I believe this is one area on which I have also started working for past one year and have seen lot of action and some Einstellung thoughts / business actions which go a long way in defining a fresh /new business model getting emerged where the customer (small business unit) will be the ultimate winner. Gone are the days when businesses had to queue up outside banks to get business loans. With the entry of new online lenders in the market, loans are quite easy to come by. You do not need to move out of your house, face tedious paperwork and bothersome negotiations with the bank manager. The online lenders are very business friendly and understand the specific needs of this niche.
Who are the New Online Lenders
So, who exactly are these new online lenders? These are companies that facilitate credit for small businesses by bringing the borrowers and lenders on a common online platform, or they themselves act as lending companies under the aegis of RBI as an NBFC.
Also known as online peer-to-peer lending, it is a very well-known method that offers fast and hassle-free loan to businesses at amicable interest rates and favorable conditions. The major names include Fair cent, NeoGrowth Credit, iLend, Lendbox, IndiaLends, World Of Lending, CashKumar ,SMECorner and many more.
These lenders leverage the power of technology to speed up the application process. They use web tools for evaluating eligibility, repayment capacity, credit worthiness and other variables that govern the loan sanction process. They are more flexible than their traditional counterparts and are proving to be very popular with small and medium business enterprises.
Quick and Easy EDC Swipe Loans
One of the most innovative and easy credit sources, EDC swipe loans are gaining acceptance among businesses. This is a loan that is secured against the EDC i.e. Electronic Data Capture machine or Card Swipe Machine, by swiping your credit card. It lets you access extra cash for your business in record time. Quick and easy, you can use this loan in any way your business requires as it is an all-purpose loan. The best part is that it is a collateral free loan with easy EMIs and attractive rates.
NeoGrowth is a pioneer in this field and today have expanded to 10 major cities across the country.
Advantages of Online Lending
These new online lenders are becoming the go-to people for small businesses as they offer many advantages against the traditional lenders. Let us take a look.
- Online lenders are easy to access, offer quick loans and the processing is faster as compared to conventional banks.
- They offer loans at competitive and attractive rates which suits small businesses and startups.
- They also offer customized loans which means there is greater scope for different business niches to fulfill their borrowing needs. From a manufacturing unit to a spa owner, all can apply and get assured loans.
- The lending criteria are highly flexible and the interest rates vary according to the amount. They can be low as well as high, depending on the nature of the loan.
Online Vs Traditional Lenders
There is no doubt that these new online lenders have made things easier for businesses but before you take the plunge, you should be aware of all the downsides. Here are the details.
- Online lenders may charge high interest in case of loans that are on the upper end of the risk graph. But then most of these loans are for shorter tenor of say within 6 to 24 months, whereas banks /traditional NBFC would have tenors of 24 to 48 months.
- The processing fee may also be higher and there is also higher penalty fee for late repayment, unlike traditional banks, which have fair processing fee and lesser penalty in case of default.
- Online lenders, mostly, asks for repayment over a short span of time which is not the case with banks. This often leads to undue pressure on the borrower.
- Online lenders are new entrants and still striving to become established in order to give competition to the banks which are more recognized and trusted. The latter have a wider network and also enjoy more clout.
NeoGrowth as a Platform
This FIN-tech company – NeoGrowth Credit – offers innovative loan products that are perfectly suited to the current business environment. They focus on small and medium sized retailers and have tailored their loans to bypass the troublesome paperwork and fixed EMI system. Loans are offered against future credit card and debit card sales to retailers. The main eligibility criteria are:
- Business operations of > 6 months
- Average monthly sales over INR 2 lacs per month
The documentation is also simple and the repayment tenure flexible. The repayment is automatic and dependent on the volume of business in a month. No penal charges are levied for tenure extension. Also, the borrower is given the option of pre-closure without having to pay any charges or undergo formalities.
Evaluating Online Lenders
At the end I would say that before moving to any online/Fintech lender, do compare the different rates offered by them. Research well and decided what you are looking to get. In short your laundry list should be well prepared before you start the search, this will help you to take a decision faster.
Jatinder Mohan Singh Shah
Sr.Vice President – Sales & Marketing
NeoGrowth Credit – Business Loans specially created for Retailers & Online Sellers
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