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Tata Capital > Blog > Loan for Business > Current Trends in the Business Finance Sector

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Current Trends in the Business Finance Sector

Current Trends in the Business Finance Sector

Businesses faced numerous financial challenges in the past. Lack of collateral, poor credit score, and absence of a solid business plan often led to the rejection of several loan applications.

Besides, loan applications were declined due to banks’ stringent eligibility criteria and comprehensive paperwork. However, the financial business landscape is changing.

Businesses now have easy access to funds, owing to the numerous financing options. Besides, digitalization has changed the way businesses seek funds. Entrepreneurs may avail of a business loan online anytime, from the comfort of their home.

Following are four recent trends in the business lending sector.

1. Rise of Alternative Lending Startups

In the past few years, numerous Non-Banking Financial Companies (NBFCs) have established their base in India. Many businesses are opting for commercial loans from such NBFCs due to their numerous benefit offerings. These alternative lenders provide finance at competitive interest rates and also levy lower fees and charges. Some NBFCs also offer flexible repayment plans, extended loan tenure, minimal documentation, besides other benefits. The business finance industry has therefore witnessed a rise in the number of alternative lenders offering customized loan solutions based on the needs and requirements of the business.

2. Provision of numerous government schemes

The Government of India has realized the importance of the timely availability of credit for businesses and hence provided numerous finance schemes for Small and Medium Enterprises (SMEs). These loan programs aid in setting up a business, managing day-to-day funding requirements, and conducting growth and expansion activities. Some schemes offered are Stand-Up India, Pradhan Mantri MUDRA Loan Yojana, Small Industries Development Bank of India (SIDBI) Make in India Soft Loan Fund for Micro, Small & Medium Enterprises (SMILE), Skill India, and Credit Link Capital Subsidy Scheme (CLSS) for technology upgradation of Micro and Small Enterprises (MSEs), besides many others.

3. Growth of online lending market

Numerous sectors have adopted digitalized means to grow their business. The business finance sector has also employed digital technologies to provide loan-related information and allow customers to borrow through the Internet. The online platform attracts loan seekers as it offers a faster and more streamlined application process as compared to traditional method. Besides, borrowers may track their repayment history and plan their finances accordingly. Though the trend of digital lending is here to stay, it is necessary that individuals be aware of current scams in the market so as to avoid getting duped.

4. Availability of numerous finance options

Earlier businesses had limited finance options and often faced rejection from banks, making it difficult to obtain funds. However, the situation is now changing. Entrepreneurs have varied options and may choose the best financing option based on the needs of their business. Firms may choose between business loans from NBFCs, angel investors, venture capitalists, among many others.

The current trends in the business finance sector indicate an increasingly accessible and timely availability of funds. With affordable and easy finance solutions, entrepreneurs may take their businesses to new heights of success.