What’s next for small business loans? Predictions and trends in 2024

What’s next for small business loans? Predictions and trends in 2024

The evolution of Micro, Small, and Medium Enterprises (MSMEs) and their need for digital loans brings in a promising landscape of small business loans for the upcoming 2024. MSME loans attract a digital future for the technologically equipped market that integrates well with policy support.

Navigating the Digital Frontier

A continuous theme-based digital metamorphosis of small business loans and MSMEs will occur in 2024. From artificial intelligence to blockchain and the Internet of Things, these technologies are becoming essential tools in the toolkit for businesses seeking digital loans. This is a strategic attempt to streamline operational protocols and offer a seamless borrowing experience via the adoption of new gadgets.

The intersection of digital transformation and MSME loans could usher in a new era of lending, making the process more efficient and responsive to the needs of businesses.

Driving Financial Inclusion through MSME Loans

The sovereign state of small business loans specifically the governments and financial institutions are aligning their efforts in 2024 to bolster financial inclusion for MSMEs. Streamlining loan processes, enhancing financial literacy, and promoting alternative financings like peer-to-peer lending and microloans form the crux of this endeavor to democratize access to MSME loans. Thus, allowing small businesses access to working capital. 

Policy Support: Fortifying the MSME Loan Ecosystem

Comprehensive policy measures are essential for creating a strong ecosystem for small business loans. Financial aid, tax incentives, and capacity-building initiatives are all support mechanisms that aim to foster sustainable growth. The ultimate goal is to uplift these enterprises and make them key contributors to economic progress.

Rising from Adversity

While the road to recovery from the pandemic has been challenging, the resilience of the MSME sector stands out. Reports by industry bodies indicate a potential surge in the MSME loans sector, marking a significant rebound from the setbacks of recent times.

Yet, amidst these positive signals, projections also hint at challenges, particularly the projected increase in Gross NPAs within the MSME loans segment. It underscores the need for prudent lending practices and robust risk management strategies.

Interest Rates and Borrower Preferences

Aspiring entrepreneurs seeking small business loans in 2024 should brace themselves for prevailing high interest rates. 

Insights from a Forbes Advisor survey reveal evolving borrower preferences. Shorter loan terms of one to three years dominate, reflecting a desire for agility and flexibility in repayment schedules, aligning with the dynamic nature of business cycles.

The Path Forward

As 2024 unfolds, the narrative of small business loans intertwines with the journey of MSMEs embracing digital innovation. The synergy between technological evolution, inclusive policies, and adaptive borrower preferences lays the groundwork for a landscape where innovation thrives. Challenges persist, but the stage is set for MSMEs to emerge as pioneers of sustainable growth, fuelled by accessible and adaptable MSME loans that Arth provides.

A Comprehensive Guide to Micro Insurance Products for Small Business Owners

Micro insurance is designed primarily to safeguard low-income individuals by providing them with reasonably priced insurance policies providing them with a protective cover in times of uncertainty. An underserved segment of society is inevitably going to require insurance since they are more vulnerable to various risks, leaving them high and dry. Micro-insurance products therefore play a pivotal role in securing such vulnerable populations. Lately, financial service providers (FSP) have also started rolling out new-age micro-insurance products such as Credit Shield that help business owners get coverage for their loan repayments in case of loss of life or permanent disability. 

The significance of micro-insurance products in the ever-changing business environment of today cannot be emphasized enough. This extensive guide aims to shed light on the variety of micro-insurance choices available to small business owners and offers insightful information. The purpose of this guide is to educate the masses about the existing consumer-focused micro-insurance products

Micro Insurance for Small Businesses: An Understanding

When it comes to creating the global legal framework for micro insurance, India is a market that is both exciting and innovative. There have been encouraging advancements in this field, which is essential to helping the underserved maintain sustainable livelihoods. Micro insurance penetration is still comparatively low in India, even with the insurance industry being liberalized, and new opportunities created by government schemes. The current environment seems to be mostly driven by supply. Features including product design, efficient underwriting procedures, efficient distribution, increased awareness, easy premium payments, smooth claims processing, and modern technology integration are recognized as critical to expanding market penetration and impact.

Key Types of Micro Insurance for Small Businesses

Property Insurance: Commercial property insurance is necessary if your company’s operations involve real estate and other tangible assets. It guards against occurrences like fire, weather, civil disobedience, and vandalism that could destroy or harm your company’s buildings, tools, and computers. If the property damage results in a loss of business earnings, you might want to buy extra coverage. For example, say you have to shut down a manufacturing facility for several days due to damage from a storm. This form of comprehensive coverage will cover both property damage and lost revenue as a result of the shutdown.

Business Interruption Insurance: If a small business must temporarily close due to an insured loss—such as a lightning strike or fire—a business interruption insurance policy will replace your lost revenue. Theft, wind, and falling objects are additional risks that are covered by business interruption insurance. In the unlikely scenario that any of these issues affect your small business, business interruption insurance covers financial losses resulting from lost sales, damaged inventory, and extra costs like temporarily relocating the operation.

Cyber Liability Insurance: Consider obtaining a Cyber Liability policy if your company maintains a website or if you keep private client data on your desktops or laptops. Your company is shielded against cyberattacks by cyber liability insurance. The price of fixing the damage and the legal fees related to a data breach can have a massive influence on your business, not to mention the harm it can do to your brand, whether your website is hijacked or defaced.

All Things Considered!

Micro insurance, provided by fintechs like Arth is a vital lifeline in the landscape of small business management, offering low-income business owners reasonably priced insurance policies to deal with financial losses. The aforementioned ways help small business owners navigate business uncertainty by buying a micro insurance policy, highlighting the vital role it plays in mitigating risks and providing stability in the fast-paced business world of today.

Can startups also apply for MSME loans in India?

Entrepreneurs now consider business finance loans for Micro Small and Mediums Enterprises as the best financial option to obtain immediate funding for their companies and utilize these funds towards growing their business in a sustainable manner. Small and medium-sized business owners, individuals, and startups can all benefit from the MSME loan options available in the market at user-friendly terms. MSME loans are hence attractive, convenient and easy for business owners across the spectrum.  

MSME loans particularly Unsecured Business Loans are the preferred choice for entrepreneurs to finance their business. The funds raised can be used to expand the company’s operations, address cash flow issues, or buy new production equipment, among other things. 

According to the Government of India, the nation now has the third-largest startup ecosystem globally and anticipates YoY growth at a steady 12–15% annual rate. India has achieved a significant milestone by surpassing 100,000 registered startups in 2023.

Startups within a certain size and revenue limit can access MSME Loans to fund their business growth. There are a host of options available in the market for Startups to choose from. Here we look at some of the top reasons why Startups should apply for MSME loans. 

Interest Rates

Since Startups and MSMEs are essential to the expansion of the economy, lenders offer business loans to them at the most attractive and reasonable interest rates. MSME business finance loans have lower interest rates than other types of loans, which lessens the possibility of the borrower facing financial hardships to repay the loan. 

Accessibility

Securing funding for a new venture, the development, or the maintenance of an existing company can be among the most difficult tasks involved in managing a company. It is simple and hassle-free to apply for an MSME loan. The loan amount is disbursed quickly & promptly, and there is minimal documentation required. When you need money quickly and urgently, this can be helpful.

Collateral-free loans

Collateral is not required for most MSME loans, so you can apply for them without having to provide any security like mortgaging your home or office. This take away the stress and reduces the long and tedious paperwork, so that businesses can get a loan quickly, simply based on a few criteria related to their business. Thus, MSME loans are a perfect way to raise money.

Business Control

Funding your business often comes at a heavy price for Startup owners. If you strive to raise moneym through venture capitalists or investors, you might have to give up an interest or stake in the company, and lose control on how the company should be controlled and run. In such a scenario, a strong cash flow from an MSME loan can guarantee that you get the required money at the right moment and also maintain control over your company.

Small & Short-Term Loans

A lot of traditional business loans are of a large amount and long tenure. MSME Loans on the other hand can be small in size and quick to repay. Borrowers can take small loans based on their immediate short-term fund requirement and also repay the loan quickly and in flexible terms. Thus, MSME loans can provide a company with the short-term money it needs without requiring the borrower to make any long-term financial commitments. Since there are no long-term debt obligations, it also guarantees efficient cash flow management.

How Arth is transforming MSME Funding

Arth as an inclusive Fintech in MSME finance offers multiple finance options customized to different business needs. Arth understands that Startups and MSMEs play a major role in the expansion and development of the Indian economy. However, their growth potential is constrained by a number of issues. As a responsible and evolved Fintech, Arth offers a range of financial solutions to Startups and MSMEs that includes MSME Business Loans, Insurance, Affordable Housing Loans, Payment solutions, and Welfare assistance that go a long way in helping them establish themselves. Arth is a platform that is crucial in revolutionizing the MSME Fintech sector in India and advancing the development of a fairer and more sustainable economic structure.

Fintech companies are promoting financial inclusivity in India

As technology transforms the globe at an unprecedented rate, financial technology or fintech  firms have been leading this revolution by providing pioneering solutions across various fields of finance. They are leveraging their creativity and technological prowess to bridge the gap between traditional banking services and the unbanked populace, particularly in a country like India. 

Indian Fintech firms are providing previously underserved populations with innovative, affordable and easily-accessible financial services, through the use of low-cost mobile technologies and digital platforms. This is helping their customers not just with higher control over their finances, but also contributing to the country’s overall economic growth and development, and paving the way for a more egalitarian future. 

India’s Fintech Landscape 

The Indian economy is among the fastest growing in the world, and one of the key drivers of this growth is the rise of startups, especially in fintech. The meteoric rise of Fintech in India has been facilitated by the proliferation of smartphones, improved internet connectivity, as well as increased digital literacy among the population. The growth can also be attributed to the Indian government’s agenda towards financial inclusion through programs like UPI and Jan Dhan Yojana.

As a global fintech power, India ranks third in the world in terms of total fintech firms, with a strong base of over 3,000 such firms, according to various reports. Most of the Fintechs in India operate in the payments sector, followed by lending and wealth-tech. Over the last few years, India’s fintech sector has crossed a major turning point, and according to the Boston Consulting Group and FICCI, the Indian Fintech sector is poised to cross a valuation of $150–160 billion by 2025. 

Key factors driving financial inclusivity 

Digital payments and accessibility: Fintech firms have been key drivers in promoting digital payment solutions in India. These platforms provide convenient and secure mobile wallets as well as UPI-based transactions for individuals formerly excluded from formal banking. This digital payment system has enabled a broad spectrum of people, ranging from urban professionals to rural farmers to make and receive payments seamlessly through their mobile phones. 

Innovative lending models: Getting a loan from traditional sources has always been a challenge for those with low credit scores or no past credit history. This is a big gap that fintech firms have been able to fill, by building new models that use new data sources to evaluate creditworthiness for giving loans. This has helped in making credit and other financial services available to a larger population, including those who are denied access to the traditional banking sector. 

Financial education and inclusion initiatives: Inclusive fintech firms are involved in financial education and inclusion programs aside from transactions and loans. They educate their users on the importance of financial decisions, investment opportunities, and credit building on user-friendly platforms. Such activities assist in promoting financial literacy, enabling people to make wise decisions concerning their financial health. 

Fintech companies: Carving the pathway for an inclusive future! 

In a nutshell, fintech companies have surfaced as catalysts for transforming the nature of financial services. They have been successful in making finance accessible and available to the masses, previously not served by Indian banks and lenders.

The growth in the Fintech sector has also triggered an economic surge while enhancing financial inclusion across the nation. Fintech companies have been tearing down barriers and enabling people from all walks of life to engage in the financial ecosystem by using innovative technologies and digital platforms, thus helping drive financial inclusion in India like never before.

Human Rights Day Exclusive: Women Customers Upholding Equality, Freedom and Justice

Women stories creative

On Human Rights Day, we want to take a moment to pay homage to three inspiring stories of our women customers who are held in high regard for upholding the principles of Equality, Freedom and Justice. These are their stories. 

Equality Manifested By A Career Choice 

Since 2019, Pinky has been running her fitness center gym in Dharuheda, Bhiwadi. Initially, she received a loan of INR 30,000 from ARTH for her gym, which enabled her to purchase basic equipment such as dumbbells and weightlifting gear. Her gym started doing well, but during the COVID pandemic, her business came to a complete halt. However, Pinky did not lose hope. After the lockdown, she refocused on her business with renewed determination.

Gradually, she repaid the loan and took another loan of Rs 50,000 from ARTH. With this loan, she purchased additional fitness machines for her gym and expanded her business. Pinky is incredibly strong and hardworking. She did not give up on her courage and today, she stands on her own feet, successfully running her fitness center.

Pinky’s story reflects an unconventional career choice she made as a woman since society does not expect women to be business owners of gymnasiums, a role which is traditionally assigned to men. 

Pinky is the symbol of Equality. 

Freedom Of Choice To Own A Venture 

Ganga Devi belongs to the village of Pragati Puram in Raeberalli, Uttar Pradesh. She has been associated with ARTH since 2017, when she wanted to set up a tiffin service business in her area. To do the same she availed a credit facility of INR 20,000. Currently Ganga Devi has been refinanced for the third time with a small loan amount of INR 40,000.

However, due to the lockdown, her business completely faltered. It is then, when Ganga Devi decided to support her family for their daily needs by partnering with ARTH in the production of masks and hygiene kits.

Being a woman, Ganga Devi was always subjected to gendered roles that were assigned since her childhood. Her story about becoming an entrepreneur and also being a support system for the country during COVID-19 symbolises her freedom of choice to follow her dream. She is a testament of Freedom to millions of women in India. 

Justice To Womanhood 

Manju is a resilient single parent, a woman of great strength and kindness. She has two children, a daughter, and a son, and resides in Naka Hanuman Gadi in Ayodhya. After the unfortunate demise of her husband eight years ago, the responsibility of managing the household and caring for the children fell squarely on her shoulders. Being a widow, she had to face several hurdles since widowhood often leads to a loss of will to live or continue. 

In her quest to secure a better future for her family, Manju realised the need for financial support to start her own business. It was then that she heard about Arth, an Inclusive MSME Fintech that provides loans to businesses. With determination, she took a loan and established a thriving tailoring shop. Using the funds wisely, Manju purchased a stitching and interlock machine with a loan of INR 30,000, significantly boosting her business.

As a result of her hard work, Manju’s income soared to new heights. Her success story doesn’t end there. Manju has availed the benefit of the widow pension scheme through the assistance provided by Arth Foundation. Under this program, she receives a monthly pension that serves as additional income to support her household expenses. 

Manju’s story is a testament of Justice to widowhood in India.