Starting a new business is a daunting task and it could be overwhelming if not planned. There’s so much to take care of – documentation, planning, strategizing, and making decisions. However one thing that is probably the most important aspect of starting a business is funding.
Whether it’s the next big idea of the tech industry or for small rural business; all kinds of businesses need some amount of initial capital to get the ball rolling. Some people get this capital from their savings but most times it is not enough. Eventually, people borrow from friends, relatives, or in case of bigger amounts they need to approach the banks.
Banks aren’t fond of taking risks, when there’s no credit history or any collateral put forth by the borrower, they aren’t inclined to provide loans. Even if they do provide loans in such circumstances, they charge high rates of interest which poses a problem for the borrower if the businesses don’t take off as expected.
An alternative to bank loans
Microlending is a form of peer-to-peer lending where the intermediaries like the banks or other financial institutions are removed from the equation. The borrowers collect the money directly from the lenders; choosing loan offers that they find the most suitable with convenient repayment schedules.
With microlending, the power lies in the borrower’s hand, partly. The borrower can choose the type of microloan, the period of repayment, and the number of options. With banks, it would be difficult to get a loan without any collateral or security and favorable credit history. Microloans have no such restrictions.
Now individuals and small scale businesses who were previously turned down by the banks due to lack of security or have no credit history can easily approach microfinance institutions or microlenders that enables paperless transactions for small amounts of loans at reasonable interest rates.
The technical twist
In present times, it has become easier to get microloans using technology. FinTech companies are helping microfinance institutions build integrated solutions that are speeding up the process making it, seamless, and easily accessible. No longer will there be endless paperwork or long queues to worry about for a loan. Now, the loan gets transferred to the borrower’s account almost instantly.
VolkSoft is a FinTech company that has built many intelligent loan management solutions for various microfinance institutions, private banks, and business correspondents. It has helped countless microlenders in bringing down the duration of a loan cycle using various mobility solutions and allowed deeper penetration into wider markets by leveraging integration of regional languages and offline modules. Find out more about their solutions here.
