How Banking & Finance Sector Help Small Businesses For Festivals

India being a country of festivals, brings vast scope for small businesses to establish and grow. It is seen during significant celebrations like Diwali, Navratri, Eid, and so on, there is a critical ascent popular for different items like idols/statues, decorations, handicrafts, artefacts, clothes, etc, which prompts production growth by small businesses.

The festive season is the ideal opportunity to prosper in a market. This period offers the most elevated business deals and hikes in income. But this needs a back supporter, which is the banks and financial institutions that help small businesses to start with a loan. However, this also strengthens their retail lending.

Banks & Finance Companies Play Crucial Role

The huge financial support of small businesses are the banks, NBFCs, fintech platforms, etc that either help a business to establish or to expand.
They also employ a large number of people. One of the crucial inputs for these businesses to grow and prosper is the timely availability of finance at reasonable terms.

Ashish Singhal, MD, SVC Co-operative Bank said, "Banks and finance companies step in to provide a variety of products at flexible terms, such as working capital, export finance, bill discounting, unsecured business loans, supply chain finance, machinery finance, microfinance, commercial vehicle loans, commercial equipment loans, etc. Banks and NBFCs are also providing support to first-time borrowers under government-backed schemes such as Mudra Loan, Stand up India and CGTMSE."

Organisations especially small ventures have confronted critical deterrents during the pandemic period. Small businesses are essential to our society, and we as a whole have an impact on their endurance. Post-covid, PM Modi's "Vocal for Local" initiative and banks and financial institutions' schemes have been the source to help build India's small businesses strong. The proficient and compelling arrangements by the financial players help them in the period of need to push economic development.

Balaji Jagannathan, Co-founder and Director, of Paycorp.io said, "Fintechs, in general, make the process simpler and faster, the festive season is just a season of higher volumes. To tackle that higher volume of requests for extra work hours, increase the team to verify the borrowers. To make the AI and other associated algorithms faster, the IT does the backend job to keep the machines and software in original condition daily."

Loan For A Festive Business Growth

A business loan fills in as a sound option for this. With the assistance of an unsecured or SME loan, there is no requirement for the entrepreneur to contribute from their pocket.

During the festive season, demand for many goods and services goes up substantially. As small businesses need to prepare in advance for meeting the demand which means higher production and stocks leading to more funds invested in working capital, financial institutions witness higher demand for loans.

"Typically retail, e-commerce, hospitality and manufacturing sector witnesses higher demand further ing festive season. As such banks and NBFCs need to address this seasonal credit requirement to enable the small business to capitalise on the growth opportunity arising during the festive season," said Singhal.

In the era of digitalisation, these days getting a quick loan online is not a tough task. Various platforms pay instant loans to users without hesitation. Also, net banking nowadays easily processes a loan to a customer without the need of being physically present there.

"Digitalisation of banking processes has helped many to procure the capital from financial institutions in matters of hours. For instance, the AADHAR-based KYC has been the go-to solution for many lending firms to validate loan claims and help them to disburse them within hours. The festive season is the most suitable time to stock up the inventory and generate better margins via sales. To ensure the extra inventory, there is a pertinent need for extra capital," said Jagannathan.

Strengthening Atmanirbhar Bharat Initiative Together

The Atmanirbhar Bharat initiative was initiated by PM Narendra Modi in May 2020 to support the MSME sector and to reduce the reliance on imported products by improving the quality and quantity within the country itself. The banking and finance sector in this case along with the SMEs work together for better economic development.

Singhal regarding this said, "The SME units play a vital role in the success of this initiative through the development of import substitutes/increasing production of goods which are currently imported due to short supply in the local market. Technology adoption and upgradation by SMEs will go a long way towards this objective."

During festivals, we can see most of the seasonal items being made in India. For instance, during covid 19 when there was a ban on lights and firecrackers that had been imported from China, then India stepped ahead to take the initiative to self-make the lights and crackers during Diwali. Similarly, there have been many small businesses as such that are boosting even the "Make in India" initiative with the assistance of banks and the finance sector.

"Banks and Finance sector which has been actively supporting the MSME sector will continue to play a critical role towards the success of this initiative by providing not only the requisite capital support but also handholding and advisory on the various government and other schemes for this sector," added Singhal.

Hike In E-Commerce Business & Online Transactions During Festivals

Ahead of the festive season, India's e-commerce sector witnesses a tremendous hike in sales. As per a Meesho-Kantar survey, this year 34 per cent of sellers plan to focus on promotions and discounts this festive season. While as per a report by RedSeer, e-commerce companies expect sales to grow 28 per cent year-on-year to USD 11.8 billion during the festive season this year.

Jagannathan said, "Festivals provide a greater opportunity for both buyers and sellers to buy/sell their choicest products. During festive season sales, eCommerce platforms provide discounts that a buyer cannot get otherwise, and to get that desired product they stretch their budgets, and to do that they procure loans. Similarly, sellers procure loans to ram up their inventory."

On the other hand, online transactions also surge during festivals. 40 per cent of all exchanges in India are advanced and payments worth USD 3 trillion were handled by digital platforms in 2021, a PhonePe report said. Apart from that, UPI transfers grew USD 100 billion (Rs 7.7 lakh crore) in October 2021, as per NPCI data.

"Festive season has undoubtedly always been the biggest season for all kinds of sales, whether it is through offline channels or online. Over the past few years, India has witnessed a remarkable shift towards different modes of digital payment. In addition to the widespread usage of wallets, the outbreak and longstanding impact of the pandemic has also given a major push to online transactions. The post-covid numbers have swelled as compared to the pre-covid era, all the more so when it’s the festive season," Jagannathan said.

Businesses Most Supported By Banks/NBFCs During Festivals

Retail Sector: Consumers tend to spend the most during the festive season and hence the retail sector sees peak demand during this time.

E-Com Sector: Over the years, E-commerce has become an integral part of the economy and large e-com players generally roll out discounts during the festive season to attract buyers. As a result, the vendors on these platforms see a huge demand surge and additional capital requirements during this time.

Manufacturing Sector: The underlying goods required to meet the additional demand are ultimately produced by the industries, which in turn need additional capital support.

Consumer Finance: Banks and NBFCs also provide special schemes for financing consumers during the festive season. This in turn drives up the overall demand during the festive season.