It is safe to say that the MSME (Micro, Small and Medium Enterprises) sector plays a vital role in the growth of India’s economy and society. The country has a significant MSME  sector, with 7.9 million registered businesses.

The MSME industry makes up 33% of the country’s GDP and creates over 120 million jobs across various industries and regions. It plays a key role in promoting wealth creation at a grassroots level, particularly for underrepresented groups such as women and marginal entrepreneurs.

In the fiscal year 2022 alone, 8.59 lakh women-led MSMEs were registered on the Udyam portal, which represents 17% of total MSME registration. Additionally, 63.4 million units contribute 6.11% of the manufacturing GDP and 24.63% of the services GDP.

But here’s the catch…

Despite of playing a vital role in the nation’s growth, the number one reason why small businesses fail in India is because of lack of access to funds for their short-term needs. There are several reasons why this happens:

  • Poor credit history or lack of credit history: Poor credit or lack of credit history is a common reason for loan denial by banks. Banks assess both personal and business credit scores to make lending decisions and establish interest rates. A low credit score may be due to factors such as bankruptcy and missed or late payments to lenders, credit card companies and suppliers. Additionally, some businesses are simply too new to have established any credit history.
  • Insufficient collateral: Before loan approvals, banks frequently request collateral, which is a physical asset that can be used to guarantee a loan if it is not repaid. However, small businesses may not have equipment or real estate to provide as collateral or may not be willing to risk their personal assets such as homes or cars.
  • Weak cash flow: Banks want to ensure that businesses have sufficient funds to make monthly loan payments as well as cover expenses such as rent, payroll, inventory and other costs. However, many small businesses may have difficulty maintaining enough cash on hand, even if they are profitable, due to the need to pay suppliers in advance before receiving payment for their products or services.

What did we do about it?

We spoke to over 50 Razorpay small business owners in the last month who expressed the short-term financial obstacles that they come across while growing their business. One common concern was the unavailability of cash between delivering the order and getting paid. 

What they needed was quick access to money without any fresh application every time. We asked them, “What if you were able to borrow up to INR 25 L in two days and pay back in easy EMIs? 100% flexibility and no collateral needed!

Let me illustrate their response with the story of a fashion goods manufacturer. He had procured raw materials from vendors and manufactured the final product. The product was then listed on an e-commerce website and also distributed to showrooms. In both cases, he will not get sales immediately or even get paid as soon as the sales happen. After the seller manages to sell his products, they will keep a buffer time (in case the buyer asks for a refund or replacement) till they actually pay him his earnings. 

This considerable amount of time between listing the product for sales and actually getting paid makes the manufacturer’s sales cycle highly unpredictable. If this cycle is delayed by even by a few days, the manufacturer’s next round of orders may suffer as he won’t have enough cash to pay vendors or employees to keep going. This means that he can’t produce goods at a growing rate, which directly affects business growth! He was in need of a quick cash solution for his short-term needs. 

We, at Razorpay, saw this as a major obstacle for growing businesses and this is how Razorpay Line of Credit came into being.


What is Razorpay Line of Credit?

Razorpay Line of Credit makes it convenient for your business to get instant access to an unsecured line of credit and manage your cash requirements at all times, especially when faced with an unexpected demand.

Here are a few benefits you can enjoy with Razorpay Line of Credit:

  • Line set up in just 2 business days with 24*7 cash withdrawals
  • No collateral. No hidden charges. No pre closure fees
  • Interest rates starting at 1.5% per month
  • Pay only on what you use & save on interest by repaying early
    For example: If you withdraw INR 100,000 at 1.5% and repay in 20 days, you pay only INR 1000 as interest
  • Get 100% flexibility & repay in easy EMIs or manually from Line of credit dashboard; use your line again without a new application for every withdrawal.
Your business needs may not be simple, but your loan can be. Explore Razorpay Line of Credit today! Click To Tweet

We collect NACH to help you with timely repayments and keep your account in good standing. We also have manual repayment option on the dashboard, for you to pay early and save on interest.

Furthermore, the money that you withdraw can be used for ATM withdrawals or any debit card/net banking payments, thus giving the flavour of cash lying in your bank account.

Ready cash can be a saviour for your business, especially when you have an unplanned payment to make. It is necessary for small and medium-sized businesses, usually transacting in cash, to have access to instant cash reserves. Even if you have planned your business finances, surprise expenses might land your business’s growth plans in trouble as illustrated by the example above. 

To solve this problem, a business can opt for short-term financing options. But how do you decide if Razorpay Line of Credit is the right product for you? Let us guide you through!

Razorpay Line of credit vs. Loan

Razorpay Line of Credit is designed especially for small and medium businesses. How is it different from loans though? Both line of credit or business loans are financial products available to businesses, but they differ from each other in many prospects. Talking about the differences, here comes the first parameter, Interest rates!

Usually, business loans have a fixed interest rate. The payment remains the same throughout the term of the loan. On the other hand, lines of credit have a flexible interest rate and repayment terms. Although interest rates are lower on lines of credit as compared to loans, the payment might fluctuate with respect to interest rate changes. 

Another parameter for the difference is, loan structure and repayment terms!

Business loans are borrowed for a specific term, say three or four years – or even longer, in some cases. They are repaid in equal monthly instalments – consisting of principal and interest for the entire tenure of the loan. 

Line of credit works differently. In this case, the lender provides a credit limit to the borrower and allows him to utilise the limit for a predetermined length of period. Like a credit card, the borrower can use the amount for making purchases and repay them after a particular period. And, then again use the credit limit over and over again to make other purchases or payments. This provides long-term flexibility to businesses when compared to a loan. 

Line of credit vs. business loan

Launching Better Short-term Loans with Razorpay Line of Credit

Razorpay Line of Credit provides quick cash to businesses that suffer from unplanned cash requirements quite often.

line of credit application

Razorpay will approve your application under 2 days. Once Line of Credit is enabled for you based on your past customer transactions, you can withdraw money, repay and borrow again from the approved credit limit. 

Get the power of credit at your fingertips with Razorpay Line of Credit. Click To Tweet

Don’t run out of cash and don’t stop growing! Get approved within 2 days and enjoy uninterrupted growth with Razorpay Line of Credit.  

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    Ashmita Roy
    Author Ashmita Roy

    Ashmita Roy is a Brand Marketer at Razorpay. When she’s not working, you can find her strumming her guitar or writing poetry. Dislikes writing about herself in third person, but can be convinced to do so via pizza or cheesecakes.

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