Has Facebook stepped into the banking sector? Will they be renamed for their new venture? Is there any other type of loans and services they provide? A lot of such questions popped up as soon as their announcement of the ‘Small Business Loans Initiative’ came out. However, it is important to note here that even in the past couple of years, Facebook has offered such loans or credit grants to small businesses around the world. They wanted to make it easy for SMBs to secure a loan quickly in times of need. India became the first country for Facebook to launch this ‘Small Business Loans Initiative’ programme, which was launched on August 20, 2021. Read further to know about Facebook’s new loan initiative and the reason for its commitment to it.
Facebook’s Small Business Loans Initiative
Components and Benefits of Loan Initiative Programme
Why Facebook started giving Business Loans in India?
Other initiatives by Facebook
SMBs effect in Indian Economy
A glimpse of Indifi
Conclusion
FAQs
Facebook’s Small Business Loans Initiative
Small Business Loan Initiative is a new initiative taken by Facebook partnered with Indifi, an online lending platform. Their primary vision is to provide loans to small businesses. They wanted to create an accessible and easy way for SMBs to take a loan without much delay in the process. Businesses that are attached/listed on Facebook, will have the eligibility to apply for this loan.
Though Facebook is leading this initiative, it does not directly involve in the entire process. Fixing the eligibility criteria, processing loans, risks in repayment are all borne by the lending partner. Facebook, on the other side, creates awareness of this programme and formulates regulatory frameworks for this business. It serves as a bridge to connect SMBs with lending partners. India is the first country where Facebook launched this initiative in August 2021. This facility is available to businesses across 200+ cities and towns in India so far.
Shubham Kumar
Components and Benefits of Loan Initiative Programme
Here's a look at some of the key features of the loan programme:
- Loan Amount: Facebook business loan for small business initiative offers the businesses a loan amount ranging from Rs 5 lac-50 lac, which is based on the business requirements. As the majority of the traditional business lenders often shy away from lending money to businesses nowadays, the Facebook loan initiative would certainly be a boon thereby solving the problem of the business capital.
- A Quick Process and Collateral-Free: The applicants can apply for this loan online and it won't even be needing collateral. Furthermore, the application process is really fast and simple. Once it is approved, the loan would be disbursed within three working days.
- Fixed-rate of interest: The Facebook-backed business loan boasts of a fixed interest rate between 17%-20% annually. Notwithstanding, the loan amount, which might be anything between 5 lacs and 50 lacs, the rate of interest is capped the same.
- Provision for the women: The businesses that are owned entirely or in part by women are allowed special concessions. This would mean a 0.2% reduction in the rate of interest. This initiative is designed to motivate more entrepreneurs in the time upcoming.
- Quick Support: After the application, the users would be confirmed for the approval of the loan within one working day. After that, they would easily be able to find out the status of the loan by calling the customer service department of Indifi.
- No processing fee: The Facebook loan initiative for small businesses does not require any processing fees.
- Collateral-free: The loan initiative programme that has Facebook partnering with Indifi will not need any collateral security against the amount lent.
Why Facebook started giving Business Loans in India?
Facebook has conducted a survey in 2020 with OECD and World Bank, to analyze the challenges faced by Small and Midsize Business (SMB) sectors. The outcome of the survey was the reason for the birth of the ‘Small Business Loans Initiative’. Here are the reasons why:
- The survey showed that the major factors affecting Small and Midsized Businesses are Capital and Cashflow. Timely requirement of Capital is necessary for the efficient and smooth functioning of the businesses.
- Most SMBs expressed their concern about the time taken to obtain credits from financial institutions.
- So, Facebook along with Indifi has taken these issues into its own hands. They provide loans to businesses that advertise through Facebook.
- Under this programme, SMBs can receive credits in less than five days.
- It is evident that Small Businesses are going to push India’s financial and economic sectors. Facebook acknowledged it by saying that they are doing this for the economic growth of our country.
- In the words of Ajit Mohan, Facebook India’s CEO, “We're not looking to make money from this programme and we don't have any revenue share. But we are hoping, this creates growth in the economy that will eventually benefit us”.
- Facebook just serves as a platform to provide loans through Indifi. This retrieves the businesses from their constraints caused due to lockdown.
Other initiatives by Facebook
Small Grants Programme was launched by Facebook in 2020. Through this, they contributed a $100 million dollar grant to SMBs across the world. This programme was launched in more than 30 countries. This was to support the SMBs that were suffering from the effects of the Covid-19 pandemic.
Damini Bhandary
SMBs effect in Indian Economy
Small and Midsized business is the major occupant of the Indian business sector. They constitute roughly 63.4 million units spread across the country. They contribute to 6.11% of manufacturing GDP, 24,62% of the service sector’s GDP. They also contribute an enormous 33.4% towards India’s manufacturing output.
Such a huge sector, when affected largely, has an adverse effect on an economy. As a result, India’s GDP for the year 2020-21, has fallen by 7.3%. India hasn’t faced such a huge drop in GDP in 68 years.
Most of the SMBs operate regionally. They require capital for their day-to-day operations. The lockdown implemented across the country was the reason for their steep downfall. When they returned to business, there was no capital to invest. Facebook identified their issue and addressed it at the right time through the ‘Small Business Loans Initiative’.
Michelle D’souza
A glimpse of Indifi
Indifi is an online financial lender that was started to provide business loans to small businesses operating in India. They serve with a motto ‘We Help Small Businesses Thrive’. They stand true to their words by taking all necessary measures towards SMBs development.
It is an Indian company started by Alok Mittal in the year 2015. They provide financial services to diverse business entities like travel, e-commerce, hospitality, retail, etc., Indifi serves to be the first lending partner to be associated with Facebook.
Conclusion
Facebook has taken measures to promote the country’s economy through various initiatives. It has promised to do more in the future. With these tech giants investing in the business sectors, it is going to be a boon for SMBs and as a result to India’s economy. It's the right time for Small Businesses to capitalize on the opportunities showered on them.
FAQs
Has Facebook launched the Small Business Loans initiative in India?
Facebook India partnered with Indifi, an online lending platform to provide business loans to small businesses.
What is the loan amount offered by Facebook Small Business Loan Initiative?
Facebook Small Business Loan Initiative offers loans from 5 lakhs to 50 lakhs for small businesses.
What is the interest charged on loans through Facebook Small Business Loan Initiative?
Loans by Facebook for small businesses are offered at interest rates of 17% to 19%.
Author: Bharath
Source : https://startuptalky.com/facebook-business-loan-initiative-india/
Date : 2021-12-03T13:21:27.000Z