MSME’s are the drivers of socio-economic development in the country. There are nearly 51 million small businesses in India that make up for 45% of the country’s manufacturing output and roughly 9% to the country’s GDP. However, a major constraint in the growth of SME sector has been non-availability of quick business loans. Not all small and medium enterprises find favour with traditional banks when it comes to loan eligibility courtesy lack of experience, absence of collaterals and infrastructure, poor financials and smaller ticket size. Small businesses usually have two ways of connecting with the lenders today – walk into one of their branches, or work with a Direct Sales Agent. It happens that both these mechanisms of acquiring customers are very expensive for the investors, and that cost is passed back to the borrower. Unlocking much needed finance in the form of alternate lending will help these SME’s accelerate growth, in turn creating new jobs, products, services and additional wealth.
Enter Loan Frame.
Loan Frame is a FINTECH company focused on SME lending and finance in the India by building the country’s largest technology enabled SME lending marketplace. Loan Frame seeks to improve availability of secured and unsecured business loans in India by providing small businesses access to multiple lenders. Loan Frame’s approach to SME lending is oriented towards leveraging the growing trend of supply chain consolidation in various industries. The team believes that the platform provides advantage on both origination and underwriting. Loan Frame has been funded by leading global venture capitalists.
Loan Frame’s process offers a far better experience than conventional methods. This includes minimal submission of documents, ability to submit and extract information electronically, fast turnaround time, and a single point of contact even while accessing multiple investors. This is achieved through an accurate information collection process during the documentation stage. Loan Frame analyses credit worthiness of the SMEs using analytics and scans other metrics digitally such as sales transactions. This method of digital evaluation of a SME significantly reduces the time to disbursal. The whole process takes a maximum of 7 working days and the borrower can get business loans ranging between Rs. 10 lakh to 10 Crore with interest rates ranging from 9 – 22%. Loan Frame offers as many as 50 debt-financing products to SMEs that address their varying needs such as Working Capital, Business Expansion, Purchase of Equipment and Research & Development
Loan Frame believes that both regulation and technology are paving the way for new models of customer engagement. Policy makers will have the task of enabling innovations to the benefit of small businesses. Much of the credit access for MSMEs was also constrained due to lack of credible secondary data. Fortunately, a lot of data is getting digitised. Aadhar and Mobile architecture are already evolving in a direction where it promises to provide access to a wide variety of data sources for authorised parties. As more and more customers get onto smartphones, there will be further proliferation in the points of access.
In short, it is evident that the SME sector is under the burden of inadequate access to credit when the demand for the same is staggering. Since, the traditional lenders like private or public banks can not meet this requirement, new players in the FinTech industry like Loan Frame are trying to bridge this gap and successfully gaining foothold in this market.