How Digital Lending Platforms Are Helping Small Businesses Manage Their Cash Flow Challenge?

This content is authored by Mr. Praveen Paulose, MD & CEO of Celusion Technologies 

Micro-entrepreneurs often face challenges to their cash flow when starting and operating their businesses. A multitude of factors might lead to cash flow problems, including poor expenditure management to promote expansion without adequate funding. However, in response to these obstacles, digital lending platforms have created digital tools and technology that can aid in identifying, regulating, and forecasting cash flows, making it simpler to overcome the hurdles.

In financial services, many of these solutions are developed using disruptive technologies like Artificial Intelligence, Blockchain, and Deep Learning that enable firms to collect rich data sets about their customers, identify consumption patterns, and even remove human involvement where possible. Hence, the MSME lending landscape is transforming as the small business owners embark on a new phase of growth that encompasses effectiveness, transparency, and accessibility, due to the integration of finance and technology, resulting in greater expectations and higher customer satisfaction.

Here are the five ways digital lending platforms are redefining the ways small business owners manage cash flow challenges:

1. Business lending made simpler

Small businesses are often overlooked by traditional lenders because their loan amounts are considered insufficient and their earnings are regarded as unstable, thus posing a risk. Digital lending platforms are making it easier for SMEs to sidestep conventional loan-obtaining techniques and expand their businesses faster due to easier and simpler business lending.‍ For example, in Peer-to-Peer (P2P) lending, borrowers are directly connected with prospective lenders. Cutting-edge technology has made the application process quicker, faster, and more efficient, encouraging more business owners to use finance to expand or infuse working capital into their operations.

2. Tools for effective account management

With the advent of digital lending platforms, MSMEs/SMEs now have access to a wide range of affordable management tools for everything from client profiles to accounts that used to be expensive in the past. They can track their cash flow in real-time while also ensuring the smooth functioning of their business with the help of online accounting solutions. These accounting solutions, for example, come with business credit integrations that automatically pay off the loan, line of credit, or credit card with cash from customer receipts without requiring human intervention. The digital lending platforms offer expenditure and invoicing tools, allowing business owners to concentrate on development and growth rather than minor concerns, thus helping the business function more smoothly.

3. Transparency in funds transfer

In recent years, the widespread reach of the internet and mobile devices has resulted in digital lending platforms creating digital banking solutions that reduce the costs of fund transfers and the need for currency notes for any transaction. As a result, the financial system has become more transparent and less prone to tax avoidance or other unethical practices, resulting in a competitive and robust business ecosystem.

4. Security

Data breaches pose a major challenge in any business and are not entirely avoidable. Small businesses often lack the resources and know-how to secure their data – and that of their customers, suppliers, and contacts. However, the availability of digital financing platforms has made cyber security an affordable alternative that assists businesses in enhancing their security measures, due to the availability of many software packages, for example, multi-factor authentication, e-signatures, etc. In addition to ensuring privacy and cyber security requirements are met, digital lending platforms also provide accessibility and timely assistance.

5. Digital invoicing

Since payments are an integral part of any business, digital lending platforms assist small businesses in reducing cash flow challenges by automating payments. The convenience of digital invoicing for small businesses allows them to add their signature effortlessly, send instantly, and receive payments almost instantaneously. By eliminating human interactions, leveraging technology reduces the need for money, and by reducing cash outlays, cash flow improves.

Each of these elements has aided in the growth of digital lending and enabled it to provide financial goods to sectors that were previously unable to access conventional banking products. In turn, digital lending platforms enabled small and medium businesses and startups to create, innovate, evolve, and expand, changing the business landscape worldwide. A plethora of promising regulatory steps has also been implemented, with regulatory agencies legitimizing the video-based customer identification procedure for verifying new clients and permitting onboarding via video KYC verification. A shift to digital lending through the use of innovative technology has the potential to revolutionize the lending industry, making cash flow smooth and efficient, thus positively impacting millions of lives.





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