Over the past few years, Non-Banking Financial Companies in India have witnessed phenomenal growth. The contribution and evolution of these lending institutions from adopting a shadow banking system to the innovation ecosystem has been worth commendable for the Indian financial system. By fostering financial inclusiveness in the nation these institutions have delivered multi-dimensional impact. They have accelerated the growth of SMEs and MSMEs- the pillars of the Indian economy. Moreover, due to their flexible financing procedure and fast turnaround time, these institutions have emerged as a great alternative to traditional banking systems. They have revolutionized the conventional business funding procedures.
Thus, it can be certainly claimed that NBFCs like FlexiLoans have been the real game-changers for SMEs and MSMEs. By providing the much-needed financial assistance these institutions have provided the whole new face to small and medium scale businesses. To further explore how NBFCs are changing current lending scenario and boosting SMEs growth let’s dive deeper through this post.
How NBFCs are contributing to SME and MSME sector’s growth
Despite the increase in coverage the penetration level of traditional banks has been quite low. These organizations have been unable to extend their reachability to unbanked masses of the nation. This is where the Non-Banking Financial Institutions have created their mark. By providing financial access to customers left out by banks NBFCs have played a significant role in promoting inclusive growth. They have truly instigated the spirit of entrepreneurship in India. With their innovative funding products, these new-age non-banking lenders have been able to address the debt requirements of wider consumers. Thus, NBFCs play a significant role in providing funding to micro, small, and medium scale enterprises. By providing a financial boost to SMEs and MSMEs these lending institutions tend to nurture and stimulate the growth of the Indian economy. Moreover, by shifting their focus on gaps left by banks NBFCs make endeavors to reach every corner of the country. They have been successful in offering credit facility to underserved retail business owners. Therefore, a large part of the success of SME startups in India can be contributed due to non-banking financial institutions.
NBFCs are helping SMEs on the following accounts:
Differentiated approach: NBFCs have become a major source of funding for small and medium scale enterprises due to their flexible lending process. They sanction collateral-free business loans without involving any substantial paperwork. Additionally, these organizations provide the small business owners access to capital at affordable rates at the right time. Thus, the NBFCs assess the financial behavior of borrowers based on non-traditional methods that are easy to be followed by SMEs.
Standardized tech-driven processes: The new age financial institutions are using deep technologies like machine learning, artificial intelligence, and data analytics. By leveraging the technologies NBFCs are simplifying the borrowing process for retail entrepreneurs. The application of algorithms is yielding the better results in terms of turnaround time and credit underwriting. Also, these innovative approaches are helping in designing powerful product solutions customized to suit the particular business requirement.
Easy application and quick assessment: With NBFCs in arena small business owners no more need to run around for financing. By relying on the lending models of these financial institutions borrowers can avail the quick, hassle-free funding. Incorporating an innovative approach and methodologies NBFCs have improved the speed of credit processing significantly. Even the transparency and reliability of processes have increased. Since everything is online there is minimal paperwork and fast processing, consequently obviating the need for filling exhaustive application forms.
Loan disbursement within hours: Just like the travel and shopping the capital market for SMEs has also evolved. Everything from application filling to capital disbursement has moved online. This is making it easier for small business owners to fulfill their immediate funding requirements. Even the creditworthiness of potential borrowers can be assessed online. Thus, unlike banks business loans from NBFCs can be processed within hours.
Easy Terms and Conditions: When it comes to repayment terms and conditions NBFCs follow less stringent norms. They provide borrowers the flexibility and ease for repayment. For instance, various choices for a refund such as weekly, or monthly or no charges on late payment can be offered. Consequently, all such benefits make NBFCs a preferred choice of SMEs for business loans.
Summing it up….
Hence, it can be concluded that with the rise of NBFCs like FlexiLoans obtaining business loans is no more a tedious task for small and medium enterprises. These lending institutions have evolved as an affordable, convenient and speedy source of funding well suited for SME business scenarios. With their robust processes and faster decision making NBFCs have redefined the way lending occurs. Furthermore, by cutting through countless processes they have provided an entirely new direction to expansion and setting up of small and medium scale businesses. Thus, by becoming the primary source of working capital NBFCs tend to catalyze the growth of new business ventures in India.