Flexi loans have become an essential financial tool for Micro, Small, and Medium Enterprises (MSMEs) in India. These loans offer flexibility, ease of repayment, and convenience. It helps MSMEs manage their cash flow efficiently. This unique structure has made flexi loans a popular solution for business owners. Let’s explore how these loans help meet the needs of various MSMEs.
What Are Flexi Loans?
Flexi loans allow borrowers to withdraw funds as needed, up to a pre-approved credit limit. This loan is a specialised product and is offered by some prominent loan providers in India. For example, the Bajaj Finance Flexi Loan is one such loan. Herein, interest is only charged on the amount withdrawn. Also, repayments can be adjusted according to cash flow. This makes them an ideal financial product for businesses with fluctuating incomes.
For MSMEs, managing cash flow is crucial. Many small businesses face irregular revenues due to changes in market conditions and demand. Flexi loans offer a way to bridge those gaps without the need for multiple loan applications or high interest charges on unused funds.
How Flexi Loans Work
With flexi loans, an MSME gets a credit line with a set limit, which can be accessed when needed. Instead of borrowing a lump sum and paying interest on the entire amount, the business only pays for what it uses. For example, if a company has a flexi loan of ₹10 Lakhs but only uses ₹3 Lakhs, interest will only be charged on that ₹3 Lakhs.
Repayments are also flexible. MSMEs can pay the interest for a certain period. They can even choose to repay both the principal and interest whenever cash flow allows. This flexibility in repayment is what makes flexi loans attractive to small businesses.
The Need for Flexi Loans in MSMEs
India’s MSME sector contributes to the country’s GDP and provides employment to many. However, these enterprises often face financial challenges. These can include limited access to working capital and a need for funds to manage day-to-day operations.
Traditional loans can be rigid, with fixed EMIs and interest on the entire loan amount, whether or not it’s used. For an MSME, this structure can be overwhelming, especially when cash flow is not consistent. Delays in customer payments, sudden costs, or slow seasons can leave businesses struggling to pay the instalments.
Flexi loans, in contrast, are designed to provide breathing room. By borrowing when needed and repaying when possible, MSMEs can manage funds efficiently.
How Flexi Loans Became Profitable for MSMEs
- Reduced Interest Costs: A major advantage of flexi loans is that businesses only pay interest on the amount used. This means MSMEs can save on interest costs compared to traditional loans. Instead of taking a full loan amount upfront and paying interest on the entire sum, MSMEs can withdraw smaller amounts. This flexibility reduces interest expenses, making it a more cost-effective option for small businesses.
- Improved Cash Flow Management: Cash flow is a critical factor in the success of any MSME. With flexi loans, businesses can borrow only when they need funds, allowing them to manage cash flow more effectively. For instance, if an MSME needs extra funds to purchase raw materials during peak season, they can use a flexi loan to cover the shortfall. They can then repay it once sales pick up. This type of flexibility helps avoid unnecessary debt. It ensures that businesses have the liquidity needed to keep operations running smoothly.
- Customised Repayment Schedules: Flexi loans allow MSMEs to repay the loan based on their revenue cycles. Many businesses face challenges in making fixed monthly payments, especially during slow periods. With a flexi loan, an MSME can choose to pay just the interest during lean months and make larger payments when business picks up. This way, businesses can avoid defaulting on loan payments and maintain a healthy credit score.
- Re-application Not Required: Unlike traditional loans, flexi loans allow MSMEs to withdraw money multiple times without re-applying. This saves time and effort while ensuring quick access to funds when needed. For many MSMEs, this ability to draw funds instantly without the hassle of paperwork is a significant advantage. It can be a great benefit, especially in the case of an urgent requirement.
The Role of Fintech in Flexi Loan Evolution
The rise of fintech platforms has played a major role in the popularity of flexi loans for MSMEs. Many fintech companies offer easy-to-use digital platforms where businesses can apply for flexi loans and make repayments. These provide MSMEs with quick access to credit with minimal documentation and quick approvals.
With digital tools like loan calculators, MSMEs can also plan repayments and manage their cash flow efficiently. This integration of technology has made flexi loans more accessible and manageable for small businesses, contributing to their growing popularity.
Conclusion
Flexi loans have emerged as a practical solution for MSMEs. These provide flexibility in borrowing, repayment, and interest costs to small businesses. The loans help small businesses manage cash flow better, reduce interest expenses, and seize growth opportunities. The loan is available on Bajaj Markets, a digital financial marketplace. Here, you can check the details of the loan and your eligibility for it on the platform. You can then apply for the product through an easy online process.
