How Do Small Business Owners Benefit From Digital Lending?

Small businesses and budding entrepreneurs often lack past financial statements to prove their creditworthiness to banks. This gap opens up doors for a more efficient system to take its place. And digitising lending became the answer.

Since time immemorial, lending has been an integral part of our society. Evidence of money lending and credit systems can be traced back to as early as the ancient Vedic period. Over centuries it has evolved from brokers simply lending money in exchange for collateral to intricate procedures involving heaps of documents. So what has remained the same? People need capital to manage their finances.

But the traditional lending organisation is failing to catch up to speed. The process takes months, tinged with the constant worry of not getting approved for the loan. You need a stellar credit score and steady cash flow to stand a chance. But small businesses and budding entrepreneurs often lack past financial statements to prove their creditworthiness. This funding gap opens up doors for a more efficient system to take its place. And digitising lending became the answer.

Digital Lending is The New Normal

Ardent technophiles are turning every domain digital. And lending is not spared either. As a result, digital lending is already changing how small businesses operate. But what exactly is the digital lending industry? Let’s find out.

To evaluate the creditworthiness of potential borrowers, Fintech platforms utilise their advanced AI systems to analyse and evaluate data. Using a contact-free credit appraisal procedure, these companies can roll out funds instantly in the most productive way. Any lender will first certify whether the borrower can repay the loans through income sourced from the funded activity or the borrower’s regular earnings, such as their regular salary. Credit appraisal establishes the borrower’s creditworthiness. Banks inquire about it from the borrowers face to face in conventional financing dynamics.

But now, all the required documents, such as GST filings, tax returns, credit ratings, and proof of economic activity are accessible online. As a result, the process of making loans available to borrowers is moved from face-to-face interaction to a virtual one. The credit decision is made automatically using a preloaded algorithm, eliminating the need for personal interaction, and the possibility of bias is zero. Compared to more conventional methods of getting loans from banks and NBFCs, DLCs are unquestionably quicker.

For a growing small business, it’s a win-win situation with less time invested and efficient funding. In return, the digital lending industry is flourishing. According to Statista, digital lending is one of India’s fintech sectors with the highest growth rate. The numbers increased dramatically from nine billion dollars in 2012 to about 110 billion in 2019. By 2023, it is anticipated that the market for digital loans will be worth about 350 billion dollars.

Key Benefits of Digital Lending

Nearly 60 million Micro, Small, and Medium-sized businesses (MSMEs) are currently operating in India, contributing substantially to GDP growth and employment. However, one of the biggest hurdles to their development has been getting credit for a long time. Currently, almost 40% of all MSME credit demand is met by informal sources. With creative business models designed especially for the demands and behaviour of this category, digital players have been transforming this landscape. Here are some key benefits of digital lending:

1. Save your time

Banks are notorious for asking for one document after another and stretching a simple task to frustrating lengths. On the other hand, with digital lending, your application process will only take a few hours to get through. With conventional institutions, you have a waiting period of 90 days, whereas, with everything online, it’s only a matter of minutes.

2.  Say bye to physical documents 

Time to bid adieu to messy budget plans and folders. You don’t need half the information you’d be supplying to the bank. Welcome to stress-free ways of the digital world where you don’t need to worry about every penny. Straightforward online tools like the one offered by Precisa do the work for you.

With Precisa’s online bank statement analysis tool, quickly scan the statements rather than wading through so many pages manually. The tool offers several built-in security checks for error-free analysis and results.

3. Don’t have a credit history? No worries 

Banks are likely to shut their doors on you if you fail to prove your ability to repay the loan. But with a lack of evidence, you’ll be knocking on every bank’s door with no answers. On the other hand, digital lending will support even those with less favourable credit histories in getting funds.

4. Available at your fingertips 

The new generation wants the comfort of carrying out all their transactions on their smartphones. The digital lending players provide them with this. Who would want to step out when you can apply for a loan from anywhere and anytime? With quick turnaround times, digital lending platforms serve as a one-stop shop for all your financial needs on your mobile screen.

Closing Thoughts

Digital lending is elevating the small business industry. Of course, proving your creditworthiness is one of the crucial elements of the process. But with bank statement analysis tools like Precisa, you can sit back and relax. If you don’t want to miss a free demo call, get in touch today!