The MSME sector is one of the highest employment opportunities provided in our country. More than 22 crore workers belong to the informal employment sector, most of which comes from the MSME sector.

Despite playing a huge part in the economy, the MSME sector is constantly facing impediments due to a lack of timely funding. Receiving the much-required capital on time is paramount for the success of any business.

According to the Reserve Bank of India, MSMEs in India have a credit demand of $490 billion. However, the total supply from formal sources is a pitiful $192 billion.

Owing to factors such as a lack of credit history and long paperwork, banks and conventional financial institutions are unable to support this segment of borrowers, resulting in a $330 billion credit gap. This void has resulted in the emergence of non-bank financial companies (NBFCs) and digital lending platforms that see this as a business opportunity.

The digital lending segment is set to see massive growth in the next 4 to 5 years. This is owed to encouragement towards digitization by the government.

We are also seeing increased usage of smartphones and internet access to every part of the country. The ‘Start-up India’ scheme has also given a boost to entrepreneurship across the country resulting in the need for more funds for these enterprises.

Yet, this deviation from traditional banks to online lending platforms was a long time coming. There are many administrative reasons as well;

Here are the top disadvantages of applying for a traditional business loan at a bank:

  1. Hordes of paperwork required by traditional banking lenders to process a business loan
  2. The high turnaround time taken to process and disburse a loan
  3. Eligibility criteria like income and business viability proof
  4. Credit evaluation is limited by the lack of structured financial details
  5. There aren’t many traditional business loans that are specifically suitable for a small business
  6. Collateral or security requirements to process your loan
  7. Rigid structures with regards to repayment tenure, pre-payment options and foreclosures
  8. High-interest rates while offering low loan amount
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Which are some of the popular business loan lending apps in India?

There are a number of lending apps that lend for various needs. Business loans are a separate segment and there are a few lenders who are doing a great job in this sector;

App NameMobile PlatformLoan AmountFeatures
CASHeAndroid & iOSRs. 5000 – Rs. 2 lakhsThe SLQ calculator (Social Lean Calculator) on CASHe lets you verify your loan eligibility ahead of time. You can quickly compare your eligibility details and interest rate by entering appropriate details such as your name, age, mobile number, salary, and so on into the SLQ calculator.
ZiploanAndroidRs. 1 lakh – Rs. 5 lakhSome of the major advantages of the Ziploan app include simple eligibility requirements, limited paperwork, and no prepayment penalty. With the use of this app, you can conveniently check the loan status online, keep track of your account statement, and be informed about upcoming EMIs.
RupeelendAndroidUp to Rs. 1 lakhApply for a loan in less than 3 mins. Simple documentation and eligibility criteria; Loan is available for the salaried, business professional or self-employed individuals
Finserv MARKETS AppAndroidUp to Rs. 30 lakhsFree credit check; Repayment tenure of 12-60 months; competitive interest rate, low prepayment charges, minimal documentation, instant approval and quick disbursal of the loan amount
Capital First (from IDFC First Bank)Android & iOSUp to Rs. 1 croreCollateral free loans; Repayment tenure of up to 48 months; Easy balance transfer where IDFC First Bank bears the transfer charges;

Why is there an increased demand for online lending apps?

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As mentioned above, getting the much-needed funds at the right time is very important for the success of any business. When the traditional banking system is not equipped to meet the growing demands of the MSME sector, business owners are seeking alternative avenues of funding, leading to the spurt of Loan Lending Apps.

These apps have utilized the recent digitization in the country to their advantage and are customizing solutions for the customers;

24/7 availability – One of the greatest advantages of these apps is their round the clock accessibility. Unlike banks, they don’t have specific working hours and can be accessed anytime, anywhere

Quick turnaround time – These apps allow the applicant to apply and submit all relevant documents online, cutting down the processing time to a great extent. Most apps process and disburse your loan amount within a day or two.

Minimal documentation – Most of the documents are accepted as a soft copy, removing unnecessary photocopying, attestations and form filings.

Flexible loan amount – These apps offer loan amounts starting as low as Rs.10,000, allowing the business owner to borrow to meet his immediate needs. He is thus relieved from excess EMI burden and interest burden every month.

Conclusion

Online loan lending apps have proved to be a boon to MSME business owners during these tough times. They have made business finance more accessible and affordable. Recently, RBI has also taken cognizance of the importance of these NBFC institutions in the development of the country. RBI is expected to announce more schemes and support to this lending system.

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