Business Loan Trends to Watch Out for in Financial Year 2017-18

by Gopal Gidwani on April 20, 2017 · 0 comments

in Financial Planning

Donald Trump’s presidency and India’s demonetisation move both caused quite a stir in the business industry. However, this did not deter aspiring entrepreneurs to set up their business ventures. Entrepreneurs continue to seek finance from banks and Non-Banking Financial Companies (NBFCs) to fund their business operations.

Due to a widespread demand for business loans, both in the organised and unorganised sector, the number of lenders providing finance is on the rise. The past few years witnessed an increase in the number of NBFCs, which provide loans at competitive interest rates. Besides, the number of lenders offering their services through digital modes has increased as well. Following are four trends to watch out for in the coming financial year.

  1. Rise in the demand for loans

The Prime Minister of India Narendra Modi, announced demonetisation of INR 500 and INR 1,000 notes last year. After this move, many financial institutions witnessed a rise in the demand for commercial loans. Small traders and manufacturers, who conduct most of their dealings in cash, faced a shortage of working capital due to the ban on the notes. Therefore, they turned to banks and NBFCs to obtain funds for their business activities. This trend is expected to stay in the financial year (FY) 2017-18. Enterprises will continue to seek finance on a large scale in order to set up their businesses and conduct expansion activities.

  1. Use of SMAC technology

Digital technologies are changing the face of businesses. Many firms are deploying digital means to deal with competition and stay ahead in the industry. The business finance sector, too, has adopted social, mobile, analytics and cloud (SMAC) in order to tap opportunities of revenue growth and operational efficiency. By adopting such technologies, financial institutions will find it easier to define business strategies, which will enable them to grow and expand.

  1. Increased partnerships

The payments ecosystem received a major boost with the launch of the Unified Payments Interface (UPI) and Bharat Bill Payments System. This launch will be beneficial to NBFCs who may now form partnerships with bill payment providers and other financial institutions like asset management companies to ensure sustainable growth over a long term. This will help NBFCs to increase their service offerings and position themselves as a better alternative to the traditional sources of lending.

  1. Use of social media to determine credit worthiness

The creditworthiness of the loan seeker is an important aspect of business loan approval. Typically, banks and NBFCs request the applicant’s credit score from Credit Rating Information Services of India Limited (CRISIL) before approving loan applications. However, some lending institutions in India have begun using social media to evaluate the credit history of the loan seeker. In this year, it is expected that banks and NBFCs will realise the potential of leveraging social media to assess the creditworthiness of customers.

Credit from external sources forms a major part of the funding for companies. With these upcoming trends in the business finance sector, it is only expected that firms will receive timely and quick access to funds.

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