The COVID-19 pandemic has been extremely challenging for the micro-small-and medium-sized enterprises (MSMEs), which are considered the backbone of many economies. Supply chains have been disrupted, customer demand has been dampened, and cash flow has been reduced because of transportation and border restrictions, social distance, and lockdowns. As a result, MSMEs are struggling to pay store rent, employee wages and suppliers.
To help millions of small companies affected by Covid-19, the government has announced a raft of liquidity initiatives, including Rs 3-lakh crore collateral-free loans. Borrowers with outstanding debts of up to Rs 25 crore and a turnover of up to Rs 100 crore are eligible. Moreover, NBFCs are offering covid loans and collateral free loans to pump up money into MSMEs.
Let’s have a look at some ways by which NBFCs can help MSMEs bounce back:
- NBFCs are quickly enabling small and medium-sized businesses to improve their financial calibre and accomplish business expansion thanks to advances in fintech solutions. Some tech-focused NBFCs, like Kinara Capital, can disburse a loan in 24-hours.
- A number of NBFCs and fintech companies are also using digital channels to reach out to business owners that would otherwise prefer the old school method of visiting branches in person.
- NBFCs like Kinara Capital offer collateral-free loans to MSMEs, these loans are easy to apply, and you can get the money within a day if you fulfil the eligibility criteria that only takes 1-minute.
- NBFCs are assisting businesses to achieve improved customer satisfaction by combining dedicated e-training programmes with in-person virtual workshops to provide practical coaching to countless small entrepreneurs.
- In addition, the RBI has permitted NBFCs to access bank funds through Targeted Long-Term Repo Operations (TLTRO) in order to encourage incremental lending and resuscitation of stressed sectors. NBFCs would be permitted to give a credit lifeline to financially distressed MSMEs under the plan.
- In the post-pandemic new world order, the role of banks and NBFCs in empowering small enterprises extends much beyond regular finance. They have sped up the process of access to capital through rapid digitisation. The quick access to capital will help small businesses grow.
- Relaxed eligibility standards allow NBFCs to be more flexible when it comes to loan acceptance, making the process easier and faster. While all types of lenders evaluate variables such as your credit score, current obligations, annual income, and so on, NBFCs are far more flexible when it comes to these considerations. In fact, you can get a collateral-free loan from an NBFC even if you are new to formal lending.
NBFCs serve MSMEs by differentiated credit underwriting that considers multiple sources of data (formal and informal), seasonality of cashflows, industry and cluster risks, as well as a 360-degree view of the borrower; designing product offerings that are best suited to their target segment (for example, flexible collateral structures, customised products tailored to their working capital cycles).