Before we directly delve into the intricacies of the given context, we should understand certain basic concepts. MSMEs are businesses that fall within certain size criteria regarding their turnover and investments in plant, machinery, or equipment. In this fast-paced world, MSME businesses play a crucial role in maintaining a balance in the Indian economy. MSME businesses contribute 30% of the GDP and 45% of the manufacturing output, providing employment opportunities to many.
The traditional method of taking loans from a bank has proven tiring and, to an extent monotonous due to the stringent need for detailed documentation. With new technologies being introduced every year and more businesses being set up in the blink of an eye, online business loans have touched lives and provided better financial conditions for MSMEs. Entrepreneurs of such enterprises can take loans, sometimes even collateral-free business loans, without visiting banks. These online loans give easier access to finance through automated processes of making a valid loan application.
Challenges Faced by MSME Entrepreneurs
Along with the threat of being outshined in this competitive sector, being an MSME Entrepreneur comes with many challenges. Some of them are listed below.
-Finance: Issues related to finance have proven to be a common difficulty for MSME Entrepreneurs. Studies have shown that only 16% of entrepreneurs receive business loans on time. This has resulted in entrepreneurs helping themselves and gravitating towards more personal resources.
-Competition: In this everlasting race of business, MSME Entrepreneurs find themselves in a sea of thousands, waiting to be recognised by the public, especially, while creating a strong digital presence. While competition is common, MSMEs struggle in different sectors, such as clothing, tourism, etc.
-Lack of Professionalism: Often, MSME entrepreneurs must depend on informal staff support mechanisms, especially those who need help coping with the increasing technological advancements. Thus, many Indian MSMEs lack professionalism, which is a major hurdle in expanding their business.
Growth of Online Business Financing for MSME Entrepreneurs
With the rise of MSMEs, multiple schemes are being invented by the nodal authorities to ensure investments for MSME entrepreneurs. A majority of financial institutions have already started to provide options for making an online loan application. Online loan applications provide a safe choice for individuals looking to open their start-up, as such loan schemes provide up to 2 crore loans, with a repayment period of five years coupled with flexible interest rates. Online loan schemes have made it easier for entrepreneurs to apply from the comfort of their homes.
Empowerment Through Access to Capital
In an economy, business capital remains of immense value. Previously, MSMEs had limited access to capital, a major deterrent in developing such businesses. Studies have shown that they often need help to access the formal credit opportunities available within the economy.
Traditionally, business loans meant navigating banks. But NBFCs are changing the game. These financial institutions offer a wider range of business loans, often with easier application processes. This empowers entrepreneurs, especially small businesses, with the capital they need to thrive. From working capital to expansion plans, NBFC loans provide the fuel for businesses to chase their goals and contribute to a more vibrant economy.
Most of the MSMEs had only 16% of their asset debt being financed formally, along with the constant threat of being exploited by bigger companies or fellow MSMEs.
To empower MSMEs, the government has taken up many initiatives and schemes to help with their finance. Some of them are:
-Pradhan Mantri Mudra Yojana (PMMY): Launched on April 8th, 2015, the PMMY offers collateral-free business loans for up to Rs. 10 lakhs to MSME entrepreneurs. Banks, NBFCs, MFIs, etc disburse these loans.
-Credit Linked Capital Subsidy Scheme (CLCSS): The CLCSS is a program launched by the MSSI which provides a 15% subsidy for MSME entrepreneurs. This subsidy is used for the introduction of improved technology to these industries as well as specified sub-sectors.
Conclusion
In conclusion, MSMEs' hassles are endless, while they face new challenges within an intensely competitive environment. However, the Government of India (GoI) has provided financial schemes to make the journey easier for entrepreneurs, especially those who would like to initiate business expansion. The business sector of India is intensely competitive, and experts state that making SMEs thrive remains a challenge for the economy. SMEs and MSMEs have helped local economies succeed and generate significant employment for local youths.
The government's commitment to MSMEs is evident in their loan schemes. Initiatives like Pradhan Mantri Mudra Yojana (PMMY) provide much-needed financial support. But for MSMEs seeking a quicker turnaround or flexible options, NBFCs are a game-changer. NBFCs offer faster approvals, less paperwork, and sometimes don't require collateral. This agility allows MSMEs to seize fleeting opportunities and respond swiftly to market demands. With government schemes providing a strong foundation, NBFCs act as a catalyst, empowering MSMEs to reach their full potential. Explore NBFC options to see how their business loans can propel your growth journey!