New Delhi: SME lending platform, Capital Float, disbursed Rs1,000 crore in loans during the 10 months ended January 2017, and it expects to disburse Rs5,000 crore in the next one year, said top executives of the company.
Bengaluru-based Capital Float is introducing more loan products, increasing its marketing spend and doubling its corporate partnerships for borrower acquisition towards this.
Founded in 2013 by Sashank Rishyasringa and Gaurav Hinduja, Capital Float is a technology-led non-banking finance company (NBFC) that underwrites unsecured business loans to start-ups, manufacturers and e-commerce merchants.
“The biggest push for the year (2017) will be our foray into the kirana (stores) segment, the small mom-and-pop shops... we have begun a pilot with providing loans to these kirana merchants of a few payment aggregators such as Paytm, Oxigen, and Itzcash,” Hinduja said.
The firm clocks revenue by earning interest on money lent and growth in loan book does not necessarily reflect the true health of the business.
Owned and operated by Zen Lefin Pvt. Ltd., Capital Float has partnered with e-commerce websites, payment gateways, cab services (it has a total of around 50 such), including Snapdeal, ShopClues, Paytm and Uber to offer loans to a large pool of small businesses and merchants that work with these companies.
Capital Float aims to double the number of these partnerships as it rolls out loan products for small retail shops and educational institutes.
Banks ask for collateral, financial statements and bank statements and also do not offer small ticket size loans. Capital Float is trying to solve the problem by digitally lending money through its mobile app and website to small businesses that might not have collateral, significant revenues or years of experience and largely bank on chit funds and local moneylenders for credit.
Having lent to 7,000 borrowers in 2016-17, Capital Float is aiming to finance 20,000 of them in the next one year, including 10,000 kirana stores, with about 60% of its total borrowers coming from outside metro cities.
Sreedhar Prasad, partner e-commerce at KPMG India, points out that a typical kirana store selling groceries may not be an easy market. “They would already have established financial arrangements with their supplier, and not all are transacting online. Most of these store owners would be above 40-45 years old and may not easily adapt to the online way of borrowing.”
“Online lending companies could look at un-branded digitized retail stores; they are small retail shops selling apparel, electronics or stationery, that have a computer in the store or have a smartphone and become an easy target market and early adopters of fintech products,” Prasad added.
Currently, loans to e-commerce sellers and small and medium enterprises (SMEs) constitutes 33% of the book of Capital Float.
The average loan amount extended to a merchant is Rs10 lakh, at an interest rate of 16-19%, for a tenure between 60 days and three years. Loans to small retail shops, however, are capped at Rs50,000.
“Diversity of products is driving our growth” explained Rishyasringa. “In the last year alone, the taxi finance product targeted at drivers in Ola and Uber grew five times. Similarly, we have a product called Pay Later targeted at traditional SMEs—a 60-day loan for B2B (business-to-business) companies which are part of large supply chains. (To acquire such SME borrowers) we are working with firms like Alibaba... and recently we launched school finance products, targeted at providing loans to schools for equipment, and capital expenditure” he said.
Capital Float is backed by George Soros’s Aspada Investment Co., SAIF Partners and Sequoia Capital. It has raised more than $80 million in debt and equity.
Its rivals include Capital First Ltd, NeoGrowth Credit Pvt. Ltd and SMEcorner.in (Amadeus Advisors Pvt. Ltd). In July 2016, NeoGrowth got $35 million from IIFL Asset Management, Accion Frontier Inclusion Fund managed by (Quona Capital), Aspada Investments and other investors.