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, the leading full-stack financial solutions company, today launched a collateral free line of credit, 'Cash Advance' for businesses. With Cash Advance, MSMEs can borrow working capital with a credit limit of 50000 to 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 63Mn MSMEs, 40 per cent of MSMEs have availed loans from formal channels like banks and lending institutions while 60 per cent 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 the accessibility of such services is based on collateral, size, vintage and credit history of business. Also, under govt schemes, businesses are required to be qualified as an MSME, as strictly defined by the government to avail loans from banks.
Having spoken to MSMEs, Razorpay found that small manufacturers, e-commerce sellers and service providers needed cash for ongoing expenses even before they received payments from customers & vendors. 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.
Razorpay's Cash Advance offers relief by providing collateral-free loans before sales and payments happen, which ideally takes 5-15 days for small businesses.
Cash Advance uses merchants payment history (not just credit history) to approve a credit offer within a few hours or instantly in some cases. Once approved, businesses can withdraw additional money whenever they need and repay whenever they want. Withdrawal is instant and businesses will receive money within a few seconds. Businesses will be enabled on the 'Cash advance' feature with renewal every 6 months or 12 months along with easy auto-repayment options.
"A number of businesses now have been facing weeks, if not months, of revenue loss due to insufficient funds thereby putting unanticipated pressure on liquidity. Most of the operational expenses are still done in cash on a day-to-day basis. So when businesses have urgent cash requirements, they often leverage personal connections with other vendors or borrow cash from informal channels. With the Razorpay 'Cash Advance', a short-term credit line, we want to improve the cash-flows of our partner businesses by making the unpredictable financing process exceptionally easy, instant, and less stressful. We understand their problems and so our solution is designed in a way that it doesn't require businesses to have a high credit score or other unrealistic requirements to avail short-term loans. We hope to support and empower as many businesses as we can with up to 100 Crores of credit by the end of this year," said Shashank Kumar, CTO & Co-founder of Razorpay, while launching an instant working capital solution for businesses with urgent cash needs.
With the launch of 'Cash Advance', the company with its tech-enabled services hopes to support and revive the capital-starved SMEs, improve their cash flows with time and help make informed decisions.
Razorpay, a full-stack financial services company, helps Indian businesses with comprehensive and innovative solutions built over robust technology to address the entire length and breadth of the payment and banking journey for any business. Established in 2014, the company provides technology payment solutions to over 8Mn plus businesses.
Founded by alumni of IIT Roorkee, Shashank Kumar and Harshil Mathur, Razorpay is the second Indian company to be a part of Silicon Valley's largest tech accelerator, Y Combinator. Marquee investors such as Tiger Global, Sequoia India, Ribbit Capital, Matrix Partners, Y Combinator and MasterCard have invested a total of USD 106.5 Mn through Series A, B and C funding. Around 33 angel investors have invested in Razorpay's mission to simplify payments and banking and redefine how finance works in India.
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( With inputs from ANI )
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