How Lending Firms Help SMEs to Achieve Growth in Business

The SME sector is vital to the growth of the Indian economy as it employs the second largest workforce in the country after the agricultural sector. It accounts for close to 50% of the entire industrial output of the nation and around 40% of our exports. These statistics underline the fact that India cannot grow unless the SME sector grows.

While the sector continues to receive a lot of support from industry associations and the government bodies, their biggest challenge still remains SME funding. Most organisations are largely unorganised and lack collaterals required to procure SME loans from banks. Moreover, banks and other financial institutions are wary of lending to organisations that do not have an established track record of servicing SME loans and to those whose owners do not have a well-established credit rating history. Conventional lenders follow a lengthy and inflexible process in disbursing loans for small businesses in India.

Due to these reasons, most SMEs do not receive timely funds and this wreaks havoc on their growth prospects. Lack of SME loans prevents small firms from making timely investments into their business and they continue to remain locked in vicious cash flow delays.

The answer to such financial problems is to go for short-term   business loans in India. There are many FinTech firms in India that understand the growing pains of SMEs and thus offer customised loans to them based on their pressing business needs. For instance, an SME might be short of manpower in an approaching season and this could be holding it back from ramping up production. Such an SME could quickly go for a short-term SME loan and use it to hire more manpower. Such SME funding could then be repaid over the next few months on the basis of earnings from sales made during the peak season.

Likewise, you as a small business owner could be waiting to receive payments for an order fulfilled for a large organisation. The credit period for such payments is typically 90 days in India. However,  your suppliers for raw materials and other service providers in the supply chain might not be willing to wait that long and this could impact your future business prospects. So rather than waiting for payments,  take a loan for small business in India and get moving. In most cases, the costs of taking an SME loan are more than offset by the profits made by a business for that duration.

Thus, SME funding provides immediate working capital to your business and you can repay it over a short period of time. This is unlike secured SME loans that are primarily meant for strategic expansion of a business and have lower interest rates but longer tenures for repayment.

A recent study conducted by the National Small Business Association found that 19% of small business owners cite lack of available SME funding as the major challenge in their growth while 82% of small businesses fail due to improper management of cash flow.

While looking to avail a loan for small business in India, you could tap different sources. You could look at banks, non-banking finance companies, government institutions and even venture capitalists. All have their own sets of pros and cons. Banks usually ask for collaterals and venture capitalists might want a stake in strategic decision-making thus making a small business owner lose partial control over his business. FinTech companies are the latest breed amongst unsecured SME loan providers that have come up with innovative ways to provide small business loans in India to help SMEs grow. Let’s look at some of the benefits in borrowing from them.

Innovative business funding options

No two small businesses are the same and keeping this in mind, FinTech companies offer innovative and flexible SME loans to meet a variety of financial needs. Organisations can choose from a host of SME funding such as Term Finance, Online Seller Finance, Merchant Cash Advance and Supply Chain Finance. Such a variety of loan products suits different small businesses such as manufacturers, traders, distributors, and retail store owners. The repayment options are equally flexible. Most lending companies provide a loan for small business in India, ranging from Rs 1 lakh to Rs 1 crore for varied tenures.

Put your cash flow to maximum use

A business that loses out on an opportunity due to want of SME funding is the one that is most likely to lag behind its competition in the long run. A small business could use unsecured loans to open a new branch, launch a marketing campaign, add to inventory for seasonal demand spikes, and so on. Such business funds should only be used for the desired activity and income generated from such avenues should help you repay the loan over a short span of time.

Simple online loan application process and speedy disbursal

Unsecured SME funding provided by new age FinTech companies is easier to obtain as they follow a simple, friendly and technology-based loan application and disbursal process. You can fill in application forms anytime and from anywhere as per your convenience. The loan applications are usually decided in a matter of a few days.

Collateral-free finance helps you focus on your business

Collateral-free finance doesn’t require you to pledge any property or asset to get a business loan. Lenders of such loans look at the strength of your cash flows and expected receivables before providing funds. Any SME with a minimum of one year of business operations can avail of such business loans. Compare this with traditional banks that are highly inflexible when it comes to scrutinising an applicant for short loans. Public Sector banks require a business to be running for at least three to five years to be eligible for a loan and generally do not lend for short tenures of less than a year. Through quick approvals for term loans, online lenders ensure SMEs meet supply chain needs, daily payments and other urgent expenses so that they are free to focus solely on their business growth.

The SME sector is opening up for tech-driven innovation and hence requires sustained monetary support to improve global competitiveness. Favourable government policies and easy access to finance greatly enable the ease of doing business in India.

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