Using technology to help SMEs overcome credit challenges:- www.deekpay.com

India is known for its multiculturalism and varied terrain. It is also home to a vibrant SME ecosystem. Due to their nature and size, SMEs often need to rely on credit to maintain and expand their operations. Plans to add new product lines or equipment may require large amounts of capital. But you may also need small amounts of funding on a regular basis to increase inventory or add new suppliers. Depending on the amount of credit you need, you may encounter credit challenges when borrowing from informal sources or banks. Expansion becomes challenging due to credit access difficulties when facing capital shortfalls at different stages of business growth.

The rocky road of SME borrowing

For salaried individuals, monthly bank statements are available. SMEs, on the other hand, may not have verifiable records of all transactions and income. Gaps in financial data make for an incomplete picture of the creditworthiness of the enterprise, reducing the availability and affordability of credit.

It is also more difficult to access small amounts of capital that are critical for short-term business needs. Recourse to informal loans, often accompanied by very high interest rates and strict repayment conditions, can increase the vulnerability of enterprises.

There are many other reasons why credit may be a challenge for SMEs like yours. For example, you may:

- Do not wish to use the funds for purposes other than those specified by the bank

- Not always collateralised

- Need for immediate financing of short-term requirements

- Unsustainable loan repayments

- Not aware of all available credit options

Using Technology to Overcome India's SME Credit Challenges

India's SME ecosystem and its challenges were diverse, and a single individual could not solve all the problems. Banks, NBFCs and regulators are working to strengthen the country's credit infrastructure. In the meantime, you can use technology to build a digital footprint of your business's financials. The more digitised a business is, the more data it has to validate its financial viability.

Take small steps, such as trying to open a current "business only" account with a reputable bank if you don't already have one. Use digital payment methods to receive payments and establish a reliable transaction history. Similarly, when you borrow, maintain a healthy credit ratio and make timely repayments to improve your creditworthiness.

Banks and fintech companies can assess creditworthiness using alternative data-based tools that go beyond credit history and cash flow projections. This can improve loan approval times by reducing the amount of documentation and physical processes. Innovative credit solutions suited to the needs of SMEs can significantly improve the ease of doing business.

Read more to learn how to get better access to business credit.