Why Fintech is the best solution for financing a business.

As recent RBI statistics show, non-performing assets (NPAs) at public and private banks reached over 9.5% in September 2022, indicating banks are still burdened by bad loans.

As a result, banks have tightened lending practices, making it harder for small and medium enterprises (SMEs) to secure business finance

In the ultra-modern virtual generation, fintech lending is becoming essential to serve the growing credit requirements of MSMEs effortlessly.

Banks Unable to Meet Rising MSME Credit Demand

According to the IFC study, 85% of MSMEs lack adequate credit options, with only a 5th of those funding needs being addressed via formal credit channels.

On the other hand, India has over 63 million MSMEs that contribute around 30% to GDP and have a huge $400 billion credit gap, according to IFC information.

This gap between demand and supply has enabled the upward thrust of fintech lending companies utilizing technology to offer quick and easy business finance options.

Also Read:- Don’t Miss This Out If You’re Looking For Business Loan At Lower Interest Rates

Fintech lenders leverage big data and analytics for faster credit decisions, decreased paperwork formalities, and quick mortgage disbursals.

They emphasize on imparting a hassle-free customer experience so that commercial enterprise owners can focus on developing and expanding their organizations rather than financial concerns.

Also Read:- The Fintech Space in India

What is Fintech Lending?

Fintech lending leverages financial technology and statistics to provide quicker, extensively accessible lending services through virtual platforms. Key models consist of:

  • Direct Peer Lending

Online structures directly connect investors and business borrowers. It provides easier access to financing but investors and debtors ought to compare risks and terms diligently.

  • Crowdfunded Loans

Investors can fund quantities of loans to small firms via fintech lending platforms. Allows traders to diversify and generate returns even as supplying small businesses with growth capital. Know crowdfunding or small business loan which is best your business?

  • Digitized Mortgage Lending

Fintech lenders make use of technology to simplify and quicken commercial property loans for small organizations. Automation expedites cumbersome techniques.

  • SME Financing

Loans tailor-made, particularly for small and medium enterprises, furnished through streamlined fintech structures. Expands access to capital with alternative credit assessment.

Also Read:- Small Scale Industries in India (SSI) – List, Types, & Eligibility

In precision, fintech lending makes use of alternative data, algorithms, and technology to provide handy, less costly business finance so small corporations can thrive.

Platforms connect traders seeking to diversify with underserved market segments in a streamlined way, albeit with risks. It is a relevant emerging mode promoting financial inclusion.

Also read:- Now, FinTech Start-Ups To Provide Capital To SMEs

Fintech Lending vs Traditional Lending 

ParticularsFintech LendingTraditional Lending
DocumentationDigital tools like APIs for efficient and hassle-free data collection.Physical paperwork and signatures.
Decision-Making TimeMinutes, thanks to streamlined virtual procedures.Days or weeks because of massive paperwork.
Customer Support24/7 help accessible through virtual channels.Limited to business hours and channels.
Risk AssessmentComprehensive evaluation of more than one data factor.Focus on credit scores, work and job history, and payment cycles.
Funds DisbursementSame-day disbursement for quick monetary support. Delayed

Key Advantages Fintech Business Finance Offer

Here are a few key advantages fintech enterprise loans provide over conventional lending:

1 NPAs Limit Bank Lending, MSME Credit Demand Grows

Banks require huge paperwork and other formalities before processing loans, while fintech creditors have online programs with soft copies of primary documents like business registration, bank statements, and KYC documents.

A 2022 study throughout India and Southeast Asia reveals fintech lending requires 83% fewer documents as opposed to traditional lenders.

2 Streamlined Digital Loans With Minimal Paperwork

The complete fintech loan application system, from eligibility verification to approval, documentation and disbursal takes place digitally in a paperless way.

Business owners can effortlessly track application status by logging into their respective accounts. McKinsey studies indicate over 90% of digital lending in India takes place online or through mobile channels.

3 Fast Approvals and Disbursals Via Technology

By leveraging technologies like artificial intelligence and machine learning, fintech lending agencies can make faster credit decisions and disburse funds in 72 hours or less as opposed to weeks for traditional business loans.

A small business finance report by Allied Market Research indicates that tech-enabled algorithms enable fintech companies to process loans in just a few minutes.

4 No Hidden Fees, Transparent Pricing

Unlike traditional lending, fintech lending companies don’t impose prepayment penalties, allowing borrowers flexibility in repaying early. Additionally, banks often charge hidden fees deducted from the loan amount, while fintech lenders clearly explain charges and have processing fees between 2-5%.

Also read:- The Great Indian FinTech Story: Is FinTech The Next Biggest Thing In The Financial Industry?

Takeaway

In conclusion, fintech lenders are meeting the needs of the 21st century digitally transforming small businesses in India by providing quick, transparent, and flexible business finance options.

Leading fintech loan providers have already disbursed over ₹8,500 crores to over 1,50,000 MSMEs across 1300 cities in India through their online platform. As digital adoption grows, fintech lending is slated to gain more traction supporting the backbone of the Indian economy.

By indifi

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