Are you interested in applying for an SME loan? If so, you have come to the right place. In this blog post, we will discuss how to apply for the SME loan scheme in Pakistan (max PKR 2 crores).
We will provide you with information about the process, what documents you need to submit, and the eligibility criteria for SMEs and startup loans.
With this knowledge, you will be well on your way to applying for the SME loan scheme and hopefully receiving the funds you need to get your business up and running.
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How To Get SME Loan In Pakistan | Business Loan In Pakistan
Table of Contents
- How To Get SME Loan In Pakistan | Business Loan In Pakistan
- What Is The SME Loan Scheme?
- Who is Eligible For The SME Loan Scheme?
- Requirements For The SME Loan?
- How To Get an SME Loan? (Top Sources)
- Pros And Cons Of Getting an SME Loan
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What Is The SME Loan Scheme?
The SME loan scheme, also known as the Small and Medium Enterprise loan scheme, is a government-funded program in Pakistan that provides financing to small and medium-sized enterprises.
The goal of the program is to help support and facilitate the growth of small businesses and encourage entrepreneurship across the country.
Through the SME loan scheme, businesses can apply for loans ranging from Rs. 50,000 to Rs. 2 crores, depending on their eligibility criteria and requirements. The scheme also offers benefits such as lower interest rates, longer repayment periods, and preferential terms for women-owned businesses.
| Features | Details |
|---|---|
| Eligibility Criteria: | Businessman aged 22 to 65 years |
| Markup Mechanism: | Floating Markup (KIBOR + spread) |
| Pricing Criteria: | Variable based on the floating markup |
| Required Documents: | Loan Application Form, borrower’s profile, financial statements, property documents, etc. |
| Repayment Frequency: | Monthly, Quarterly, or lump sum |
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Who is Eligible For The SME Loan Scheme?
The Small and Medium Enterprises Development Authority (SMEDA) of Pakistan offers a variety of loan schemes to support small and medium enterprises (SMEs) in the country. The eligibility criteria for these loan schemes may vary, but generally, to be eligible for an SME loan in Pakistan, you must:
| Enterprise Category | Criteria |
|---|---|
| Small Enterprise (SE) | Annual Sales Turnover: Up to PKR 150 Million |
| Medium Enterprise (ME) | Annual Sales Turnover: Above PKR 150 Million to PKR 800 Million |
| Start-up | A small or medium enterprise up to 5 years old |
| General Requirements | 1. Be a small or medium enterprise as defined by SMEDA |
| 2. Be registered with relevant regulatory authorities in Pakistan | |
| 3. Have a viable business plan demonstrating potential for growth and profitability | |
| 4. Have a good credit history and financial standing | |
| 5. Meet any other specific requirements set by the loan scheme you are interested in |
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Requirements For The SME Loan?
| Incentive Scheme | Details |
|---|---|
| SME Asaan Finance (SAAF) Scheme | |
| Eligibility | All new and operational SMEs that are new borrowers of the participating banks |
| Maximum Financing | Up to PKR 10 million |
| Loan Types | Term loans and working capital/running finance loans |
| Security | Loans may be secured against personal guarantees of the borrowers |
| Loan Tenor | As per the financing facility approved by the participating bank |
| Mark-up Rate | Up to 9% per annum for the end user |
| Risk Coverage | The government of Pakistan provides risk coverage on a first-loss portfolio basis: |
| Portfolio Category | Risk Coverage |
| Loans up to PKR 4 million | 60% |
| Loans exceeding PKR 4 million and up to PKR 7 million | 50% |
| Loans exceeding PKR 7 million and up to PKR 10 million | 40% |
How To Get an SME Loan? (Top Sources)
SME Loan From SMEDA
| Step | Process |
|---|---|
| Eligibility Check: | Determine if you meet the eligibility criteria for the specific loan scheme. |
| Document Gathering: | Collect necessary documents like proof of identity, business ownership, financial statements, and a business plan. |
| Application Submission: | Submit your loan application online through the SMEDA website or in person at an SMEDA office. |
| Decision Waiting Period: | SMEDA reviews your application and decides based on eligibility and the information provided. |
| Loan Agreement Signing: | If approved, sign the loan agreement and provide any additional required documents before loan disbursement. |
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SME Loan From Banks
Several banks in Pakistan offer Small and Medium Enterprises (SME) loans to support the growth and development of small and medium businesses in the country. like SBP etc.
Here are the top five banks that give SME loans in Pakistan:
| SME Loan from Banks |
|---|
| National Bank of Pakistan (NBP) |
| State Bank of Pakistan (SBP) |
| First Women Bank Limited (FWBL) |
| SME Bank |
| Bank of Punjab (BOP) |
| United Bank Limited (UBL) |
SME Loan From Non-profit Organizations
Here are five organizations in Pakistan that offer interest-free loans to small and medium enterprises (SMEs):
| SME Loan from Non-Profit Organizations | Organizations Providing Interest-Free Loans |
|---|---|
| Pakistan Poverty Alleviation Fund (PPAF): | Provides interest-free loans through its microfinance program. |
| Akhuwat: | Offers interest-free loans through its microfinance program. |
| Kashf Foundation: | Microfinance institutions provide interest-free loans through their microfinance program. |
| Grameen Bank: | Microfinance institutions offer interest-free loans through their microfinance program. |
| First MicroFinance Bank: | Provides interest-free loans through its microfinance program. |
Pros And Cons Of Getting an SME Loan
| Pros of SME Loans | Cons of SME Loans |
|---|---|
| Access to Capital: | Debt: |
| Provides funding for businesses lacking traditional sources. | Adds debt burden if repayments are delayed. |
| Growth Investment: | Interest Costs: |
| Enables investment in new equipment, staff, or expansion. | Increases overall borrowing costs due to interest. |
| Improved Cash Flow: | Collateral Requirement: |
| Helps maintain a healthy cash balance for financial obligations. | May require collateral, risking assets if not repaid. |
| Flexibility: | Credit Risk: |
| Customizable loans with flexible terms and interest rates. | Difficult for businesses with poor credit to obtain loans. |
| Credit Rating Improvement: | Repayment Terms: |
| Timely repayments can boost credit rating for future financing. | Inflexible terms may strain business cash flow. |
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FAQs | SME Loan
Name of Authority that deals with SMEs in Pakistan?
Small and Medium Enterprise Development Authority (SMEDA) deals with SMEs in Pakistan.
Organizations that give Interest-free loan business in Pakistan?
Pakistan Poverty Alleviation Fund (PPAF)
Akhuwat
Kashf Foundation
Grameen Foundation
First MicroFinance Bank (FMFB)
These organizations give interest-free loans to small businesses in Pakistan.
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