Why q-commerce is driving more new-age brands to tap alternative financiers

Platforms like Recur Club, GetVantage, Velocity, and Klub are stepping in to meet this demand, offering innovative debt solutions tailored to the fast-paced, quick commerce ecosystem.

Delhi-based debt marketplace Recur Club has disbursed as much as ₹150 crore to consumer startups to fuel their quick commerce ambitions in the last four months alone, a 3x jump from the previous four months, founder Eklavya Gupta told Mint.

“The last few months have seen almost 3x growth in debt financing requirements, proportionate to growth thanks to quick commerce. Even e-commerce was much lower before," Gupta said. Recur Club has financed over 200 consumer brands and more than half of them sell on at least one quick commerce platform.

Brands primarily use these loans to expand inventory for faster stock replenishment at dark stores. These short-term loans help brands meet rising demand as business grows on the back of quick commerce.

Some brands also use the money to finance their marketing spends, according to Recur Club’s Gupta. Demand from beauty-personal care and apparel brands is the highest, he added.

Fireside and Vertex Ventures-backed beauty and personal care brand Pilgrim has seen its working capital requirements double in the last 12 months compared to the previous year, its founder Anurag Kedia told Mint.

The firm’s quick commerce business has doubled in the last five-six months alone and is expected to grow further in the next six months. “Working capital is a priority for any consumer business — quick commerce and otherwise. Most beauty brands will hold inventory for 60-90 days, especially if there's a long tail," Kedia added.

Nascent consumer brands are following suit, too. Firms younger than one to two years with revenue less than ₹70-75 lakh per month are keen to tap alternative financing as they scale, Recur Club’s Gupta added.

“We’ve seen some of our portfolio companies growing from ₹50-70 lakh a month to nearly ₹1.5 crore, all because of quick commerce. Smaller brands generally pick one quick commerce platform, scale, and then move to the next one. Working capital requirements are directly proportionate to sales," Gupta added.

Also Read: A quick-commerce correction on the radar for consumer brands

Meanwhile, GetVantage, which serves brands including WickedGud and Arata, saw financing to consumer brands rise nearly 180% last quarter compared to the previous year.

“Consumer brands will require as much as ₹1.66 trillion in credit to seize the ₹8.3 trillion quick commerce market opportunity in India by 2029," said Bhavik Vasa, founder of embedded finance firm GetVantage.

As quick commerce emerges as one of the fastest-growing channels for consumer brands, the need for agile working capital and growth capital has never been greater, Vasa said. "Brands are scaling rapidly, requiring significant inventory and marketing capital to seize this immense opportunity," he added.

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Why alternative financing?

Many startups struggle to raise capital from traditional lenders such as banks and non-banking financing companies (NBFC) given their conservative approach. Moreover, lengthy approval processes further dent the experience.

Alternative debt instruments like cash flow and revenue-based financing models have emerged popular among young startups in recent years, offering a quick way to secure financing without diluting equity.

Recur Club takes a portion of the brand’s monthly or quarterly sales depending on the arrangement, typically in the range of 15-30%. Brands can secure up to two-four times their monthly quick commerce sales as capital, founder Gupta added.

The financier has also partnered with a quick commerce platform to provide brands easier access to quick credit, Gupta said, declining to name the platform.

While alternative financing models offer quick access to capital without diluting equity, they come with their own set of challenges. Interest on these loans can sometimes exceed 20%, making it an expensive option for young startups that have limited cash flow.

“The rise of quick commerce in India is putting immense pressure on D2C startups to manage cash flow effectively as they scale revenue at lightning speed. Traditional financing options, such as banks or venture debt, operate on slower, legacy models designed for older economic frameworks, often failing to keep pace with the agility startups require," said Ninad Karpe, founder and partner, 100X.VC.

“New-age fintech players are tailor-made for this dynamic ecosystem. They offer fast, flexible, and innovative financial solutions that align with the evolving needs of modern startups, empowering them to thrive in an ultra-competitive landscape," he added.

In the last two years, quick-commerce platforms such as Zepto, Blinkit, and Swiggy Instamart have offered consumers an easy and convenient way to shop for groceries and other daily essentials, hence making them the fastest-growing sales channel for many consumer brands and resulting in higher operating costs.

Fast-moving consumer goods (FMCG) makers including Hindustan Unilever Ltd and Nestle India Ltd are seeing increasingly higher traction in their numbers from quick commerce channels. The numbers point to a fundamental shift in consumer behaviour, especially since consumers are more than willing to pay a premium for quick deliveries.

Also Read: Quick delivery, quick returns: How Instamart, Zepto and Blinkit plan to take on e-commerce giants