What should a small and medium-sized enterprise (SME) keep in mind before applying for loans on an online lending platform? Gaurav Hinduja, co-founder of Capital Float, helps us understand how online platforms and Narendra Modi’s “Make In India” initiative has helped the emergence of a new breed of loan seekers in India.
Capital Float is a digital finance company which provides working capital finance for SMEs in India. Borrowers can apply online in minutes, select desired repayment terms and receive funds in their bank accounts in three days.
Initial checks Capital Float makes before applying for a loan
Gaurav said a lot of checks are done in terms of financial background, credit history and innovative under-writing. Under innovative underwriting, a lot of emphasis is given regarding data on e-commerce portal, driving history in case of drivers seeking loans, psychometric tests which validate the integrity and acumen of the applicant, social media verifications and the amount of time the applicant spends on the application form. Pointers like these helps the company get a holistic view on the applicant before they go ahead and approve the loan.
Staying Ahead Of Competition
Over the years, the fintech space has seen a galore of online lending platforms like i2ifunding and Fairassets Technologies India. Gaurav believes the uniqueness of his firm is the fact that they are catering into niche areas like lending to kirana stores, the speed at which people are able to access loans, speed of approval and the low cost at which borrowers are able to take on loans.
The Make in India Impetus
Gaurav said that the Make in India concept is a great initiative and is still in its early days. Capital Float, which gives quite a few loans in the traditional manufacturing sector, has seen a steady growth that’s happening in certain verticals in the manufacturing sector and Gaurav believes that a lot of this can be attributed to PM Modi’s initiative. In spite of being at its nascent stage, he believes this initiative is creating the right noises for SMEs to invest in this sector.
The lending firm has a series of innovative partnerships to deliver credit to entrepreneurial ecosystems that have been traditionally underserved by banks – with leading aggregators such as Snapdeal and PayTM in B2C e-commerce, Alibaba in B2B e-commerce, Uber in transportation, Pine Labs and mSwipe in payments amongst others.
Gaurav sees the whole B2B e-commerce domain really take off in this country in the next 5-10 years just like how the B2C e-commerce space did. “Credit and access to credit becomes a very important factor for the growth of the B2B segment,” he added.
Gaurav also shared his experience on the emergence of new strata of self-employed Uber and Ola taxi drivers. Platforms like Capital Float, have started to allow these drivers to buy their own car and have an asset right on these platforms rather than driver someone else’s car. Gaurav said that his firm sees almost 500 applications per month from drivers who tend to seek a loan of about Rs. 7 lakhs – Rs. 8 lakhs.
Raising funds in a dry season
The company recently raised Series B round of funds of $25 million led by US-based Creation Investments Capital Management, along with existing investors SAIF Partners, Sequoia Capital and Aspada Ventures. According to Gaurav, the company’s display of growth, team structure, usage of technology to build a disruptive idea and the ability of a lending business to actually make money has helped them has helped them scoop funds.
“ The way we have formed our investor group is that every investor brings something very unique to the table. For example, SAIF is really well known in the e-commerce investing space – they bring in a lot of networks and contacts and help us go to market with a lot of interesting loan products in the digital ecosystem world. Sequoia is one of the best technology firms globally; they’ve really helped us in terms of technology recruitment and mentoring our technology team. Aspada, one of our first investors, helped us get access to new forms of capital both within India and globally from a debt perspective. The new investor Creation has invested in various financial firms globally and in India, they bring a financial services experience to the table which we really liked because at the end of the day we are a fintech firm.”
With the fintech space gaining the right kind of momentum in the startup space, the company aims to disperse about Rs.2,000 crores of loans and add about 20,000 customers in the coming year, which is almost a 10x to 15x growth from where they are this year.
The process of scrutinizing these loan applications might be modified slightly as Capital Float enters new product areas but a large part of it would still be very similar to what they’ve built over the years.