India has one of the world’s largest MSME bases. The sector contributes considerably to the country’s GDP, exports, and also offers a large number of job possibilities. However, until now, financial institutions neglected this area because of significant risks, despite their demonstrated development record. As a result, more than 60 percent of the MSMEs had turned to unstable informal funding sources. Considering that banks and other traditional financial institutions demand a credit history, extensive documentation, and evidence to evaluate a loan applicant’s reliability, a considerable number of entrepreneurs and small company owners missed out on loan chances.
Change in the scenario:
The introduction of fintech tools, particularly digital financing, has been a game changer for MSME financing in India in recent years. MSMEs accounted for roughly 17 percent of year-on-year growth last year, owing to a favourable regulatory system and change in government measures. However, a big portion of the market with digital lending potential remains untapped. According to studies, digital lending to MSMEs would rise 15 times by 2023 as a result of increasing digitalization and access to simpler, cheaper finance provided by digital lending organisations.
When compared to traditional forms of financing, digital lending is gradually gaining favour among MSMEs due to the convenience of access and hassle-free methods of receiving a loan. To determine loan eligibility, NBFCs and major digital lending businesses rely on data about business development and financial health.
Loan requests were traditionally reviewed based on different forms of financial information and paperwork provided to a lender, such as tax returns, credit reports, payment history, bank statements, and so on. With the rising digitalization of this data, digital lenders can swiftly assess the sort of loan and rate of interest under which the applicant is qualified. Digital information administration and powerful analytics enable digital lenders to process loan applications more quickly.
The rise of FinTech lenders has been a boon to MSMEs because the lending procedure is now done digitally. This implies that financing is simple because the documentation is low, if not non-existent. The top Indian digital lenders providing smooth finance to MSMEs are listed below.
1) Indifi Technologies:
Indifi is a significant non-banking financial company for MSME lending in India. It is an end-to-end digital financing solution that collects and analyses data from multiple sources about small companies, deriving critical data such as their history and current characteristics in terms of the sector to which they belong. The portal then evaluates the creditworthiness of these enterprises and, if approved, forwards the applications to numerous lenders. In this way, Indifi helps businesses who previously had next to no provision to bank loans or professional finance organisations by offering them a straightforward, easy, immediate, and inconvenience free experience to manage their pressing financial difficulties and continue on their ongoing development.
2) Capital float:
Capital Float is a financial technology trendsetter in India, founded in 2013 has demonstrated expertise in MSME financing. The speed and ease with which loans may be obtained have long been a source of frustration for Indian borrowers. Capital Float is a loan firm that focuses on MSMEs and assists them in scaling up. Capital Float provides flexible, short-term loans to online retailers, small-scale manufacturers, and beginning B2B service providers.
3) Clix capital:
Customers are being empowered by the digital lending NBFC with quick and easy loans for all of their private and business demands. Clix Capital provides a comprehensive range of financial solutions across five industry segments: corporate finance, asset finance and leasing, MSME finance, consumer credit, and housing loans.
Pramod Bhasin, creator of Genpact and former CEO of GE Capital India and Asia, and Anil Chawla, former CEO of GE Capital India and Asia’s Commercial Finance Business, co-founded the firm.
Lendingkart has created technological solutions based on big data analysis that helps lenders analyse customer creditworthiness and deliver other relevant services. Lendingkart Finance Limited (previously Aadri Infin Limited) is an Indian non-deposit taking NBFC that specialises in SME financing. The Company’s goal is to change small business financing by making it easier for SME financing in India. To evaluate the creditworthiness of small companies quickly and correctly, the firm uses technology and data analysis tools that analyse big quantities of information from various databases.
5) Neo growth:
NeoGrowth offers small company owners financing to help them achieve their goals for growth. The no-hassle loans are enabled by technological advancements and make use of the digital payment environment. NeoGrowth offers retail and supply-chain financing to a variety of businesses. In the previous seven years, the organisation has granted business loans to various clothing sector traders across India, assisting them in growing their businesses or developing them further. Some of the primary benefits of NeoGrowth business loans are personalised repayment solutions, no collateral need, doorstep assistance, and simple top-ups.
6) SME corner:
SME corner is a new generation FinTech lender that provides collateral-free business loans in 24 hours to SMEs in India. By combining unique technology and data science to address the complicated SME financing problem, SME corner is helping overturn the challenges in SME financing. To create a consistent and speedy consumer experience, the firm employs a proprietary web platform that blends machine learning, data analytics, and AI.
SME corner has 10 billion in assistance from sponsors such as IDFC First Bank, Ambit, Fullerton India, Northern ARC, and DMI Finance. Lenders such as HDFC Bank, SIDBI, AU Small Finance, U GRO Capital, and InCred have also financed the firm.
7) Vayana network:
Ramaswamy Iyer created Vayana Network, a renowned financial loan firm. It assists MSMEs by offering simple and low-cost finance to help them manage working capital, expand their businesses, and generate jobs. It has formed alliances with a number of banks and financial organisations to handle these loans for businesses.
8) Coin tribe:
Amit Sachdev, Manish Chaudhari, and Rohit Lohia launched CoinTribe, an online loan platform located in Gurugram. It joins small scale business entrepreneurs with banks and other non-bank financial institutions (NBFIs) to allow rapid and easy loan acceptance, as well as risk and credit evaluation tools.
With the increasing number of internet users in the nation, digital lending platforms have the potential to become the preferred route for unsecured SME applicants. It will not only offer the SME industry a much-needed boost, but it will also help to develop a strong fintech environment that will support the potential development of other sectors.