Old May Not Always Be Gold

Like most college friends, Ankit, Murthy and Kumanan lost touch with each other soon after graduating. Unlike most friends who lose touch with each other, they ran into each other while vacationing in the same resort at the same time to celebrate new years’ eve. While their career paths had diverged 15 years out of college, they were soon reminiscing the good old days with an equally old bottle of scotch. After rewinding and replaying the past a few times, the conversation caught up with time and they started talking about work.

After several years of working in a traditional bank, Ankit got bored and joined a new age digital lending company as the head of credit. Kumanan worked at large garment manufacturing units in India, Bangladesh and China. Watching the industry disappear around him, he sensed opportunity and had recently started his own T-shirt design and manufacturing company where he was riding the e-commerce boom and sold most of his inventory online. He had ambitions of starting his own brand soon. Murthy had joined his father’s business and expanded a single department store into a chain across the entire city. He also supplied snacks, beverages, toiletries, cleaning equipment to the largest software company of his city and they were constantly demanding that he supply paper, ink and most other consumables as they grew and expanded.

With the scotch taking care of any and all inhibitions, Murthy and Kumanan’s frustrations surfaced and they started talking about how they love their work, the sense of independence, the sense of control over their destiny but how they absolutely hated dealing with lenders and banks. In their mind, Ankit personified this opaque, insensitive, slow lender and they wanted him to explain why all their past loan and credit card applications had been declined. The barrage of questions targeted at Ankit reached a point where Kumanan even wanted Ankit to explain why his voter ID had the wrong address! Ankit smiled and surprised them by saying he shared their frustration of being unable to provide the right loan to the right person at the right time in his old bank and that he also moved to a new age digital company with the intent to redefine lending in India.

Ankit then asked Kumanan and Murthy to explain how they went about getting a loan and got the answer he expected. Like most business owners, they did not have the time to deal with multiple banks and they used an agent to help them get loans. While they did not particularly like their agents, they did send a guy over to their office to fill forms, collect documents, organize bank discussions and get them their funding without them having to figure out every bank, product and process. In addition, Murthy and Kumanan both had multiple suppliers who they had worked out individual credit terms with. They also admitted that whenever they needed urgent money or large sums that banks would not provide, they got it from local moneylenders at exorbitant terms. It was quite beyond them as to why a bank would think they cannot repay a larger loan when they were clearly taking multiple loans and successfully paying them off.

Ankit explained that traditional banks and lenders had very limited scope for loan officers to think out of the box and act beyond established policies.  Banks did not have significantly different products or processes and ended up providing 2-3 year lump sum loans that were not large enough for Kumanan or Murthy.  They always ended up spending time allocating money across various activities such as expansion, payroll, supplier payments, seasonal demands, online vs offline sales where payment cycles were vastly different. The advantage of Ankit’s new age company was three fold: custom products designed to address specific financial needs of businesses, high speed customer experience with minimal documentation, and low pricing due to product features that enable non-conservative underwriting. Kumanan and Murthy’s curiosity was piqued and they wanted to know more.

Ankit asked Kumanan to imagine a world in which he downloaded a mobile app, added all his suppliers and had a line of credit with standard terms available that he could use to pay any supplier any time. He could pick his repayment period and the payment goes through immediately! No need to haggle with each supplier and the credit line grew with usage and regularity of payments. Since he sold online, he also had the option of picking a tailor made e-commerce loan where repayments were mapped to the payment cycle and a transparent cash flow control mechanism ensured that many more people qualified for affordable large loans. These loans even adjusted themselves for seasonality of his business and he could request top-ups as and when he needed them. Kumanan was very impressed that these products were not restricted to his imagination but were actual products that Ankit was able to provide via his new age digital lending company.

Murthy wanted to know if there was something for folks like him who did not sell online. Ankit told him that instead of taking long term loans that may not be utilized all the time but keep accruing interest, Murthy should opt for an invoice financing loan wherein all his supplies to the large software company could be funded as and when they make a purchase from him. That way, he does not have to plan for their expansion and is confident of the right amount of money at the right time and the right rate. Murthy agreed that while this product did sound interesting, he preferred if somebody came to his office to explain the product and handle the paperwork. Ankit mentioned that his company did not have any “paperwork” since most customer information was collected digitally but he is happy to send over a person to Murthy’s office to help guide him through the product and process. Murthy then wanted to know why he could not get a larger loan and Ankit explained that lenders and banks are happy to lend when they have some visibility into the cash flow of a business. As an example, Ankit’s company had recently launched a merchant cash advance product that collected daily payments directly from the credit card machines that Murthy had in all his stores. Typically, it was a lot easier to qualify for such a loan, there was minimal documentation and there was no need to think about payment due dates!

Having given up hope of ever hitting the gym, Kumanan and Murthy were happy with their new year resolution of trying out custom financial products from new age digital companies and keeping in mind that old may not always be gold!

Tushar Garimalla

Tushar has deep expertise in credit, risk management, portfolio management and analytics gained during his 10-year career with HSBC and Capital One in India and the US. Most recently, he worked on a small business credit card portfolio purchase for Capital One including business development valuations, due diligence, system integration and credit policy development. Tushar graduated from IIT Madras with a B.Tech in Electrical Engineering.

Tushar heads Decision Sciences at Capital Float. 

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Online Seller Finance – working capital loans for e-commerce merchants

The fact that ecommerce is growing exponentially all over the world is undeniable. Entrepreneurs everywhere are competing with each other to get a piece of this lucrative pie. Definitely, starting a business in the virtual world entails much less costs, making it easier for more and more people to fulfill their dreams of running their own enterprise.

However, even with ecommerce, there are some things that do need to get taken care. For instance, you will need an impactful website that stands out among the crowd and you will need products and/or services that the market is currently looking for. You will also need to identify a network of suppliers that you can work with and hire employees to take care of the day-to-day activities as well.

Most importantly, you require capital to keep the business running and leverage business opportunities. This is where Capital Float’s Online Seller Finance comes to the rescue. If you, as a new entrepreneur, were to approach a bank or NBFC for a loan, you will be faced with difficult terms and conditions, the least of which is proving that you’ve run the business successfully for at least a year.

On the other hand, with the flexibility, ease of processing and convenience of accessing working capital even an amount as low as ₹1 lakh to as high as ₹3 crores, Online Seller Finance, specifically designed for ecommerce businesses, is the way to go.

Features 

1) Loan range from 1 lakh to 3 crores

We cater to a wide range of e-commerce merchants. Each merchant has a different capital requirement based on their business need or opportunity. With our wide ticket range, we cater to practically any working capital requirement of the online seller segment. These funds could be used for a variety of purposes such as making supplier payments, adding inventory during peak seasons or diversifying into new product categories.

2) Customized credit criteria

We acknowledge that each merchant is inherently different and must be treated individually. Unlike many traditional financial institutions, we don’t follow a cookie-cutter method to underwrite our customers. By leveraging Big Data & Analytics, we are able to underwrite each customer on the merit of their business performance and offer a tailored credit product. For example, the merchant is offered a specific loan amount basis their monthly sales on the marketplace and projected revenue.

3) Quick, online application process

We are a digital finance company and believe in limited paperwork. We offer the convenience of technology to our customers right from the start of the relationship. Borrowers can apply online using their mobile devices, as long as they are connected to the internet. The 10-minute application is very simple, quick and entirely hassle-free. The borrower can upload their documents online and need not visit a physical office for presenting the documents.

4) No pre-closure charges

Borrowers can close their loan by repaying the balance amount before the end of the agreed tenure. We offer the feature of ‘no pre-closure charges’, which means that the borrower will not be liable to pay any extra charges for closing the loan ahead of time.

5) Get up to 2x credit based on your marketplace sales

Online merchants applying for ‘Online Seller Finance’ can avail up to twice the amount of sales they make on e-commerce marketplaces. For example, if the seller makes ₹10 lakhs in sales per month, the seller can receive working capital funds of up to ₹20 lakhs. These funds can fuel growth on the marketplaces, helping the seller to increase their business geometrically. Higher the sales, the higher the eligible loan amount, higher the chances of leveraging business opportunities.

Benefits

1) Collateral-free

Our Online Seller Finance credit product is an unsecured working capital loan. The borrower need not pledge any security or asset as collateral to avail this loan. Funds are approved on the merit of the borrower’s business performance on the marketplace and not on their assets. Merchants can avail funds and operate without the anxiety of conceding their securities.

2) Funds in 3 days

Our technology and Big Data capabilities help us speed up the underwriting process. We understand that ‘timing makes all the difference’ to online merchants, given how dynamic the business is. Payments can’t be delayed and opportunities must be seized immediately. Bearing this in mind, we disburse loans to the borrower in less than 72 hours of the loan application.

3) Flexible repayment terms

Banks and other NBFCs typically function using the model of EMIs, or easy-monthly-installments. ‘Online Seller Finance’ allows you to repay the installment on a fortnightly basis. As a result, the installment is smaller in amount and is less burdensome to repay when compared to a monthly installment, which would typically be twice the sum. This way, your cash flows remain unaffected and you have more funds to deploy into your business.

4) Ideal for expanding your business

Financing the online seller segment is relatively new in the lending space. Not many financial institutions have fully understood this segment, which has caused several e-commerce sellers to return empty handed from formal lenders. Capital Float was the pioneer in digital lending to e-commerce sellers. Therefore, we’ve made it a lot easier for online merchants to avail finance for their business. Our partnerships with leading marketplaces like Amazon, PayTM, Snapdeal, Myntra, Shopclues, eBay, Craftsvilla, etc. has enabled us to reach to a wide range of sellers. Merchants on these platforms can avail easy funding and expand their business on the platform.

Eligibility and Documents

To qualify for ‘Online Seller Finance’ you must comply with the following parameters.

Eligibility

1) Applicant’s business must have minimum operational history of 1 year

2) Applicant’s partnership minimum vintage should be between 3-6 months

3) Minimum quarterly sales of ₹25,000

Documents

1) Bank statements for the last six months

2) KYC documents of the applicant and the organization

Fee and Charges

At Capital Float, we conduct business in the most transparent manner. This means, you’re only obligated to pay a processing fee of up to 2% for the loan. There are no hidden or pre-closure penalties during or after your application procedure.

Oct 24, 2018

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Capital Float Partners With Of Business to Provide Easy Finance to Online B2B Merchants

Capital Float, the largest digital lender to SMEs in India, has partnered with OfBusiness, a leading B2B e-commerce marketplace, to help small scale Indian manufacturers and traders avail easy funding for expanding their business. Through this partnership, buyers on the OfBusiness platform can leverage Capital Float’s Pay Later product to avail instant funds for procuring industrial materials.

Capital Float has enabled purchase financing for small scale manufacturing companies and assists them in growing their business on OfBusiness. This partnership will help in bringing these informal borrowers into the mainstream credit ecosystem. Buyers on this platform often face hurdles in obtaining timely finance to operate and expand their business, due to their lack of credit history based on traditional credit parameters. However, Capital Float’s tech and big data-driven algorithms uniquely underwrite applicants, confirming their eligibility in minutes, while also offering credit limits in real time. Some of the factors taken into consideration during the decision-making process include transaction history, cancellation rate and customer rating on the platform.

“For the first time, a partnership of this scale is focussed on enabling B2B e-commerce buyers in India. We are the pioneers of digital lending in India and the first movers in the online seller financing space. The insights we have gained by closely working with online sellers has aided us in developing this best-in-class product, custom-built to address the needs of buyers on the OfBusiness platform,” said Sashank Rishyasringa, Co-Founder, Capital Float. “Through this partnership, we aim to diversify our customer portfolio and strengthen our position in this space. Our target is to increase our present loan disbursement by three times by the end of September 2016,” he added.

Capital Float has strategic partnerships with some of the largest online marketplaces. Equipped with this rich experience in the online selling space, Capital Float is augmenting its reach by penetrating into the B2B e-commerce segment. The company is aptly placed to serve the unique needs of the sector with it’s highly customized credit offerings and swift processes.

SME financing in the manufacturing space requires deep understanding of SME’s cash flows. We at OfBusiness, are committed to building a tech-enabled ecosystem for SMEs for all their commerce and credit needs. Partnering with Capital Float has enabled us to bring customized financing solutions in the manufacturing space,” said Ruchi Kalra, Co-founder, OfBusiness.

Publications that have covered the release: 

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Oct 24, 2018

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Digital financing: The way forward for financial inclusion in Asia – E27

The authors Aman Bhargava and Akshay Sharma are Senior Vice President and Manager at Capital Float, respectively. Capital Float specialises in digital lending to MSMEs in India.

In this age of digital disruption where technology has made an impact across a number of service sectors — e.g. transportation (Uber), accommodation (Airbnb), retail (Amazon) etc.– finance is clearly no exception. Post the financial crisis, incumbent large financial institutions have been weathering a storm of increased capital requirements (i.e. reduced ability to lend) and increased regulatory costs whilst dealing with an erosion of public confidence.

Digital lending, a subset of digital finance, has been growing rapidly in several large economies in tandem with lending platforms (e.g. Lending Club in the US, Funding Circle in the UK, and Lufax in China). As terms such as peer to peer (P2P) and marketplace lending have come to dominate headlines, digital lending has begun to revolutionise the traditional lending business through the use of technology in order to reduce costs, underwritten with surrogate data points, and speeded up processes.

Lending — ripe for disruption

Lending itself consists of three key areas:

  • (i) Origination (or customer acquisition)
  • (ii) Underwriting (or credit assessment)
  • (iii) Execution (including documentation, contract and flow of monies)

Conventional lending, especially in emerging economies, is an archaic process that is ripe for disruption in each of the above areas.

Traditionally, customer acquisition occurs via brokers or middlemen, underwriting is heavily collateral-based and execution is a tedious process requiring a lot of paperwork that usually stretches up to six weeks in duration. Furthermore, there is a fear of rejection, which in several cultures prevents a number of creditworthy borrowers from applying.

While the opportunity to disrupt traditional financial services is immense, it is important to understand the key drivers in this field. Like most sectors, it is imperative that governments put in place an ecosystem that can help and enable players to create these disruptions.

The three most important enablers for digital lending are:

1. Telecommunications and connectivity

The telecommunication sector has been pivotal in spurring the digital revolution globally. Creating networks that enable consumers to connect from computers, laptops and mobiles are the most basic requirements to kickstart a digital revolution.

From financial services to retailers, everybody depends on networks to provide a compelling online and mobile experience. Telecom operators must offer an integrated, multi-channel or omni-channel user experience: on the desktop, on mobile devices and in stores. The reach of such networks is essential for digital finance to succeed and penetrate new markets.

2. Technology and data

Technology, as one would expect, is at the heart of the digital revolution. Investments in technology by organisations have only been increasing over time.

Advances in digital technology have allowed services to reach a number of people, who had limited or no access earlier. If these advances have to continue, then increased capital investment in equipment and software is an absolute must. Encouraging companies to invest more in R&D, say, via tax incentives is crucial to penetrating the consumer base.

3. Regulations and policies

Post the financial crisis, increased regulations have forced large banks to reconsider their traditional methods, especially in light of additional balance sheet charges. This has opened up new markets globally.

Regulators in the West, particularly the UK followed by the US, have been proactive in allowing these markets to grow and challenge the traditional players. As the rest of the world cautiously opens up to this new space, digital finance players have thrived under flexible and friendly regulations.

It is imperative to encourage an atmosphere in which innovation in financial services and products offered to consumers is prevalent. While the need to be cautious post the 2008 crisis is justified, regulators should be careful not to stamp out truly innovative and disruptive ideas.

Digital finance — banking for the ‘unbanked’

A recent report by The Guardian, states that almost 500 million people across Southeast Asia still often turn to informal moneylenders to meet their everyday needs. Decisions requiring credit, such as expanding a business, buying a house or paying medical bills, are taken out of the hands of the so-called “unbanked”. Uninsured and with no savings, they are also less resilient to health problems, unemployment or a natural disaster.

Digital finance holds the key for financial inclusion, as nearly 50 per cent of the population in developing countries own mobile phones. The impact of digital lending in emerging economies goes beyond the traditional financial services offered. It also helps create additional jobs and acts as an economic stimulator.

A number of firms in Africa and Asia are using digital finance to tackle development challenges. Technological innovations, like mobile money, have acted as catalysts in providing a variety of financial services. Consumers at the bottom of the pyramid in several countries today are using mobile money to make payments for a wide range of services.

Apart from traditional services — such as credit, savings and financial education — consumers also enjoy access to money-transfer services, micro-loans and insurance.

How can we make this happen?

MSMEs (Micro Small and Medium Enterprises) also stand to gain substantially from digital lending. Apart from access to finances, electronic payment systems allow them to secure a diverse range of financial products and an opportunity to build a financial history. The importance of digital finance in building both credit history and transactional data of individuals and firms for lenders cannot be underestimated.

Close public-private cooperation is a key factor for this type of innovation to be taken to scale and enable people to live a more secured, empowered and included life. If approached wisely, it is possible for emerging economies to leapfrog developed nations in the adoption of these digital channels, and at the same time accelerate financial inclusion.

Article sourced from E27. Read the original article here.

Oct 24, 2018