Shouldering the burden of taking the Indian economy to places post-lockdown rests upon the shoulders of small and medium-sized enterprises! But then, unlike large-scale enterprises, they often falter when it comes to the long haul, courtesy of the lack of adequate financial reserves.
While the concept of credit lines and business loans for SMEs and MSMEs has been around for a long, the process has always been lined with tedium and bottlenecks. However, the new normal, i.e., the world in 2021, is continuously breaking free from the shackles of documented lending, precisely upon riding the wave of digitization.
However, digitization isn’t merely a customer-centric approach to minimize the financial workload, and there is a lot more to it than what meets the eye when procuring an MSME loan is concerned.
The Concept of Digital Lending
Most lenders have already migrated to digital lending setups precisely to make it easier for MSMEs and SMEs to get their hands on a business loan. The process remains simple as you, as the business owner, need to head over to the online platform, apply for the business loan upon verifying eligibility, and fill out the online application form.
Digital lending, or the concept of digitization, on the whole, is expected to make underwriting, onboarding, servicing, disbursement, and even the approval process easier and faster.
Challenges faced by Manual and Offline Lending Setups
Financial institutions that have still not adopted digitization as a core functional metric are expected to smart under the following challenges, including:
- An arduous process concerning loan application and approval
- Excruciatingly long onboarding duration
- Erratic portfolio management and data monitoring
- Lack of customization
- Sluggish document management
- Inefficient risk assessment, loan renewals process, and credit approvals in case an MSME loan has been applied for
These challenges can be combated and mitigated instantly if the lender adopts a digital framework instead of persisting with a passive and dated manual system.
Technical Aspects of Digitization
With digitization making its way into the financial hierarchy, a business loan can quickly get processed within hours instead of days. But, there is a lot more to this necessitated adoption, which includes:
- Brighter and faster onboarding with a dedicated interface for uploading documents
- Usage of data analytics for improved underwriting speeds
- Boosted information flow to analyze credit info better
- Automation approval support
- Existence of pre-defined financial algorithms
- Optimized loan disbursement
- Minimal turnaround time
- Better credit decisioning
- Lesser overheads and, eventually, better interest rates for customers
Now that you are aware of the various perks offered by digital lending setups when SMB loans are concerned, it is a matter of time that every financial arrangement adheres to the concept of digitization. However, if you seek an MSME business loan at this time, you can check for available digital options at the Finserv MARKETS to compare and contrast options, as per flexibility and ease.