In the last 3-4 years, India has seen tremendous growth in the number of new businesses. The policies of the Indian government and its stand on promoting new businesses ventures in the country has been the driving fuel in encouraging many people to start a small business. In addition to these the existing small business almost got a lifeline as the difficulty to get a loan for working capital fell sharply. As per the BIZ2Credit Small Business Lending Index, June 2018, all categories have seen a rise in the loan approval percentage.
The government schemes like ‘MUDRA’ have gone a long way in providing small businesses with the necessary capital influx, in addition, it has also encouraged other private lending institutions to provide more loans to small business owners. Shortage of funds has been the problems in small and medium business sectors for a long time in the country. But at present be it big banks or small or financial lending institutions, they have steadily seen growth in the number of business loan applications from small business get approved.
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The key reasons why the small business loan is now trending are:
- Growth in Indian Economy: In recent times, the Indian economy has seen notable growth trends and with that demonetization has brought a lot of unaccounted money from the hands of people to the government, which ultimately flowed to the banks through RBI. Now banks have more money to lend, in addition, it has also eased some conditions as the market started becoming more friendlier to SMEs.
- Faster Approval and Disbursal: As a result of a friendlier approach by lending institutions towards small scale business there has been faster approval of loan applications and quick disbursal which has served in favor of business who are able to meet their working capital requirements on time without disrupting their business cycle.
- Flexibility in Repayment: Modern banking system is more flexible and quick. Flexibility in repayment options makes it beneficial for a business to avail loan when they require funds and repay it on their option as per the funds available with them.
- Business Friendly: From market conditions to government policies, most of the things have seen a shift to be more business-friendly than before. It has resulted in lending institutions as well to have terms and conditions which are business friendly. No hidden cost, low processing fee, no documentation charges, and pre-payment charges have paved way to make a business loan attractive.
- Start-up Loans: There is a start-up wave in the country, government policies and regulations in the recent times have been designed to encourage people especially the young generation to opt for a start-up rather than the usual career of pursuing a job. Any business new or old requires funds, and lending institutions have played their supporting role by providing the much-needed funds to start-ups which are mostly small businesses.
When quick and easy loans are available for small and medium businesses, it makes it easier for them to focus more on growth and expansion rather than curb their expenses to manage the limited funds which more often hamper the business cycle as well. But thanks to the modern banking system in combination with business-friendly government policies and schemes which in overall has made the life of small business better and to avail a business loan easier.
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