{"id":21623,"date":"2023-08-29T03:29:52","date_gmt":"2023-08-29T03:29:52","guid":{"rendered":"https:\/\/tata-blog.osian.dev\/blog\/?p=21623"},"modified":"2024-09-19T17:01:37","modified_gmt":"2024-09-19T11:31:37","slug":"how-data-is-transforming-small-business-lending","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/whats-trending\/how-data-is-transforming-small-business-lending\/","title":{"rendered":"How data is transforming small business lending"},"content":{"rendered":"\n
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Small businesses are critical drivers of economic growth. Unfortunately, they also remain an underserved segment of the Indian economy when it comes to credit access. However, with advancements in technology, innovative lenders like Tata Capital have harnessed data to drive deeper penetration in small business lending. <\/p>\n\n\n\n
Today, data is more accessible than ever before. From the introduction to GST to the increased digital adoption since before the pandemic, there is a general move towards digitisation, making more data available regarding individuals and business transactions. <\/p>\n\n\n\n
Employing Machine Learning and predictive algorithms to the data available offers lenders deeper and valuable insights that are transforming lending as a whole and making it more accessible for small businesses. <\/p>\n\n\n\n
Here\u2019s how data plays a role in transforming small business lending:<\/p>\n\n\n\n
Data demonstrates the company\u2019s financial health<\/strong><\/h2>\n\n\n\n
Insights into the overall financial health of the company can help assess the credit risk of the company. One of the critical reasons for MSMEs to remain out of the credit access system has to do with the fact that it was cumbersome and time-consuming to assess the credit risk posed by these companies. This obstacle denied access to capital even to creditworthy small businesses. <\/p>\n\n\n\n
However, thanks to the Digital India initiative led by the government and the RBI, lenders have access to data that indicates the MSME\u2019s financial position. From e-invoicing to credit bureau data and past transaction and trade history information, lenders can access relevant information at the click of a button. Additionally, access to alternate data points on customer behaviour patterns and trends based on their internet presence allows lenders to make a thorough credit assessment. Lenders can underwrite loans based on these verified data sources offering relevant and authentic information. <\/p>\n\n\n\n
Data aids inclusion<\/strong><\/h2>\n\n\n\n
Data analysis and machine learning can provide a very nuanced picture of the applicant\u2019s creditworthiness. In addition, there is the possibility of accessing real-time data of the business, such as sales trends, shipping trends, customer reviews, and employee\/supplier feedback. <\/p>\n\n\n\n
Access to such information allows lenders to do their due diligence while empowering MSMEs to have the flexibility to choose a lender that offers convenience and better pricing. <\/p>\n\n\n\n
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