Everybody thought we were nuts – TOI

Written by Shilpa Phadnis. 

When Stanford MBA graduates Sashank Rishyasringa and Gaurav Hinduja started online lending startup Capital Float, it was counter-consensus. All around them they had naysayers, including investors who they had approached early on.

“You guys must be nuts -lending is not a business for you.” “It’s an offline business. You guys have to set up branches.” “Why don’t you guys start an e-commerce or a big data company.” These were some of the comments, recalls Sashank. About the only ones who believed in their idea were their parents.

The two worked with Baba Shiv, professor of marketing at the Stanford Graduate School of Business, to shape their idea of democratizing access to capital. “We wanted small and medium businesses to have access to credit on collateral-free terms.People needed loans against their business health and not against personal property,” Sashank says.

Capital Float started in 2013 and is the trade name of Zen Lefin, a non-banking finance company (NBFC) registered with the RBI.

Sashank, who was passionate about policy and development, was an engagement manager with McKinsey & Co in New York and India before he teamed up with Hinduja to start Capital Float. He graduated in economics from Princeton Uni versity and did an MBA from Stanford. Hinduja was the head of operations at Gokaldas Exports, overseeing one of the country’s largest apparel manufacturers.

 Banks, Sashank says, follow a cookie-cutter approach in assessing SMEs.Their lending policies are restrictive, collateral re quirements are inflexible and disbursements take up to 60 days. There are over 3 crore registered SMEs in the country and around Rs 7 lakh crore of loans have been disbursed through banks to them. But estimates show that the unmet demand is over Rs 9 lakh crore. “We wanted to use tech to bring agility to lending, become a lender as fast and flexible as a family member, but do it in a formal way ,” Sashank says.
Capital Float created flexible credit products that have helped SMEs get out of the clutches of informal sector financiers who charge high interest rates. One of the early customers was a mobile phone vendor from Bhilwara in Rajasthan. “He had pledged his house to get seed capital to start his business. He sold mobile phones on Snapdeal and had a great track record. From Rs 5 lakh a year back, he runs a Rs 50 lakh credit line with us today ,” Sashank says.
Capital Float has partnered with e-commerce marketplaces like Snapdeal, Flipkart, Amazon and Paytm to finance small merchants selling online. “We give an in-principle approval in 10-15 minutes after assessing the credit risk. Borrowers can apply online in minutes, select desired repayment terms and receive funds in their bank accounts in seven days with minimal hassle. We want to benchmark lending to the ecommerce experience,” Sashank says.
The company uses proprietary algorithms to check fraud and repayment history , and uses psychometrics to assess entrepreneurs’ payment ability . “We have taken the human bias out of financing and lowered the cost of lending,” Sashank says.

Now, with Rs 200 crore of loans disbursed, and $17 million raised from investors including SAIF Partners and Aspada, the early scepticism around their venture has more or less vanished.

News piece sourced from the Times of India. Read the original article here

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Why Online Vendors Should Apply for Capital Float’s Online Seller Finance

Are you an online seller looking to optimize and grow sales? Given the highly competitive nature of e-commerce, it’s always advisable to have a cash flow option handy for successful expansion. Furthermore, you wouldn’t want to lose out on market opportunities due to the lack of convenient financing options. And that, is where Capital Float comes into the picture.

In the cut-throat world of e-commerce, having a lucrative financing option at the right time is likely to translate into a significant competitive edge. There are three key occasions, wherein, an online seller may require rapid financing:

  • Respond to an increase in sales by purchasing inventory
  • To be prepared for seasonal fluctuations in revenue, and bridge short-term gaps in liquidity.
  • To widen product portfolio by diversifying into other product segments or to widen reach by operating on a new marketplace

Here are a few compelling reasons as to why you must apply for Capital Float’s Online Seller Finance to maintain your competitive advantage in the business:

  1. Flexible loans that are customized to your need

The exciting features at Capital Float’s Online Seller Finance ensure speedy expansion for your business in a simple manner. As an e-commerce vendor, you can raise funds from INR 1 Lac up to 1 Crore, depending upon your cash requirements. Furthermore, we provide you with effortless repayment modes for a loan tenure between 90-180 days. Our partnerships with multiple, leading e-commerce platforms enables you to acquire our e-commerce seller loans to operate and expand across different online marketplaces.

  1. A quick, hassle-free process

        a) Minimum documentation

To apply for our eCommerce seller loans, you need not furnish a heavy stack of documents. All we would need from you are your bank statements of the last six months and KYC documents credentialing you and your business.

         b) Zero collateral

We provide unsecured loans, meaning we don’t take collaterals as guarantee for loans. You won’t be asked to pledge your property or vehicle to avail a loan from us. Our loans are bereft of the anxiety that are often associated with loans against collateral.

        c) Loans against marketplace sales

Our motto is to help businesses to ‘Break Limits’. We understand that many a time, businesses with potential are hampered by the lack of finance. We are committed to change that. You can avail Online Seller Finance on the basis of your proven sales on e-commerce marketplaces, receiving up to 150% of your average monthly sales.

  1. Apply anywhere, any time

While financial institutions like nationalized banks, private banks and traditional NBFCs not only take weeks to sanction a loan, but they also have tedious application procedures, Capital Float ensures immense flexibility in the process. We have designed a handy mobile app through which you can apply for a loan from anywhere, as long as you are connected to the internet. The four-step online application procedure is not only user-friendly, but allows you to raise funds without losing on precious time.

External financing is an excellent tool for you to grow as an online vendor and keep operations smooth. Capital Float’s sole aim is to bridge the current gap in the market with innovative and flexible credit products for online enterprises like yours. That said, Online Seller Finance is just the product you need to fulfill your finance requirements in a smooth, hassle-free manner.

Wait no more. Take your online business to the next level with our online seller loans. Click here to apply.

Oct 24, 2018

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3 Things To Do When Applying For Business Loans

The growth of the SME (small and medium enterprises) segment, which contributed nearly 40% of India’s exports, has been restricted by the lack of access to timely finance. Only 4% of 57.7 million small business units in the country have access to formalized finance, leaving many to rely on informal lenders, who charge exorbitant interest rates. Requirements like collateral and detailed documentation as well as the long processing and disbursement time of loans deter SMEs from approaching traditional financial institutions. Thus continues the huge gap between the need for funds by SMEs and the amount of funds actually approved as loans.

This severe shortfall needed to be addressed, especially given the importance of SMEs to India’s economy. This is where FinTech companies like Capital Float have risen to the occasion, offering new business loans that are aligned to address specific needs of the SME sector. While cutting-edge technology is being deployed to make innovative financial products available to smaller businesses, SMEs must be aware of the available finance options to take make an informed decision.

SMEs make some common mistakes when applying for secured and unsecured loans. As a result of these mistakes, their loan applications may get rejected. Here are some tips for small businesses to avoid rejection of their business loan applications.

Be organized

Banks and other lending institutions would require certain documents to verify the claims made by a business. The decision to sanction a loan is taken by the lender after evaluating the prospects of a business, its ability to repay the loan amount and its previous credit record. This is done by checking various documents certifying the presence and existence of a business, its financial statements, taxes paid by it and other documents that indicate the financial standing of the business and the business owner(s). To ensure speedy approval of its loan application, a business must organize its documents and submit these in an orderly manner to the lending firm.

Any kind of delay in submitting the desired documents may be viewed negatively by the lender and could even derail the whole process. So, every business seeking a short term loan needs to be organized about its documentation. All the papers should be ready for submission when applying online for a loan. Your swiftness in providing the necessary information along with requisite documents can speed up the approval process.

Be Mindful of Your Credit Profile

The credit profile of the business owner or owners plays a key role in the ability of the SME to secure a business loan. Ensuring a good credit profile is not difficult. This is possible by ensuring that all your credit card and bill payments are made on time. The timely repayment of all due amounts including the ones relating to any existing loans helps improve the credit score.

Often business owners ignore their credit score thinking that it would not impact their ability to secure a loan for their business. They fail to understand the significant negative impact this can have on their business. It is important for business owners to regularly check their credit scores and take the necessary steps to improve them. Such efforts can ease the process of securing finance for the business in the future. In some cases, the credit scores do not even reflect the true situation. Regular monitoring can help business owners rectify the errors in the scores and boost their chances of getting loans on time.

Have A Firm Business Plan

Seeking loans without any kind of business plan may result in the loan application being rejected. A business plan is a reflection of the goals, the purpose of a business and ways to achieve them. It shows how a business intends to operate and how much funds are needed and at what time. A clear business plan not only helps a small business to ease the process of loan application, but also to determine the specific amount of funds required. This in turn enables the business to apply for a business loan well in advance besides providing the lender clarity into the purpose for which the loan is sought.

Thus, a well laid out business plan helps a business provide answers to questions like:

  • How much loan is required and for what purpose?
  • How quickly are the funds required and for what duration?
  • What is the current financial standing of the business and when will the business be able to repay the borrowed amount?
  • Does the business need secured or unsecured loans?

With FinTech lenders like Capital Float offering an array of innovative products, small businesses also need clarity to enable them to choose the loan that is most appropriate for them. A business plan would also help with this. In the absence of a business plan, the screening process may take longer and the chances of rejection of the loan application are also higher.

A business seeking a loan should not borrow from the first lender it comes across. Instead, it’s advisable to do thorough research and compare the loan terms offered.

Capital Float helps small businesses seeking loans to identify the right type of loan for their working capital needs, besides offering multiple repayment options. The use of advanced algorithms helps to underwrite businesses uniquely, check the repayment ability in absence of credit scores and develop customized lending solutions to suit the individual requirements of potential borrowers.

Oct 24, 2018

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Unsecured Loans – Is It The Right Option to Grow Your Business?

Achieving growth is a dream for every business, more so if it is a small or medium enterprise. Who doesn’t like expanding their production and also the revenue of their business? While business expansion is necessary, one thing which is primarily required for business growth is finance (with acumen being the second important ingredient). How does one secure business finance?

Banks and financial institutions provide the solution – business loans.

Business loans are the perfect solutions to financing which enables business growth. Banks and financial institutions lend the much-required business finance in India to business enterprises. This finance comes in two variants – secured loans and unsecured loans. Do you know what they are and how they are different?

Secured business loans

Secured business loans are also called asset-backed loans. These loans are granted on the value of an asset which is pledged as collateral for the loan. These loans are risk-free from the lender’s perspective as in the case of default by the borrower, the asset which is pledged is possessed by the bank to fulfill the loan liability.

Unsecured business loans

Unsecured loans, on the contrary, do not require any collateral or security. The loan is granted on the repayment capacity of the business which is indicated by the enterprise’s creditworthiness. These loans are granted as short-term loans which also have short repayment tenure.

Difference between the two

Both secured and unsecured business loans are fundamentally different and their differences are as follows:

 Secured Loans  Unsecured Loans
They require a security against the value of the loan  These loans are granted without the requirement of any collateral
The interest rate is low  Interest rate is high
The amount of loan depends on the value of the asset pledged for the loan The amount of loan depends on the repayment capacity and creditworthiness of the enterprise

Do unsecured loans help in business growth?

Unsecured loans are very easily available and do not require any collateral. They thus have various advantages which make them an ideal solution for quick financing. But do such loans also enable business growth? Let’s find out:

No asset backing required

Secured loans are limiting in the sense that they require business assets to be pledged as collateral. Unsecured loans are easily available and they do not require any business assets to be secured. As such these loans are not restricting. If your business is small and does not have many assets, it becomes a problem to avail a secured loan. This hinders the growth of business. Unsecured loans, on the other hand, can be availed without any assets.

The quantum of loan is not limited

Suppose you require a loan worth Rs.50 lakhs but the value of assets which are to be pledged is limited to Rs.40 lakhs. Would you be able to acquire the desired loan? Secured loans allow loans limited to the value of the asset pledged. Even in this case, the total value of asset is not allowed as loan as a margin is retained by the lender. So, if you have an asset worth Rs.20 lakhs and want a loan of Rs.20 lakhs, you would be able to avail only 80% to 90% of the value of your asset (Rs.20 lakhs in this case) as loan (i.e. Rs.16 lakhs or Rs.18 lakhs). In case of unsecured loans, the loan is granted on the business potential and creditworthiness and not limited by the value of any asset. Thus, businesses can avail an unsecured loan as per their requirement for aiding growth.

Easily available

Unsecured loans are easily available as the funds are sanctioned within days of the loan application being done. As such, these loans provide the necessary funding to businesses in a short span of time which can be used to increase business profitability and boost business growth. These loans come in handy when the business is poised to grow following a surge in demand. As the loan is easily available, high demand can be met by increasing production. High demand yields better revenue for the business and enables it to grow.

Ideal for young businesses

Businesses which are still in their nascent stage require funding to expand and grow. This funding can be easily secured through an unsecured loan as it does not require any collateral, which is hard to source for budding businesses. Thus, the growth of these young enterprises is dependent on unsecured business loans.

Unsecured business loans, therefore, play an important part in the growth of businesses. Though long term secured loans are essential for long-term finance, short-term unsecured loans help businesses meet their more immediate requirements, which has a direct bearing on their growth.

NBFCs offer unsecured business loans which are also called as business installment loans or term finance. This loan offers the following benefits to businesses:

1. A loan of Rs.1 lakh to Rs.1 crore can be availed by businesses for any of their requirements.
2. There are no hidden or additional charges under the loan. Applicants are required to pay only a small processing fee of 2% of the loan amount borrowed. Apart from this there are no foreclosure or part-prepayment charges incurred on the loan.
3. Certain NBFCs use customized credit criteria while underwriting customers. The credit offering is tailored as per the applicant’s requirement.
4. The loan is sanctioned within 3 days of successful application thus providing the funds at the earliest.
5. No collateral security is required for the loan.
6. Application for the loan can be done quickly through the online medium which reduces unnecessary hassles.

Unsecured loans sometimes prove to be that important source of funding without which businesses couldn’t have grown and achieved enhanced profitability. If you are also looking for a business loan for your business growth avail an unsecured loan today!

Oct 24, 2018