India’s Next Business Borrower May Be a First-Generation Entrepreneur: Micro Entrepreneurs Drive Commercial Credit Growth at 22% CAGR, Finds Equifax India Commercial Aspirational Report

With 40–55 million businesses still outside formal commercial credit, Equifax India finds the next lending opportunity increasingly concentrated among first-generation entrepreneurs, Tier-II/III businesses and digitally formalising enterprises whose GST, UPI and cash-flow footprints are changing how creditworthiness can be assessed

Mumbai, 10th September: India's next commercial credit opportunity may not come from traditional corporate borrowers but from the millions of individual entrepreneurs building businesses around digital payments, GST records, online commerce and increasingly formal operating models, according to the latest Aspirational India: Business Credit Market Performance report from Equifax.

The report estimates an overall commercial enterprise universe of 80–105 million businesses, of which only 40–50 million are currently served by formal commercial credit, leaving a potential 40–55 million credit gap. The largest opportunity sits among the Emerging and Growth Seeker segments, which together represent a potential credit gap of approximately 31–37 million businesses.

At the same time, the profile of the business seeking credit is changing rapidly. Between FY23 and FY26, commercial borrowing by individual business owners grew at a 22% CAGR, significantly ahead of the 14% CAGR recorded for traditional entity-level borrowing. Individual entrepreneurs now account for 28% of total commercial balances, making them a material part of India's formal commercial credit ecosystem.

Subhankar Mishra, Interim Managing Director, Equifax India, said: “India’s commercial credit opportunity is changing as fundamentally as the businesses seeking it. Individual entrepreneurs are emerging as meaningful economic units, increasingly leaving digital, GST and transactional footprints even before they become traditional corporate borrowers. As lending moves from collateral-led to cash-flow and information-led underwriting, lenders can assess businesses on how they actually operate, opening the door to deeper, more responsible credit access for millions still outside the formal system.”

 

The company is no longer the only unit of economic activity

Historically, commercial lending was structured around the company: audited financials, collateral, established banking relationships and a demonstrable corporate history. That model is increasingly being challenged by a new generation of entrepreneurs who may begin as proprietors, small businesses or informal enterprises, but increasingly operate with identifiable digital business footprints.

Equifax analysis shows that India's commercial underwriting ecosystem is moving from asset-backed lending towards data-driven, cash-flow-based underwriting with GST, digital receipts, UPI transactions, TReDS and Account Aggregator-enabled banking information providing new signals of business health.

In other words, the balance sheet is no longer the only story a lender can read. The transaction trail is becoming part of the story.

 

47.5 million businesses could represent the next commercial credit frontier

The report's segmentation illustrates why a single “MSME borrower” category is increasingly inadequate. Across the estimated 80–105 million commercial enterprise universe, approximately 47.5 million businesses sit outside the served formal-credit pool at the midpoint estimate.

The largest gaps are concentrated among:

• Emerging businesses: 25–30 million potential enterprises, with a 19–22 million credit gap
• Growth Seekers: 20–25 million enterprises, with a 12–15 million gap
• Credit Experienced: 15–20 million enterprises, with a 5–8 million gap
• Asset-backed Operators: 10–15 million enterprises, with a 2–5 million gap
• Credit Intensive businesses: 10–15 million enterprises, with a 2–5 million gap

The implication is clear: the next phase of commercial lending cannot be solved simply by increasing the number of MSMEs served. It requires identifying what kind of business is seeking capital, what stage it is at and how it generates cash.

 

Bharat is becoming an entrepreneurial growth engine

The geographic profile of entrepreneurship is changing alongside the credit profile. The report finds that 50% of startups are now emerging from Tier-II and Tier-III towns, contributing to a startup ecosystem of 22.3 lakh+ startups and more than 2.3 crore direct jobs. Nearly 48% of recognised startups feature female directors, while annual patent filings have risen to 4,500+, pointing towards a broader shift from informal entrepreneurship towards innovation-led business creation.

Formalisation is accelerating as well. Annual new company registrations have risen from approximately 1.2 lakh to more than 2 lakh, signalling a widening pipeline of businesses moving towards formal structures.

For lenders, this creates a structural opportunity: businesses can increasingly become visible to the formal financial system before they develop the traditional characteristics of a mature corporate borrower.

 

India's digital infrastructure is turning business activity into credit signals

The expansion of GST, UPI and the Account Aggregator ecosystem is changing the underwriting equation. According to Equifax India, rapid integration of these data networks can enable faster verification of business cash flows, reducing dependence on fixed collateral as the primary indicator of creditworthiness. This shift is particularly relevant for smaller businesses where conventional financial statements may be limited, but transaction-level activity can reveal sales velocity, payment behaviour and cash-flow consistency.

The report describes this evolution as a movement towards data-driven and cash-flow-based underwriting, where digital business activity increasingly functions as an additional form of “information collateral.”

 

The next credit demand is coming from businesses trying to grow — not just survive

Commercial borrowing is also becoming more growth-oriented. Equifax identifies precision engineering and auto components, EV and clean-tech components, logistics and quick-commerce suppliers, and agri-processing and food exports among high-growth sectors where businesses are seeking capital for capacity expansion, manufacturing retooling, inventory-intensive operations and export-oriented upgrades.

For these businesses, the nature of credit demand is fundamentally different from short-term survival finance. A precision engineering business may require capital to expand capacity amid China+1 opportunities. An EV component manufacturer may need capex to retool production lines. A quick-commerce supplier may need working capital to meet real-time inventory requirements, while an agri-processing business may need machinery finance to move up the export value chain. The opportunity for lenders is therefore shifting towards matching the structure of capital to the operating cycle of the business.

 

Credit history itself is becoming an economic asset

As businesses mature, access to larger pools of capital increasingly correlates with their established credit histories. The report finds that PSU banks account for 60% of exposure in the ₹2 lakh–₹10 lakh ticket segment, while private banks hold a 36% share in the ₹10 lakh–₹2 crore segment. More significantly, businesses with more than five years of bureau history account for 39% of higher-value exposure.

This points to a broader transition in commercial lending: credit history is itself becoming an asset. For a business that begins with small working-capital facilities and demonstrates consistent repayment and cash-flow behaviour, the credit relationship can progressively unlock larger and more sophisticated forms of finance.

 

The scale of the formalisation opportunity is already visible

The wider MSME ecosystem provides the foundation for this transition. The report cites 8.9 crore+ Udyam and UAP registrations as of July 2026, representing 39.6 crore+ employment generated, while MSMEs account for 31.1% of GDP and 45.73% of India's exports based on FY2023–24 data cited in the report. The CGTMSE guarantee programme had sanctioned ₹14.69 lakh crore in guarantees as of June 2026.

MSMEs also contribute approximately 35.4% of manufacturing output, while the report cites MSMEs as driving 48.5%+ of India's overall exports. GST and digital transaction data are increasingly enabling revenue-based underwriting models in place of purely fixed-collateral-led assessments.

 

From MSME lending to entrepreneur lending

India's commercial credit market is moving beyond a binary distinction between “formal” and “informal” businesses. The emerging borrower may be a proprietor with a UPI trail, a small manufacturer with GST-linked revenues, a Tier-III startup building an online business, a woman entrepreneur scaling a local enterprise or a supplier participating in a rapidly expanding digital supply chain.

For lenders, the opportunity is to recognise these businesses before they become conventional corporate borrowers and to build credit journeys that evolve as the businesses do. The next chapter of India's commercial credit story, therefore, may not be about lending more to the companies we already know.

It may be about learning to see the businesses we have historically been unable to see.

 

About Equifax India

Equifax India is a leading provider of credit information and analytics solutions, helping financial institutions and businesses make informed decisions through data, technology and insights. As part of Equifax Inc., the company combines global capabilities with deep understanding of the Indian credit ecosystem to support responsible lending, financial inclusion and sustainable economic growth. 

 

For any further details, please contact:

Suhas Diwakar Zele (Head of Marketing & Communications, Equifax India)
suhasdiwakar.zele@equifax.com  & marcom.india@equifax.com