SME Loans with minimum documentation and complete paperless process for unsecured business loans

Fintech lenders have conceptualized the synergies from the application of technology to finance in a novel way. The basic principle behind the paperless lending model is the online and instant access to finance. However, in recent years, paperless has made wide strides into other domains of lending especially SME loans. We shall try and understand the minimum documentation and paperless process of SME business loan extended by fintech lenders and the benefits realized.

Paperless Finance is an innovative step taken to make the business loans easier for borrowers by the use of electronic medium and avoiding the use of paper. Paperwork requires careful maintenance and is a time-consuming process. Further, there is a risk of loss or damage or tampering of confidential information. This took up a lot of effort on the part of the lender and loss of time on the part of the borrower. A paperless system has eliminated these hassles and made finance easily accessible to small business units.

Technology is the major driving force which is has enabled fintech lenders to completely achieve paperless lending. The ecological benefits of paper conservation are also immense.

Features Which Has Made Paperless Lending Easier: One can carry out the business loan process 100% digitally, right from applying for the SME business loan online, checking the loan status and balance enquiry, getting the loan approved and finally sanction of the amount into one’s bank account.

  • Mobile Banking- India has a very high level of mobile penetration. Fintech lenders have enabled loan application through mobile apps. Truly business loans are within a hand’s reach. Availability of e-passbook, online loan account, and customer portals enable the loan applicant to get timely status updates of the loan application. Various apps are available where one can handle one’s account with smartphones.
  • Internet Lending – India has amongst the largest base of internet users in the world. Thus, the spread of internet-enabled lending process comes as no surprise. One can directly apply for SME loans on the lender’s website portal.

For a business owner, security and confidentiality of sensitive business information are of prime concern. With the advancement in technology Identity theft, data theft are common threats.

In the past, when all the transactions happened on paper, the customer’s signature validated the customer’s identity and the proof of authentication and secure transaction. But with the onset of the electronic medium, the manual signature is not possible. Thus a digital e-signature assumes prominence. Fintech lenders recognizing the importance of digital security have put in place world-class IT infrastructure:

  1. Data security framework: Use of best-in-class security tools, strict IT governance and security frameworks to virtually eradicate any security issues. Enterprise content management system governed by a highly encrypted data security framework.
    B. World-class secure data center facilities and Infrastructure: Data centers are hosted through secured public & private cloud operating from India that operates with minimum N+1 redundancy.
  2. To ensure your privacy and security, in the website portal & mobile application, there is inbuilt user based authentications like
    1. Form authentication using the Sign In Portlet with extensible adapters for checking and storing credentials

2. Single-Sign-On (SSO) solutions
3. SAML plugin JAAS integration with application server

  • e-sign facility of the final loan agreement


Understanding e-Sign

Paperless lending needs a secure standardized tool to validate all the transactions. This is where e-Sign and eKYC play a key role. It is the equivalent of hand sign for the identity and authentication. E-Sign and e-KYC i.e. electronic know your customer is data in electronic form which provides adequate privacy and security to the customers in the financial online transactions.

Electronic signatures are a cryptographic mechanism which is used to ensure the authentication. It is accepted by all fintech lenders and there is a minimum incidence of fraud or forgery, with guaranteed integrity.

Benefits of e-signature include:

  • Reduced Processing Time for the fintech lender
  • Easy authenticity of the user
  • Reduction in the processing Costs
  • Ensures Security and Confidentiality for Documents and Data
  • Increased Efficiency
  • Prompt Decision-making and Approval Process
  • Hallmark of a secure and trustworthy system
  • Convenience to the user, without the need to physically visit fintech office premise

By the use of e-signature or digital signatures the documents one electronically signs are 100% trustworthy and are an authenticated paperless transaction.

Digital signatures can be inserted into the document and can easily travel electronically to from one computer to another through emails and FTP (file transfer protocol) to the destination. The Digital signature solutions are seamlessly integrated with all the business applications.

To make Indian lending space completely digital, fintech lenders have adopted Aadhar based OTP verification. This aligns with the Government of India’s Digital India initiative and is gradually making the fintech revolution a large scale, impactful social movement.

Carol Gilmore

Carol Gilmore