BENGALURU: The pandemic has not only knocked off revenues of MSMEs’ but also disturbed their hopes of survival. In a bid to rescue MSMEs and improve their cash flows, Razorpay has launched a collateral free line of credit called Cash Advance. MSMEs can borrow working capital with a credit limit of Rs 50,000 to Rs 10 lakh, within 10 seconds through the Razorpay dashboard, depending upon the credit history of the business.
Global analytics company CRISIL found that during these downturns, micro and small enterprises are unable to manage working capital challenges as easily as their large and medium peers. India has more than 63 million MSMEs, 40% of these have availed loans from formal channels like banks and lending institutions while 60% don’t have easy access to working capital loans. While the government continues to offer schemes that will benefit MSMEs, most of them have only been able to partially take advantage of it, primarily because accessibility of such services is based on collateral, size, vintage and credit history of business. Also, under these schemes, businesses are required to be qualified as an MSME, as defined by the government to avail loans from banks.
Razorpay found that small manufacturers, e-commerce sellers and service providers needed cash for ongoing expenses even before they received payments from customers. For instance, e-commerce sellers need working capital loans to stock up at short notice in order to continue selling as per demand. Even suppliers have been struggling to deliver critical components to manufacturers, thereby halting the manufacturing process, resulting in mounting losses.
Cash Advance uses merchants payment history to approve a credit offer. Once approved, businesses can withdraw additional money whenever they need and repay whenever they want. Businesses will be enabled on the ‘cash advance’ feature with renewal every six months or 12 months along with auto-repayment options.
In a statement, Shashank Kumar, CTO & Co-Founder of Razorpay said, “With this service we plan to improve the cash-flows of our partner businesses by making the unpredictable financing process easy. The businesses don’t need to have a high credit score to avail short-term loans.”
The company hopes to support and revive the capital-starved SMEs and improve their cash flows challenges.
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