This Startup Is Using SMEs' Digital Footprint To Sanction Loans
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Imagine this: You have received an important order from your client and to complete it you need about INR 10 lakh. You have two options.
First, visit a bank and submit your documents. Officials will process your application and sanction your loan after proper verification and you will get the cash in hand in seven to ten days. Second is the easy step of searching SME lending platforms online. Share the required information with any of them and your loan will be processed in 48 hours.
With endless documentation and slow processing systems in place to make the entire procedure as cumbersome as possible, getting loan smoothly is every SME’s dream. Fintech companies are actually working to turn this dream into a regular affair.
FlexiLoans, a digital lending start-up, is using Data Analytics tools, including your point-of-sale records, to solve credit problems faced by small businesses in the country.
In an exclusive conversation with Entrepreneur India, Manish Lunia, FlexiLoans Co-founder Manish Lunia talked about the company’s aim and interest in serving the underserved and the underserved business class of India.
In 2015, concerns over growing Non-performing Assets (NPAs) started hitting hard and worrying banks grew overtly cautious. As a consequence, SMEs, as is always the case, found themselves at the receiving end.
In the same year, Lunia along with his ISB(Hyderabad) batchmates Ritesh Jain, Abhishek Kothari and Deepak Jain came up with the idea of FlexiLoans to alleviate the problems of these small businesses using digital footprints.
Today, the firm receives 3,000 applications every month, of which, it sanctions 500. The average sum sanctioned is INR 5 lakh, which even goes up to INR 50 lakh for tenure of six months.The company’s loan book has an NPA of less than 0.5%.
Lunia's mantra is simple: “A business man doesn’t take loan with an intention to default. We do not provide loans for starting a business. We deal with established firms or help the newly established businesses grow. Additionally, if a company defaults, our partners have a choice to block them from their platforms.”
Securing the Unsecured
FlexiLoans sanctions unsecured loans in the form of terms loans, working capitals. It also provides line of credit and point-of-sale (POS) related loans. With the growing penetration of PoS machines, PoS-loan is the company’s latest product.
“With POS-related loans, we determine the repaying capacity of the customer through the data shared by POS companies. Over 70% of a month’s installment is divided and charged as fixed amount on a daily basis while the remaining 30% is recovered end of the month,” he added.
The core business of the company is sanctioning loans by decoding data from its partners, which includes Flipkart, ShopClues, Uber, Amazon, and Ola. FlexiLoans only check the legal background of the customer and their political affiliations to avoid defaults.
Lunia refused to agree to the fact that the company is grabbing a slice of banks’ profit pie. He said, “We are not eating the bank’s lunch, we are actually getting the bank’s lunch ready.”
“We allow people with poor cibil scores to increase their business. If the business does well, why would they default? With a healthy business growth, one is more likely to repay and improve his cibil score. This will help him take big ticket-size loans from us and banks in future,” he stressed.
The company claims to be growing by 250% on a month-on-month basis and have more than 70 partners. In the next five year, Lunia aims to take the company’s loan book to INR 50,000 crore.
The company has raised INR 100 crore as seeding funding from angel investors, including Sanjay Nayar, CEO of KKR India, Anil Jaggia, Former CIO of HDFC Bank and Vikram Sud, former head of operations and technology at Citibank. FlexiLoan is now keen on raising about INR 5-6 million majorly as debt.