New entrepreneurs and small enterprises, which have typically been locked out of the financial system and ignored by big banks and other financial institutions, have found solace in a breed of new financial technology start-ups.

In the last 12-18 months, about three dozen start-ups such as Indifi Technologies, Capital-float, Aye Finance, Orig’a Leasing, Fair-cent and Lending-kart have emerged to provide fast, easy and collateral-free loans to small businesses. The loans, mostly short term, are in the range of Rs. 3 lakh to Rs. 1 crore but with an interest rate as high as 15-22 per cent.

These start-ups are looking at revolutionising the financial system by changing the way it works, by either giving loans without collateral or by connecting small businesses to financial institutions for quick loans.

They also allow SMEs to focus on building their businesses instead of worrying about gaps in their cash flows. They use technology to simplify the lending process, enhance the speed, provide price transparency, improve customer experience and reduce borrowing costs for businesses.

Most of the Fintech start-ups use big data analytic’s to understand the credit comfort and assess the credit-worthiness of the small business owners. Most of the credit risk analysis is done digitally so that loans can be disbursed in less than 48 hours.

Source: Business Line

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