#msme lending

Indian Bank is set to extend loans to micro, small, and medium enterprises (MSMEs) in the Special Mention Account (SMA) category, following a government guarantee announced by Finance Minister Nirmala Sitharaman in the Union Budget 2024. In an exclusive interview, Managing Director and CEO Shanti Lal Jain expressed the bank’s commitment, stating, “We’re open to lending, especially to our customers in SMA 1 and SMA 2, who are eligible for this guarantee.”

The Finance Minister introduced a mechanism aimed at ensuring ongoing bank credit for MSMEs facing stress. This initiative is designed to support MSMEs when they reach the SMA stage due to uncontrollable circumstances, preventing them from falling into non-performing asset (NPA) categories.

Sitharaman noted that this credit support would be backed by a government-sponsored fund, enhancing banks' internal capacities to evaluate MSMEs for credit. She emphasized that a new credit assessment model will be developed, focusing on the digital footprints of MSMEs, rather than relying solely on traditional asset or turnover metrics, making it more inclusive for businesses without formal accounting systems.

Regarding the collection efficiency of MSMEs for the April–June quarter, Jain attributed the decline to several factors, including heat waves, general elections, and seasonal variations. He reported a 2% decrease in collection efficiency in the MSME segment, both year-over-year and sequentially, contributing to a 1% overall drop in collection efficiency from 96% to 95%.

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of most economies, contributing significantly to employment and economic growth. However, despite their importance, MSMEs have historically faced significant challenges in accessing finance. Traditional banks often find it risky or unprofitable to lend to these businesses due to a lack of credit history, collateral, or perceived instability. This is where financial technology, or fintech, has stepped in, transforming the landscape of MSME lending.

The challenges faced by MSMEs in traditional landing

High interest rates: MSMEs often face exorbitant interest rates due to their perceived risk profile.

Complex documentation: The paperwork involved in traditional lending can be overwhelming and time-consuming.

Buy Now Pay Later for Distributors

Distributors typically buy a lot of goods from manufacturers and sell them to certain merchants. Distributors, though, frequently struggle financially to make such significant product purchases.

However, relying on modern financial services for payments, such as Buy Now Pay Later, can greatly assist them. In order to help distributors manage their working capital requirements and grow their operations, KredX offers Buy Now Pay Later for distributors.

An individual or company who buys goods from producers and resells them to retailers, assemblers, or other producers is known as a B2B wholesale distributor. Through the supply chain, they move these goods.

The lack of distributors eliminates the necessity for the manufacturer or producer to speak with any retailers.

Working Procedure Of B2B Wholesale Distributor

B2B wholesale distributors often don't sell to consumers; instead, they have a niche business or area of expertise and want to provide advantages to companies that want to collaborate with them.

A B2B wholesale distributor who specializes in a certain industry, like apparel or automotive parts, can benefit from the opportunity to buy more and receive volume discounts.

B2B wholesale distributors might thus build customer relationships with a particular segment by working in that area. Business purchasers, on the other hand, can receive things for less than the going rate when they buy straight from the manufacturer.

Conclusion

Retailer Financing 

Retailer financing, to put it simply, is a sort of short-term unsecured loan that retail companies provide to their clients. This is a common tool used to control inventories and increase sales, and it is made available to customers with good credit.

At the point of sale, sellers present purchasers with this form of retailer financing. Credit is given to customers for their purchases. Then, they can spread out or postpone payment, simplifying, expediting, and improving their buying experience.

Retailer Financing Options

There is no one method that works for all customers in terms of convenience. The possibilities for paying retailers come in a variety of forms, though. Different kinds of payment methods include:

EMI

When referring to a financing option, an EMI is one in which clients must pay the full amount plus additional interest over a protracted period of time. This most closely resembles a conventional loan, except that a retailer is offering it rather than a conventional finance institution like a bank.

No Fee EMI

As the name implies, this is comparable to an EMI with one important exception: the price of the product is not increased by interest. Instead, this financing strategy only breaks the entire cost into smaller payments due over time.

Get It Now, Pay Later

The financing option known as "Buy Now Pay Later," or "BNPL," has swiftly risen to the top of the list for online retailers. When buying necessities, such as food and medicine, it was typical to use this type of small-scale store financing. Simply said, BNPL enables clients to purchase an item and pay for it later.

This store solution is offered by funding organizations for the mutual advantage of the buyer and the supplier. While vendors receive immediate payment up front without any delays, buyers benefit from the convenience of shopping even when funds are tight. By offering Buy Now Pay Later options, organizations like KredX help shops increase sales and draw in new customers while providing a wonderful shopping experience.

Conclusion

B2b Pay Later 

In this closed-loop digital finance mechanism for short-term transactions, KredX serves as an intermediary. For business owners coping with a constrained cash flow, the organization provides hassle-free working capital finance.

The buyers can thus obtain the raw materials they require for their enterprises through this transaction model without having to pay a large sum up front. On the other hand, KredX makes sure to pay the merchants the upfront fees of the entire selling price on behalf of these purchasers. Therefore, these buyers have the choice to pay back the purchase price to KredX in installments over a predetermined length of time.

Benefits of B2b Pay Later for Business

Buyers can save time and money with KredX Pay Later because it does not require a debit or credit card. The annual maintenance charge, cash advance, or GST is not included in this transaction arrangement, saving the borrower a significant sum of money. Additionally, the BNPL structure's cash-flow-based measures are time-effective for the country's product market's mostly uncategorized sectors.

Businesses and brands may more easily adjust to the shifting consumer needs when there is a smooth and fluid transactional model in place. They can further diversify and grow their product lines in response to consumer demands in this way.

A firm is more profitable for buyers thanks to a BNPL scheme's flexible credit line and subscription models. Because of this, market analysts have noticed a marked increase in the average order value for companies using the B2B BNPL model. The average sale per client and cart conversion rate, for instance, rose 40% and 30%, respectively, with KredX.

BNPL for Distributors

The B2B market is a sizable space where businesses can buy and sell goods and services to one another. Because distributors exist to link manufacturers and retailers, business between the two companies runs smoothly.

Distributors typically buy a lot of goods from manufacturers and sell them to certain merchants. Distributors, though, frequently struggle financially to make such significant product purchases.

However, relying on modern financial services for payments, such as Buy Now Pay Later, can greatly assist them. In order to help distributors manage their working capital requirements and grow their operations, KredX offers Buy Now Pay Later solutions for Distributors.

Benefits of BNPL for Distributors

People involved in the B2B distribution industry can benefit in a number of ways from the financial product of BNPL offered at KredX. Below is a discussion of them:

Reduce the problem of working capital

Distributors earn money right away after selling goods to retailers when they incorporate BNPL at the payment gateway. As a result, BNPL guarantees a steady flow of cash, which aids in addressing working capital issues. B2B wholesale distributors can also continue this process by making bulk purchases from the manufacturer using the funds obtained from retailers through a BNPL provider.

Increased Sales

Distributors can up 40% boost their average sales per person by utilizing KredX BNPL solutions.

It is rather admirable that Buy Now Pay Later has become so successful in the B2C market. It makes sense that this short-term financing option is gradually affecting the B2B sector and providing advantages to all parties.

Finance for micro, small, and medium-sized enterprises (MSMEs) has been a concern for all stakeholders including entrepreneurs, financial institutions, and government organizations. MSMEs have gained increased attention in India in recent times, considering their strategic importance to the economy and the country. In view of the fact that banks are the predominant source of finance in India, the Reserve Bank of India includes MSMEs in the list of priority lending sectors.

With Wagons MSME Lending Program, participants will get an overview and introduction to MSME and different government initiatives to promote MSME industries and loan products.

Program Timings

Batch 01 | 06th Aug | 4 hours | 10am -2 pm

Batch 02 | 13th Aug | 4 hours | 10am -2 pm

Batch 03 | 20th Aug | 4 hours | 10am -2 pm

Batch 04 | 27th Aug | 4 hours | 10am -2 pm

Click on the link below to register : 

https://wagonseducation.com/.../msme-lending-level-1/63

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