MSME Financing: Top Challenges and Solutions

India has a growing Micro, Small, and Medium Enterprise (MSME) ecosystem. Thousands of start-ups are operating in micro-markets. They are committed to solving crucial business problems and adding value to their customers’ lives. However, many start-ups hit initial hiccups in funding and find it difficult to manage business operations.

Today, many banks and non-banking financial companies (NBFCs) offer business loans for startups, which can take care of the operational requirements. Despite these financial solutions start-ups face challenges.

Major Financial Challenges Faced by MSMEs

Non-Standardised Eligibility Criteria

Many loan providers have non-standardised eligibility criteria for MSME. They check business credibility based on projects and business loans. Many start-ups are based in different sectors and may not have breakthrough projects initially to prove their worth.

Heavy Interest Rates

Several banks and NBFCs charge exorbitant interest rates for small businesses. It puts the burden on the monthly operational budget of the business.

Lengthy Loan Disbursal Process

Taking a business loan is an uphill task for start-ups. Most banks and NBFCs have lengthy time-consuming processes. It takes weeks to process the loan application and loan disbursal which puts strain on the business’s working capital.  

Solutions Offered by Top NBFCs

Standardised Eligibility Criteria

Leading NBFCs have standardised eligibility criteria for business loans. They have extensive market research and understand customers’ pain points. They give the opportunity to all kinds of enterprises to avail of business loans.

Affordable Interest Rates

Many NBFCs offer competitive interest rates on business loans. It eases the burden on the borrower. They can repay loan amounts in easy EMIs and maintain their credit score.

Digitised Loan Process

These days, MSMEs can apply for business loans online. Top NBFCs have a completely paperless process, which includes onboarding, processing, and financing.

A business loan is one of the easiest ways to scale a business operation. This is why many start-ups and MSMEs apply for business loans from banks and NBFCs. With numerous lenders available on the market, it is crucial to rely on a loan provider that offers customised solutions as per the business requirements.