invoice financing gives way to arrange funds by either mortgaging or selling to pay the bills of your invoices. Though there are some advantages and disadvantages about invoice financing which can help your business’s end on a short term goal.

Here are some of the pros of invoice financing:-

Invoice financing gives a boost in liquid cash for smooth operations. The working capital security is achieved which fulfils the daily expenses of the company. Your business property and assets remain untouched. It gives a higher period of short term liquidity of cash.

You can apply for a quick and secure loan type from the lenders as they calculate the amount given in your invoices rather than undergoing complete evaluation of your business earnings. Such loans are disbursed in 24 to 48 hours after you apply for it. Hence again it proves that your working capital will not be a hold-up. 

Additional Read: A Brief Look Into The Latest Research Report on Working Capital Management

The chances of the default payment and late payment are considerably lowered since it’s the lender’s responsibility to take care of your finances and collecting the payments from the clients as well as the customers. 

The cons of invoice financing which you need to be aware of are:-

The new business start-ups cannot opt for such proposals because in the longer tenure invoice financing can become expensive if left unpaid.

Under invoice financing, you are at risk of exposing your financial credentials to the customers as the payment collection is done by the lenders.

When you plan to mortgage or sell you give the idea that you do not trust your customers to pay on time. This might affect your working relations with your clients.

This idea of financing should only be used if liquid cash is urgent and absolutely necessary.