We here at Loanmeet are talking about how facilitating Working Capital Loans via peer to peer lending for small business in as little as 24 hours could revolutionize the funding market through the online platform. Our motive is to make funds in terms of working capital i.e. day to day money required to run a business, available to hundreds of small and mid-sized companies on best terms. SMEs in India contribute nearly 45% of the industrial output with market as huge as 29 million small businesses which are presently running in the country. Thanks to the digital revolution that has influenced this new trend of lending in the small scale businesses as there is big lack of credit to small businesses, which if rectified could be an inhibiting factor for growth of entrepreneurship in India. SMEs on the whole contribute nearly 60% to the economy which if proliferates, will advantage India to a huge extent.
Helping entrepreneurs to quickly secure funding that they need to grow their business through a safe, efficient and price transparent environment is what P2P lending could bring into the system. The biggest hurdle for SMEs and entrepreneurs today is adequate and timely banking finance in order to raise the capital. Small enterprises are hit badly by the poor access to funds. P2P is an innovative product which can provide funds to SMEs for their working capital requirements and support expansion plans. So the non-involvement from the banks to bridge the gap between the demand and supply mismatch has taken a toll. Banks typically ask for collateral or traditional equity, both of which cannot be presented by most of the small scale industry businessmen. Due to the banks’ reluctance to lend, these enterprises are forced to high financing cost from the traditional lenders and thus are never able to scale their businesses to high levels. If a platform helps a borrower meet a local lender who is familiar with the geography and business specific information in the operational area, it will help evacuate risks involved in such challenges such as raising capital. India’s banking system does not help in building big businesses. The make in India campaign under Mr. Modi’s ache din will only chip in if the medium and small enterprise have good access to the capital. If their access to capital is resolved one can imagine their ability and potential to innovate and employ thousands of people.
But what exactly do the small enterprise need that they require working capital funding? A small enterprise such as brick-kilns, stores, small local food chains or restaurants need financing to purchase raw materials, see how they can expand, employ people, pay wages, procure stock in advance. If there is an availability of proper valid bills, accounting systems and credit risk involved for SME’s could be calculated by the P2P lenders, then this gap between the supply and demand mismatch could be easily bridged. Raising capital through Loanmeet at a rate of 10-12% as compared to informal sources like money lenders that quote as high as 35-40% would any given day be better to grow one’s own business. What we need to do is just predict that the borrower’s (enterprise in this case) credibility in terms of its future ability to service the loans even in the times of uncertainty or certain financial stress. If a local intermediary can ascertain turnover, income and other key financial information required to arrive at a credit decision then depending upon the business requirements, Loanmeet definitely can help provide working capital loans or term loans.
So some avenues may prove cheaper, hassle free and easy as compared to banks in terms of lending money. This is what Loanmeet is driving. Sunil Kumar, the founder, aims to grow this very new platform among the masses where potential lenders lend to potential borrowers. With approximately 600 lenders and 5000 borrowers already joined the Loanmeet revolution in such a short span, it is expected to have tremendous growth as an alternative source of credit in the years to come compared to banks, who have been tightening their credit standards and have had their reputation tarnished due to various crisis in the past. We at Loanmeet are here to fuel the demand for P2P lending. Loanmeet has already been in the news and has been covered by popular media houses such as CNBC, ET and the Mint.