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Financial Services / Payments

How Alternative Lenders Are Transforming the Financial Landscape

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Embifi Global Services Pvt Ltd
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The Indian economy is growing by leaps and bounds. The backbone of the economy and its growth can be attributed to the large and diverse Micro, Small, and Medium Enterprises (MSME) sector. Even though the sector contributes significantly to the Gross Domestic Product in India, currently, it has largely been ignored.


With the booming Indian startups, the much-needed attention has now been accorded to the MSMEs, especially the micro businesses.


Different startups have taken different approaches to solving them – digitization, digital ledgering, digital payments, and online credit offerings.


One of the best ways to solve the credit needs for such micro businesses is alternate Business to Business (B2B) lending services and providing B2B payment platforms.


What is Alternative Lending?


Alternative lending is an umbrella term for all the methods through which businesses avail of loans without the help of traditional banks. Alternative B2B lending services have easier qualification criteria, faster approval rate, quick turnaround time, and lower credit requirements as compared to banks, thus making them a savior for SMEs and even home businesses.


What are some of the alternative lending facilities available?


1. Direct B2B lending: These are facilities taken from non-bank lenders and were the biggest source of b2b lending in 2021. Direct loans are particularly helpful for SMEs which often fail the stringent qualification criteria for traditional bank loans.


2. Venture Debt: These alternative lenders take a part of the company’s ownership in exchange for capital- the percentage of ownership to capital being negotiable. This is helpful for businesses that do not have enough collateral to get a traditional bank loan. The benefits of venture debt are more than financial as they help establish industry connections for their clients.


3. Invoice financing or factoring: Here, the alternative lender provides you with an amount that is equivalent to a percentage of your unpaid invoices. In this arrangement, the alternate lender uses the invoices as collateral for cash flow.

How can SMEs benefit from alternative lending vis-á-vis bank loans?


Alternative lending can be of particular benefit to MSMEs as non-traditional lenders often offer more than just finances. Alternative lenders provide flexible B2B financing through their diverse range of products designed specifically for B2B ventures. Additionally, the decision time and clear communication wrt loan application can help save time and effort for the SMEs. Thus, avoiding the traditional bank loan may not be that bad an idea for businesses, however, it is critical to choose the right


B2B financing partner and the SME should spend time finding out the right partner for its credit needs. Additionally, finding the right B2B payments platform is also something that SMEs should focus on.


Takeaway


Alternative lenders are transforming the financial landscape as they are rising in popularity for their convenient B2B lending/ financing services. While the Business to Consumer (B2C) space has seen multiple startups, the B2B lending and B2B payments platforms are mushrooming.


A recent addition to B2B payment platforms in India is EMBIFI. Including a range of services like plug-and-play APIs, a white label neutral platform, bespoke lending service, instant reports and analytics, and a seamless dashboard; Embifi has all the resources in its bucket to meet the B2B lending needs. For further details, check out their website and connect with the Embifi team directly.

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