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Tata Capital > Blog > Loan for Business > How Can Blockchain Drive the Growth of SME Finance?

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How Can Blockchain Drive the Growth of SME Finance?

How Can Blockchain Drive the Growth of SME Finance?

Organisations, as well as individuals, often associate blockchain with cryptocurrencies like Bitcoin or Ethereum. Sure, this technology facilitates the trade of cryptocurrencies, but that’s not all it does. It also offers        .

While many small business owners think that blockchain is only helpful for large organisations, this notion is a fallacy. This tech ensures financial transparency regardless of the size of your establishment.

A quick refresher on Blockchain

In simple terms, blockchain technology offers a decentralised ledger that records and distributes information of all monetary transactions between two or several entities. The technology is designed as such that nobody can manipulate or modify any ledger transaction to serve a personal purpose.

Such a digital system bolsters financial security within companies, big or small, and it is impossible to cheat or hack it. While two organisations working together may not trust each other while posting financial data, they will trust an immutable ledger shared between them.

Additional Read:  Top Things Lender Considers While Sanctioning a Business Loan

Benefits of Blockchain for SME finance

Several industries are already reaping the benefits of this technology, so why should the SME finance sector lag behind. Here is how SMEs stand to gain from blockchain.

1. Transparently financing trade between companies

As an SME, you often rely on a host of partners and vendors to manufacture products and bring them to the market. Working with a distributed set of entities presents its set of challenges around credit settlement and documentation. Simply put, there may be friction coming to an agreement on who owes what and how much you jointly owe a financial institution.

If you use blockchain, all such financial information is constantly recorded and updated on a ledger that is instantly distributed to all stakeholders. For instance, if you took a joint business loan with your collaborator and have repaid your part, the ledger will display the information for everyone to see. This level of transparency enables trade efficiency and conflict resolution for SMEs.

2. Quickens availing of funds

SMEs aim to grow at a rapid pace. While this notion is sound, putting it in action will require quick access to SME loans. And blockchain can indirectly help with the same! By recording loan transactions between two entities on a ledger that is entirely open for all to see, this tech fosters trust between the lender and borrower.

Moreover, blockchain can also help lending entities do away with complicated paperwork, documentation, keeping track of timely EMI payments and much more. All they have to do is refer to the digital ledger to stay on top of all happenings.

All of this improves lending speed and efficiency. Removing trust barriers while simultaneously distributing information can make it easy for SMEs to opt for quick finance and continue deploying their growth plans.

Additional Read: When to Get a Business Loan: Best Time for the Loan 

The bottom line

When it comes to SME finance, blockchain technology can work wonders by promoting transparency and mitigating risk between several entities.

Are you looking for SME finance with a credible financial institution? If yes, then your search ends at Tata Capital. We encourage business growth by extending quick business finance at attractive interest rates and negotiable repayment terms. 

If you want to figure out your potential EMIs with us before applying, log on to our website to use our business loan EMI calculator.

So, why the wait? Apply for a loan for your SME today!

Apply Now
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