Business loans form one of the most important sources of funding for a company – be it an established firm, an SME, or a start-up. In the past, the lending landscape has seen several changes in a bid to support the growing number of business ventures in the country. Here are some business loan industry trends you must know if you’re looking to secure funding for your venture.
Digital lending is the process of obtaining a loan through digital means, with minimal paperwork involved. This trend is being spearheaded by fintech firms, and their biggest advantage is the instant disbursement of funds. Loans are underwritten using big data technology, which is an efficient way to determine the borrower’s trustworthiness and repayment capacity. Moreover, digital lending often sees a more relaxed loan eligibility criteria that attract a young and adventurous customer base with entrepreneurial ambitions. Digital lenders are aggressively expanding in the SME sector; hundreds of fintech businesses today are trying to close the funding gap in the informal sector.
MSME Loan Shares Are Growing
According to a recent study by TransUnion CIBIL, MSME loans contribute to about 23% of total loans in India (as of Q3FY19). In the future, lending is likely to be skewed towards this segment. In fact, the major part of the growth in MSME lending can be attributed to private banks and NBFCs, as PSU banks’ share has consistently reduced in the last five years.
Improvement in Eligibility Rates
Loans for business are more easily available now as criteria for eligibility are relaxing. There is quite a lot of improvement as regards the turn-around-time (TAT) across lending institutions. As per the TransUnion study, TAT in MSME underwriting has immensely improved from 32 days in 2016 to just 26 days in 2018. This has happened in tandem with increased adoption of digitization in the commercial lending industry. Tata Capital, especially, has a high eligibility policy, along with an adaptive business loan structure that is suitable for modern businesses and their dynamic needs.
In September 2018, the finance ministry launched a portal for fast-tracking MSME loans. Under the scheme, loans of up to Rs. 1 crore are to be approved by banks in under an hour with minimal documentation – only GST and income tax details are required. Other initiatives such as the Pradhan Mantri Mudra Yojana, Credit Guarantee Fund Trust for Micro and Small Enterprises have also been launched to support small businesses – the engines of growth in our economy.
Traditional loans for business need to change to keep up with the dynamic needs of modern businesses in India. We’re witnessing a major shift from legacy systems to new-age tech in the business loan industry, in an effort to enhance efficiency and offer greater value to consumers.
At Tata Capital, you can avail easy business loans – starting at just 19% – to fund operations, invest in machinery, launch a new business line or scale operations. Our fully unsecured business loans are designed to support your needs and secure the future of your business.