According to the NASSCOM Start-up report in November 2017, India is currently the world’s 3rd largest start up ecosystem! Against the backdrop of a booming entrepreneurship atmosphere, and thousands of small businesses getting added every year in myriad different industries and sectors, the demand for Fintech NBFC or in other words MSME finance has reached new heights! The current mantra in the business finance scene? – Loans that are Faster, Easier and Affordable!
Digital Lending – The Trend
With the growth of the start-up culture, the new ventures of the MSME sector (Micro, Small and Medium Enterprise), like all businesses, need monetary support. Moreover, in today’s digital era, they need their loans to be economical and affordable, easily procurable, with fast disbursal cycles. In other words, the MSME finance scene in India is seeing a gradual shift from the traditional finance sources to the alternate digital lending sources.
Traditional Business Finance Sources – The Challenges
The 5 most common barriers that small businesses face while taking a loan from a conventional MSME finance source in India, such as banks, government agencies, etc, include:
- Assessment of creditworthiness of a borrower by bank officials are done by outdated methods where small businesses get stuck
- Loans from traditional finance institutes being secured in nature, require collateral from lenders as security, such as real estate, gold, machinery, investment portfolio, etc. Many a times this prevents small businesses to avail business finance even if they have good prospects for growth with the capacity of timely payback.
- Banks are plagued with complicated and complex loan procurement processes which is time consuming and cumbersome
- The waiting time for loan approval/disbursal are much higher in conventional banks extending up to months
- The interest rate to be paid for business finance from a conventional bank is much higher
An Alternate MSME finance Solution – The Success Story
Against the backdrop of immense technological advancement in recent times, the Fintech (Financial Technology) sector has seen rapid growth and is all set to cross the $2.4 billion mark by 2020 as per the NASSCOM and KPMG reports.
TAB Capital, one of the leading fintech lenders use digital technology to make lending faster, easier and less costly. Specializing in MSME finance, TAB Capital’s work is all about granting a loan against financial statements, bank account transaction history or e-commerce transaction behavior (all of which can be digitally uploaded by the applicant / borrower), within a matter of 1-2 days and at an interest rate that is much lesser than the banks. The creditworthiness of the borrower is assessed using big data along with psychometric tests and social media behavior. The trading position of the business is also taken into account.
As a conclusion it can be safely said that the emergence of the Fintech NBFC for MSME finance is a global phenomenon that is transforming the entire lending model and in turn the business sector in totality. An idea can change the world, and as fast the idea can be converted into reality, more profitable and effective it will be. Gone are the days of the waiting in line for form fill-ups and waiting months to get a loan to have your business see the light of the day. With players in the market such as TAB Capital, monetary support for your innovative business idea is just a click away!