Small businesses have been the backbone of the Indian economy much before the coming of the Industrial Revolution. While in the earlier times, they were restricted at the operational level, ever since the government formally accepted their importance, there have been positive changes through financial assistance.
These businesses provide employment and generate a substantial part of the country’s GDP making it important for the government and financial institutions to provide loans. Read on to understand how far financial assistance through small business loans has proved beneficial.
Small Business Loan: Evaluating the Statistics
Let’s categorize the statistics of small business loans for a simpler understanding:
- Commercial Growth Momentum
Since, there has been a positive movement in the cash flow and lending space, the commercial credit portfolio has marked a 20% growth along with credit exposure standing at ₹28.2 lakh crores at the end of 2023.
- Demand for Commercial Loans
The constant growth in economic expansion has spurred the demand for commercial loans. The demand for commercial loans increased by 29% in July-September 2023. The demand for credit for MSMEs at non-banking financial institutions has seen a growth of 39% in the same period.
- Growth in Credit Supply
Credit supply has seen a 20% year-to-year growth in 2023 reflecting an improvement in lenders’ capacity. This is set to increase in 2024 as the finance minister has announced a 100 crore credit scheme for MSMEs.
Interestingly, around 7% growth year to year growth was marked by borrowers availing below 1 crore amount and a decrease in value has been seen by borrowers seeking loan amounts higher than ₹10 crores.
Trends in Small Business Loans
The landscape of small businesses continues to expand and so does the lending horizon making it crucial for small business owners to stay at the top of loan trends. Take a look at these trends that can help you choose a reliable lending plan:
- Online Lending Platforms
The introduction and rise of online lending platforms and finance tech companies have facilitated the growth of small businesses substantially. Business loan app have streamlined the lending process by providing easy and instant loan services. For Instance- Lendingkart offers loans to MSMEs without any collateral and a promise of loan disbursal within three days of approval.
- Alternative Credit Scoring
Credit score has always played a significant role in determining borrowing capacity. However, in 2024 we can see a shift towards alternative credit scoring methods that rely on factors such as cash flow, customer review and even social media presence.
- Collaborative Lending
Collaborative lending is an emerging concept with the potential to remodel lending methods. This allows small business owners to get in touch with investors through lending platforms who are interested in funding the business at competitive interest rates.
Insurance is essential for protecting our assets, health, and financial well-being. However, the rise in fraudulent schemes has made it critical to be vigilant and informed. Understanding how to recognize and prevent insurance scams can save you from significant financial loss and stress. Here’s a guide to help you navigate this potential minefield.
1. Common Types of Insurance Scams
Understanding the various types of insurance scams is the first step in protecting yourself. Here are some of the most common ones:
- Premium Diversion: This occurs when an agent collects insurance premiums but does not pass them on to the insurance company, leaving you uninsured.
- Claims Padding: In this scam, the insured person exaggerates the damages or losses to receive a larger payout.
- False Claims: Scammers file fake claims for incidents that never happened or for exaggerated damages.
- Agent Fraud: This involves unscrupulous agents who might sell fake insurance policies or misrepresent the coverage details to earn a commission.
2. Warning Signs of Insurance Scams
Recognizing the red flags of insurance scams can help you avoid becoming a victim:
- High-pressure sales tactics: If an agent is pushing you to sign up quickly without giving you time to review the policy, be cautious.
- Too-good-to-be-true offers: Extremely low premiums or high returns on an insurance policy can be a sign of a scam.
- Lack of documentation: If you’re not provided with proper documentation or the agent avoids giving you written details, it’s a major warning sign.
- Unsolicited offers: Be wary of unsolicited calls or emails offering you insurance products, especially if they ask for personal information immediately.
3. Steps to Prevent Insurance Scams
Taking proactive measures can help you avoid falling prey to insurance fraud:
- Verify the agent and company: Always check that the insurance agent is licensed and that the insurance company is legitimate and well-established. You can do this through your state’s insurance department or the National Association of Insurance Commissioners (NAIC).
- Read the policy carefully: Never sign any document without thoroughly reading and understanding the terms and conditions of the insurance policy. If something is unclear, ask for clarification.
- Keep records: Maintain copies of all your insurance policies, payments, and correspondence with your insurance agent. This will help if you need to dispute a claim or verify details later on.
- Report suspicious activity: If you suspect you’ve been targeted by an insurance scam, report it to your state’s insurance department, the NAIC, or the Federal Trade Commission (FTC).
4. What to Do if You’re a Victim
If you discover that you’ve been a victim of an insurance scam, act quickly:
- Contact your insurance company: Inform your insurance provider immediately and provide them with all relevant information.
- File a police report: Report the fraud to the local authorities to create an official record.
- Notify the authorities: Report the scam to the NAIC, FTC, or your state’s insurance department for further investigation.
- Consider legal action: Depending on the severity of the scam, you may need to seek legal advice to recover your losses.
5. Stay Informed and Vigilant
Educating yourself about the different types of insurance scams and how they operate is crucial. Stay informed about the latest fraud trends and always be cautious when dealing with insurance transactions. Remember, if something doesn’t feel right, it’s better to investigate further than to risk falling victim to a scam.
The Bottom Line
Credit flow for small businesses in India has been acting as the catalyst. Additionally, the government’s formal recognition of MSMEs in 2015, introduced several new schemes aimed solely at funding these businesses with plans like Pradhan Mantri Mudra Yojana or Prime Minister’s Employment Generation Programme. In the July-September quarter, 46% of MSMEs originated in the semi-urban and rural regions. The key factor behind this development has been the improvement in lending schemes.
At present, small enterprises along with micro-enterprises are contributing an estimated 30% of the country’s total GDP, which is set to increase given the latest trends in the lending landscape.
