Loans Without A Moan

Despite running healthy businesses, entrepreneurs in India consistently struggle to raise timely credit from banks. Those that succeed often have to pledge personal property to fund business needs. Restrictive lending policies, inflexible collateral requirements and slow disbursements by formal financial institutions frequently push small and medium enterprises (SMEs) towards informal financiers; but while these lenders are quick to offer funds, crippling interest rates tie down the borrower to a chronic cycle of debt.

This is when Capital Float was born, an online platform that provides working capital finance to SMEs in India. Capital Float believes SMEs have three basic demands: simple access to credit, collateral-free terms and a trustworthy partner. “We were inspired by the early traction in alternative lending in fintech in mature markets such as the US, the UK, and China, and as we looked at India, we felt that India was ripe for disruption both from a fintech and alternative lending perspective,” says Shashank Rishyasringa, co-founder and managing director of Capital Float.

Capital Float offers flexible, short-term loans that can be used to purchase inventory, service new orders or optimise cash cycles. Borrowers can apply online in minutes, select desired repayment terms and receive funds in their bank accounts in three days with minimal hassle. Capital Float is the trade name of Zen Lefin — a non-banking finance company (NBFC) registered with the Reserve Bank of India.

According to the co-founders, the company’s mission is to bridge the current gap in the market with innovative and flexible credit products for SMEs, delivered in an efficient and customer-friendly manner.

Although they have met with a lot of initial challenges, they are on a strong growth trajectory now. “The first year was filled with challenges. One of the basic challenges was to convince people and the ecosystem. Trust was an issue among the SMEs. Then, it was equally challenging to convince and get a team,” says Gaurav D. Hinduja, co-founder and managing director of the NBFC.

But, all these challenges are behind them. The NBFC has successfully raised over $42 million in equity capital in the last 2.5 years and expects to breakeven in next 6-8 months. Currently, they are disbursing Rs 100-150 crore worth of loans per month.

The co-founders believe there is a huge unmet need for financing in the SME sector and the potential market is worth $200 billion to $0.5 trillion. “We are just scratching the surface,” Rishyasringa says. “Customers are increasingly moving online, with things like cabs and movie tickets being booked online, why should we visit a bank physically!”

In line with their focus on the SME market, Capital Float is seeing maximum traction from tier-II and tier- III cities. Headquartered in Bengaluru, their management team consists of experienced professionals with prior careers in bluechip companies such as McKinsey & Company, Gokaldas Exports, Oracle, Citibank, Capital First, and Wipro.

ayushman@businessworld.in