With rapid digitalisation, there is a positive shift taking place in the banking and non-banking sector for retail as well as MSME loans. Digitalisation has helped lenders to shift from offline to online processes. Also, with the numerous benefits of online loan processing, both lenders and borrowers have welcomed positive transformations in the overall process.

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While the traditional method of off-line MSME loan application and disbursal still exists, lenders are looking at the online route more keenly. This is because the latter offers several benefits to lenders and their customers.

Broadly, lenders can be bifurcated into three types – offline-only, online-only and hybrid.

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“Offline-only” model -- There are hardly any banks or NBFCs that continue to follow the “offline-only” model. Only some financial entities use this model. However, they too have introduced some element of “online-ness” to their business model. Most millennials would not prefer to deal with a financial entity that does not have any digital presence.
“Online-only” model – A lot of Fintech companies are trying to adopt this model. In terms of economics, this works out to be the most cost-efficient. However, they may face issues scaling up beyond a point, since the average Indian borrower still isn’t fully ready for a “faceless” lender. Mobile and internet penetration in India has grown impressively over the years and so has the use of smartphones. However, most Indians would still prefer to “see” a lender and then interact with it either digitally or physically.
Hybrid model – This is the most prevalent business model among lenders currently. Most lenders have gone slow on the rapid expansion of the physical network. After setting up an optimum physical branch network, most lenders have focused on building a strong digital infrastructure.

A country as large as India demands a mix of physical and digital presence. Going “offline-only” is grossly inefficient considering the rising real estate prices (rent and ownership). On the other hand, being “digital-only” is yet to gain complete acceptance by a majority of the Indian populace.

There is no denying the fact that “digital” is the way ahead for the banking/NBFC sector in India. Most new-age lenders offer loans digitally to businesses with many advantages. Hence, it makes sense to examine some common advantages of online Business Loans.

Below are some of the benefits of online Business Loans over Offline Business Loans:

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Enhanced Accessibility

Earlier, accessibility was one of the primary issues faced by borrowers. With the online Business Loan process, the entire process is online which allows the borrowers to have access at any point in time. Whereas in the case of an offline Business Loan application, you have to physically visit the branch for every process.

Minimal Human Intervention

The major difference between online and offline Business Loan processes is human intervention. Earlier, the entire banking process used was focused on the offline channel which involved heavy human interactions. Due to online Business Loan processing, there are fewer human interactions. Today, borrowers can apply for a Business Loan online at any given point in time without any human intervention, which is preferred by many borrowers these days.

Easier Documentation

One of the major hurdles during the offline loan process is the heavy documentation requirement. The long and tiring offline documentation process consumes a lot of time and effort. On the other hand, the online documentation process saves a lot of time and borrowers can directly upload the documents within minutes.

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Shorter Processing Time

New-age NBFCs offer you instant Business Loans with minimal documentation and online processing. With an online Business Loan, the time taken to complete the overall process is reduced drastically.

Security

In the case of an offline Business Loan, there is a huge chance of losing documents and misuse of the personal data of borrowers. On the other hand, an online Business Loan is more secure as only the borrower has the access to the entire data.

Conclusion

Undoubtedly, the introduction of the online process for Business Loans has benefitted retail loan and MSME loan borrowers. It has resulted in making the loan application process faster, simpler and safer. For example, you can also use a business loan EMI calculator online to check your eligibility with different lenders so that you can plan the loan accordingly. For lenders, it saves the cost involved in setting up physical infrastructure, among other benefits. For borrowers, it provides speed, convenience and availability.

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