Small and medium businesses play a vital role in the growth of the nation’s economy. MSMEs contributed 30.1% to India’s GDP through Gross Value Added (GVA) in 2022-23, with a 45.73% share in exports for 2023-24. Apart from a seminal contribution to the overall GDP and exports of the country, MSMEs also create employment opportunities for millions of Indians.

While MSMEs remain a critical part of the Indian economy, they often face challenges in securing business credit to grow and expand their ventures. The emergence of online business loans has helped change the lending and borrowing game for such small businesses, ensuring simpler, faster, and more convenient access to collateral-free customised credit to grow and scale businesses.  

Advent of Online Business Loans: A Critical Shift in Lending

The emergence of online business loans has helped cater to the credit needs of small businesses. All major public and private sector banks and NBFCs extend easy business loan funding via digital channels. This has been accompanied by a growth of government initiatives specifically tailored to meet the credit needs of MSMEs. Government-backed schemes like the Pradhan Mantri Mudra Yojana and Credit Linked Capital Subsidy Scheme have empowered MSMEs with much-needed financial support. The Indian Government has also introduced dedicated online portals where MSMEs can gather information about schemes, review the eligibility requirements, documents needed, loan amount, authorised lenders, and more before applying for the loan. 

How are Online Business Loans Empowering Small Businesses 

The growing wave of digitisation has made accessing business loans online easier for small and medium businesses. The advent of digital lending platforms and online business loans has become a boon for small businesses in the following ways:

Easier Credit Access

Small business owners often find it difficult to access credit through formal platforms. This limited access to credit previously acted as a major deterrent to the growth and development of the MSME segment. Availability of online business loans has helped ensure easier access to credit for such small businesses. Business owners in rural areas as well as small cities can now easily access working capital funding and other types of business credit through online applications without physically visiting lenders. 

Boosting Inclusivity 

The advent of easily accessible online business loans has also fostered inclusivity in the lending space. Online business loans make acquiring business financing accessible to a broader range of business owners, especially those located in underserved and remote areas of the country. Unlike traditional bank loans that require multiple in-person visits and extensive documentation, online onlines espouse a simple application process that’s completely digital. As a result, small business owners, women entrepreneurs, and minority-owned businesses can easily access funding against minimal paperwork and tailored eligibility requirements. This inclusivity helps empower small businesses to grow, innovate, and contribute further to the economic development of the country.

Faster Approvals and Quicker Loan Disbursals

Apart from easier credit access, online business loans also ensure faster approvals. Most digital lending platforms determine loan eligibility based on cutting-edge AI and ML algorithms. These algorithms review the financial health data of the company, its performance, and the applicant’s credit history to determine the type of loan and interest rate offered to the borrower. This automated system cuts down on the time required to vet applications and process approvals from a few weeks to just a few days. In fact, several online business loans come with 24-hour approval and disbursal guarantees that ensure small businesses have access to credit within merely a day. This helps such businesses access the required capital and seize time-sensitive growth opportunities. 

Minimum Errors

As mentioned earlier, online business loans have revolutionised the way business credit applications are processed and approved. The use of AI-based tools for verifying application, vetting eligibility, and sanctioning credit has helped eliminate human bias and errors from the process. Small businesses applying for online business loans can benefit from a more accurate credit assessment and secure the required capital at the earliest.  

Convenient Tracking

Online business loans have also simplified the process of tracking your loan applications. Earlier, small business owners were required to visit the physical office of the lender to get updates on their loan application status. But with the advent of online business loans, SMEs can now conveniently track their loan applications online using the lender’s dedicated loan portal.  

Tailored Loan Offers 

Credit requirements of small businesses vary greatly from that of large-scale operations. Online business loans from NBFCs and new-age Fintechs help offer tailored lending solutions that meet these specific needs. Small business owners can get in touch with digital lenders to benefit from customised loan products that are tailored to fulfil their unique business requirements. From lower interest rates and customised repayment terms to higher loan amounts, SMEs can leverage online business loans to meet various credit requirements with a set of customisable loan products. 

Access to Collateral-Free Credit 

Due to the lack of pledgeable assets, accessing secured business credit is often difficult for small businesses. Online business loans make it easier for such small enterprises to meet their credit requirement without any collateral. Small businesses can secure loans of up to Rs. 1 Crore without pledging any valuable assets. In other words, SMEs can now access substantial business credit to grow and thrive even without pledgeable assets. 

Conclusion 

In summation, the availability of online business loan has changed the borrowing game for small businesses significantly over the last few years. Perks like easier access to credit, better inclusivity, faster approvals, minimum human errors, convenient tracking, and tailored loan offers have helped SMEs to fulfil their business goals easily. Overall, the advent of online business loans has simplified the process of availing credit for small businesses, helping them grow and enhance their contributions to the GDP output of the country.