An eminent panel of experts from International Financial Corporation, Stanford GSB and CreditEase curated a report and highlighted Capital Float as one of the 100 companies in the world facilitating Financial Inclusion. Our co-founder, Gaurav Hinduja spoke with Anju Patwardhan, MD of CreditEase China on Capital Float’s business model, strategic direction and technological breakthroughs. Read the full interview below.
1. What inspired you to start your business?
The fact that India had more than 50 million SMEs with no access to formal credit who, despite contributing a staggering 15% to the country’s GDP with a high market share of 40% towards employment, had an unmet credit demand of $ 400 billion. Traditional lending institutions are limited by the constraints of their conventional underwriting models that restrict financing due to the volatility of this sector. This, in turn, pushed SMEs to the informal sector where the high interest rates charged by moneylenders fettered borrowers to a chronic cycle of debt. Capital Float was established with the objective to bridge this gap in the market with innovative and flexible credit products for SMEs, delivered in an efficient and customer-friendly manner.
2. Who is your target user base and what is your mission for this group?
Capital Float aims to service high potential, under-served, SMEs with an annual business turnover ranging from Rs 10 lakhs to Rs 100 crore. Our mission is to provide a seamless borrowing experience using customized finance products that cater to the specific needs of different SME segments. Here, technology plays a crucial role in reducing turnaround times, implementing paperless processes and pioneering predictive lending.
Also, we drive our products and processes to realize the national objective of financial inclusion. A recent example of this is the introduction of the Proprietor Loans product that facilitates business growth for micro-entrepreneurs in India. The product targets the small retailer segment such as mom-n-pop stores, salons, medical stores, mobile phone retailers, small restaurants, etc. who face challenges in obtaining loans for business expansion from traditional lenders owing to a lack of formal credit history and sufficient collateral. Capital Float is the first company in India to introduce a product that finances this segment. Moreover, we’ve disbursed the quickest SME loan in India, for this loan, in under 90 seconds.
We designed the Proprietor Loan app in collaboration with IndiaStack. This simple loan app enables small retail store owners to apply for a loan ranging from Rs. 25,000 to Rs. 5 lakhs without having to leave their store. Benefited by the merits of a completely paperless process, the applicant has to merely provide their AADHAAR number to apply for the loan. The app fetches the relevant data using the number and underwrites the customer in real time. We disburse funds to the applicant’s account within minutes of the application. We achieve scale by partnering with ecosystem leaders, such as Metro Cash and Carry, PayTM, Amazon Business, Payworld, etc. and serving storeowners operating on these platforms.
3. What is the central “friction” that your company is striving to overcome/mitigate, and what is distinctive about your strategy for enhancing financial capacity your user base?
Predominantly, traditional banks and non-banks have employed a conventional approach to underwriting. They have constantly shied away from utilizing data points from public sources such as social media, and those that are available from the Government in the form of Aadhaar and GST information. Capital Float has designed its credit underwriting with the fundamental understanding that every SME is different. Leveraging data points from partners in each industry sector along with conventional data, our rigorous credit underwriting engine processes loan applications and disburses funds in real time.
In terms of enhancing the financial capacity of SMEs, we lead a partner-driven approach. The company has partnered with ecosystems across various verticals such as e-commerce (Amazon, Flipkart, PayTM, eBay, Alibaba, Amazon, etc.), retailers (Storeking, Metro Cash & Carry), PoS payment enablers (Mswipe, Pine Labs, Bijlipay, ICICI Merchant Services), digital remittances (Wirecard, Payworld, Eko) etc. By taking an ecosystem led approach, we are able to maintain a low OPEX and cater to a wide range of SMEs without increasing our sales headcount.
We have the widest portfolio of working capital finance products, ranging from Merchant Cash Advance (loans against card swipes) and Supply Chain Finance (loans against bills receivables) to Unsecured Business Loans (traditional business instalments loans) and Proprietor Finance. We designed a unique credit solution called ‘Pay Later’. By using this product, borrowers can make multiple drawdowns from a predefined credit capacity. Interest is charged on the utilized amount and not the entire credit capacity, and the balance gets restored upon repayment. ‘Pay Later’ can be used to make supplier payments within 24 hours.
A collaboration of partnerships with industry leaders and niche products ensure that we can expand our outreach to a majority of our target base and enhance their financial capacity.
4. How does your business model balance the objectives of (a) providing benefits to your user base and (b) meeting the financial targets of your investors?
The SME sector in India is restricted by technical as well as functional limitations that inhibit their access to formal sources of finance. Most small enterprises simply cannot afford to expend time for the lengthy processes and immense documentation requirements that are mandatory to avail a loan from banks or traditional NBFCs. Presenting sufficiently valuable collateral for the loan amount they require is another barrier that most SMEs can’t overcome. Capital Float has a completely digital loan application process that eliminates the need for borrowers to be physically present at a lending institution’s premises to apply for a loan. The use of unconventional data points further reduces the need for a multitude of documentation for credit underwriting. All our SME-oriented credit products are unsecured in nature, which facilitates easy access to finance for a previously ineligible majority of business owners.
Customer satisfaction is immensely significant to us, which drives our efforts to ensure that we offer the best-in-class user experience to our borrowers. This is made possible through continuous innovation that enables us to adapt quickly to the ever-increasing demands of our core target base. Apart from these, we are willing to venture into unexplored SME avenues that face a significant credit deficit. We have recently launched credit products such as Proprietor Loans, Franchise Finance and School Loans for niche customer segments that have previously received little financial backing from lending entities in India. Our constant product & process innovation to reach out to new audience ensures that we never fall short in fulfilling the financial expectations and reinforcing the continual faith of our investors.
5. To what extent, if at all, are traditional deposit-taking financial institutions potential collaborators for fulfilling your mission?
Being an upcoming technology driven lender, we view traditional banks and non-banks as collaborators, not competitors. Capital Float operates India’s largest digital co-lending model, wherein we co-lend with banks, NBFCs and others. We currently have several banks and NBFCs such as RBL, IDFC, IFMR and Tata Capital participating on the platform. Loans are presented on the platform and offered on a first-come- first serve basis. We co-lend up to 30% of each loan to ensure that we have our skin-in- the-game and risks are mitigated. This model works emphatically well, as participating entities are able to leverage the strengths of the other. Banks and large NBFCs possess immense balance sheets, which when made available on the platform lowers our cost of capital. Meanwhile, banks are able to meet their priority sector lending targets by lending to SMEs via the platform. Our data-driven assessment and speed of processes, backed by a robust digital infrastructure significantly lowers the cost of acquisition for participating entities.
The co-lending model currently contributes to 40% of our AUM. We expect this figure to reach 50% of our AUM by end of this financial year.
6. Stepping away (perhaps) from your own company’s mission, what do you see as the major regulatory or technological breakthroughs needed to take a major next step forward in building global financial capacity?
Digital lending companies have evolved as disruptors in traditional financial markets, with an estimated one third of consumers worldwide using FinTech services. To sustain the efforts of this upcoming sector and extend their outreach to the majority of their target group, opening public sources of funding is a necessity that requires government intervention. In India, public funding initiatives such as MUDRA and SIDBI refinances institutions that lend to MSMEs, but within regulations of their own. As a result, refinancing support fails to cover the high operating cost of the small-ticket, short duration unsecured loans that are provided by FinTech lending institutions.
Creating a sustainable digital infrastructure that facilitates easy transfer and recovery of finance offered by FinTech lenders is the need of the hour. This, when implemented via eNACH, will help the digital ecosystem in achieving faster adoption.
Also, enhanced access to government data is yet another factor that will be a game changer for building global financial capacity. With the introduction of a new indirect taxation regime in the form of GST, India has acquired a verified database of tax compliant businesses that offers significant information to determine the credit worthiness of business loan applicants. If this data can be shared with FinTech lenders and credit rating agencies through a secure API, this will result in increasing lending opportunities to myriad SMEs across the country.
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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.
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
A small business generally embarks on its journey through investments from angel investors or venture capitalists. As its business matures, it may aspire to borrow more money not only to keep the enterprise operational, but also to explore new horizons. Such a small business can approach banks and other traditional non-banking finance companies (NBFC) to procure business loans. However, these institutions follow a prolonged process for loan approval and prefer providing small business loans only against collateral. Most small businesses that are still in their growth phase do not have sufficient collateral to get secured business loans, and so their only avenue for business funding is an unsecured business loan.
The new age FinTech companies such as Capital Float provide unsecured loans in India to small businesses to help meet their urgent business needs. By applying innovative technologies, they are able to process an unsecured loan application in virtually no time. Their processing, from loan approval to disbursal, also remains completely transparent throughout. Once approved, the unsecured business loan amount is credited to the bank account of the customer in three working days.
Unsecured small business loans come to the rescue of small businesses at critical times, and with the right amount at the right time, they considerably aid a small business in growing faster. Let us look at how taking an unsecured business loan helps in business growth.
Maintaining healthy cash flows
In the past, small businesses used to be averse to availing an unsecured loan due to concerns about falling into a debt trap. They also occasionally lacked confidence in their ability to repay unsecured loans. This is no longer the case. In a fast-growing global economy such as India, plenty of opportunities are available for small businesses to explore with greater confidence. Maintaining a healthy cash flow position provides them with additional funds for marketing of products and services, adding new inventory, expanding premises or hiring more staff.
Unsecured small business loans provide the strategic edge to make wise investment choices, which help a small business to grow faster. The revenue earned from new business ventures can be used to repay the unsecured loan and to boost the cash flow position.
Timely access to funds
One of the great advantages of taking unsecured small business loans from FinTech companies is the hassle-free and speedy loan approval process. Business opportunities today appear in a flash and and could quickly disappear, unless tapped at the right moment. Therefore, a small business cannot afford to spend time on filling up lengthy unsecured loan application forms and collating the required business documents in support.
The application for an unsecured loan from FinTech companies can be done online or through a mobile app, and all essential business documents such as bank statements, previous loan statements, tax statements, business invoices, KYC documents and the like can be uploaded online. These companies focus on providing unsecured small business loans to SMEs and fully understand the business challenges faced by them.
A variety of unsecured loans for different business needs
Businesses can avail unsecured small business loans at competitive rates from FinTech companies such as Capital Float according to their need. We provide a variety of unsecured small business loans that are designed to take care of differing business requirements. These include:
• Term Finance: Small businesses that have been in operation for more than two years and have sound business financials can take unsecured loans such as Term Finance. This product allows a business to borrow money varying from rupees one lakh to rupees one crore, for a tenure ranging from a few months to up to three years. A nominal processing fee is charged, and there is generally no pre-closure penalty.
• Supply Chain Finance: SMEs with invoice receivables from large companies can avail themselves of Supply Chain Finance for up to 80% of the invoice value. This unsecured loan can be repaid either through monthly instalments or as a one-time payment upon receiving funds on your invoices.
• Online Seller Finance: Certain loans such as Online Seller Finance have been designed keeping in mind the specific requirements of merchants who sell aggressively through online marketplaces such as Flipkart and Amazon India. Such merchants can take up to 200% of their monthly receivables as an unsecured loan.
• Merchant Cash Advance: Businesses such as retail stores and restaurants that receive the bulk of their payments through card swipe machines can also take up to 200% of their monthly receivables as an advance upfront through this loan product. Merchant Cash Advance can be repaid through a fixed percentage deduction from the card settlement amount in the subsequent months.
Benefit from competitive interest rates for unsecured loans
Besides the various innovative services offered through technology, FinTech companies such as Capital Float also offer unsecured loans at the most competitive rates. The services offered are thoroughly professional in nature as compared to other NBFCs, and greater flexibility is offered in the repayment of unsecured loan, so that a business can focus more on achieving its growth targets.
Capital Float acts like a partner to small businesses, which could be traders, manufacturers, service providers or retailers. Unsecured small business loans are provided based on the financials of a small business, and at no point is there a requirement to pledge any asset.
Capital Float believes in being the pioneer in innovation while offering unsecured loans in India to SMEs. This is showcased through our various unsecured loan products to fulfil needs of businesses in every sector. Capital Float charges a flat processing fee of 2% across various unsecured loan products, and no hidden charges are levied beyond the interest rates.
Oct 24, 2018
Many enterprises launch themselves with great hope and confidence. However, on an average, one in every four start-ups fails to make it past its first year due to a paucity of funds. Low profits, high overhead or unforeseen expenses, incorrect product pricing, and overstocking of inventories can lead to negative cash flow for any small or medium enterprise (SME).
When the paucity of funds has been created by dubious business strategies, the owners need to review their style of working and make required changes. Other than that, there are times when the enterprise is doing well in its industry and simply needs some additional funds to add more facilities for customers/employees, buy raw materials, develop new product features or expand the business to a new location.
A lack of adequate working capital for such steps towards growth or innovation does not imply that the business is unprofitable. It merely needs to ask for an SME loan from a formal lenders at this stage.
While there are multiple sources of any SME or MSME loan, the priority of borrowers who are keen to execute a profitable business plan or fund the expansion of their venture is to get a quick business loan for SMEs/MSMEs. They do not want to miss the opportunities at hand and search for lenders who can finance their plans in minimum time.
How to get the fastest business loan ?
In an age when digital technology is facilitating different transactions for both businesses and consumers, several non-banking finance companies have emerged as FinTech (acronym for financial technology) lenders who have condensed the loan-granting process. A FinTech company can be the source of fastest business loan for SMEs/MSMEs.
Applying for a Quick Business Loan and Its Benefits –
As a leading FinTech company offering fastest business loan for SMEs/MSMEs, Capital Float funds the growth of Pvt Ltd, Prop and LLP companies in various industries. We have an array of credit products for SME and MSME units that have robust strategies for continual progress in their domains.
To make a working capital loan accessible for more and more businesses, we at Capital Float have a simple eligibility criterion that only requires the borrowers to show a potential for growth in their industry. This efficacy can be proven with a minimum operational history of one year and a certain yearly revenue benchmark, which differs as per the nature of the business/profession, and can be checked on our website or by calling our team at 1860 419 0999.
The process of applying for our SME loan is fully digitalised, and it takes less than 10 minutes to fill in the necessary details. The relevant documents can also be uploaded online to support the information provided in the application. These generally include soft copies of papers validating business ownership, KYC documents, ITR/GST returns and recent bank statements.
Once it is submitted, we review the application on the same day, and upon approval, the requested amount is disbursed within 48-72 hours. The speedy disbursal of funds enables the borrowers to implement their business upgrade/improvement/expansion plans and advance on their profitable journey. The returns from such steps for business growth also make the repayment process stress-free.
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If you have a business plan that will take your ambitious venture to its next stage of growth, Capital Float has a quick Business loan for SMEs/MSMEs that you can use to finance it. For more information on our loans or to meet us personally, do write to us on email@example.com
Oct 24, 2018