Biz2Credit, an exclusive finance platform for SMEs
Plans to be a global platform for SMEs:
Plans to be a global platform for SMEs
With more than 1.1 million users, mostly SMEs, Biz2Credit, founded in 2007, is counted as one of the most trusted online credit resources in the US having arranged funding of more than $2 billion. It is described as a hub that connects small business owners with lenders and service providers and its network today consists of 1.6 million users, credit rating agencies and small business service providers including CPAs and lawyers. It has raised funding of over $1.4 billion in financing. The company had launched its India operations specifically targeting SMEs.
Biz2Credit is founded by 2 Indians, Rohit Arora and Ramit Arora.
“What really makes Biz2Credit so different is that we’re an end-to-end funding and technology provider,” says Ramit Arora, who is president and co-founder. “Unlike many financing companies, we’re truly built to cover every aspect of the funding process from origination to underwriting to closing to servicing and monitoring. Even more impressively, we’ve managed to automate a huge amount of the process at every step along the way. Business owners are finding us organically or through our large ecosystem of partner products and services. They’re filling out a simple application form which gives them a result in minutes, not weeks. Our underwriting process is without equal - we have developed such a level of expertise in assessing risk through our algorithmic underwriting standards that we have major banks now coming to us and asking us if we can implement the same technology for them as well. Compared to our competitors, we have the lowest default rates in the industry. Whereas most funders in alternative finance see defaults around 8% of gross, we average a 2% default rate on unsecured lending products,” he adds.
Another thing that makes the company so unique, according to Arora, is that it has always been highly focused on building the product and service ecosystem around the core offering. “We work very closely with companies - like Tally Solutions in India - and this gives us an unparalleled kind of insight into when our customers need financing. AI and machine learning are at our core, and our ecosystem of partners is what enables us to have such effective automated tools at our disposal,” he adds.
Arora explains that the whole strategy is built around one single platform that can flexibly serve many different markets. That means the company always start its product development process by investigating the customer’s need and whether it can be replicated across different countries and scenarios. “We call this our global core strategy. But, the way we have been so adaptable across markets is all down to our technical expertise at building towards the local ecosystem. Business owners in the US use Quickbooks or an accounting firm, but in India there’s a whole other set of solutions that small businesses are used to. That’s why we’ve built a differentiated API structure so that we can be flexible to fit within the norms of each market. This is what we call our local ecosystem strategy,” says he.
The focus is on two core standards as the company designs lending solutions. Arora elaborates: “We aim to build radically simple and useful digital tools and we aim to always make things as automated as possible within these solutions. Our worldclass development operation in New Delhi and Mumbai gives our clients all around the world new and innovative solutions on a weekly basis. Unlike other lenders in the small business space, we have invested in being technologically superior to every other loan process on the market. Not only that, we have an excellent DevOps function in addition to our core product development team that ensures everything we build meets security and scalability standards - because no matter where our clients are they need to feel confident that their data is protected and that they can get the funding they need whenever they need, 24x7 every day of the year.”
TECH TO HELP CUSTOMERS
There is also a difference in the way Biz2Credit makes use of technology. Arora says technology is secondary to the experience the company’s clients and stakeholders will have. If the technology says one thing and the company knows its clients need something different, it works to change the technology to match that need. “Whether a client wants to work with us from his smartphone or he wants to browse at home, we’re built to give them the best
experience possible no matter what. We also know that technology by itself won’t win the day. Every client has a relationship manager who is with them every step of the way, guiding the client through the lending process. Our sophisticated proprietary CRM system equips our relationship managers to advise the customer at every point. We integrate all kinds of data layers together to give our relationship managers a holistic view of the customer’s situation, and that means they can advise them in real-time as the client is trying to make a decision about funding,” he says.
Having said that the technology on its own is still powerful - in fact, the most powerful in the industry, according to Arora. “The whole system is self-service for clients. We integrate pricing engines with the external data layers (like CIBIL or FICO) to build a fully personalized scorecard for each customer. This is all transparent to the customer, also. They can see their scorecards and how they’ve been calculated - even down to what elements might be holding their scores back and keeping them from getting the deal that they want. This is quite different from the other offerings you’ll see in the industry - no one else is that self-service and transparent. It comes from our focus on service to the customer,” he explains.
How is risk mitigation taken care of?
Portfolio risk, says Arora, is mitigated through a very detailed underwriting process. The company collects bank data, financial performance data and it even has integrations to GST data and accounting platforms to validate all of that information. All these are into the proprietary machine learning system, which produces a personal scorecard for each applicant. Not only does that help reduce risk from the outset, it standardizes the process of evaluating different factors – like a credit score only smarter.
Similarly, if a case goes into collection, there is a proprietary legal collections platform that allows to administer the whole legal process for a case. This CRM for the legal team and case managers allows them to respond to risk signals much more quickly and gives them a dashboard view of where in their individual case pool they need to pay attention.
“All of this results in our unmatched performance in terms of NPAs. On total loans of $3 billion, we are only seeing a default rate of 2.5% - 3 times lower than most alternative lenders in the SMB market,” claims Arora.
A SOLID BUSINESS MODEL
Arora is of the firm opinion that the company’s business model is very sustainable. “We feel that we’re building on a foundation that is rock-solid, in fact. Small businesses are the foundation of thriving economies - and those small businesses need working capital to keep the lights on and the wheel turning. In India alone, the SMB market produces close to 40% of GDP. That’s a massive contributor to the economy, and we expect that number to remain strong for years ahead. With 30 million SMEs in India, policymakers are paying attention to the market and doing everything they can to open up access to financing for so many of those businesses. We are perfectly positioned to be right in the middle of that growth for the long-run,” says he.
This foundation in the SME market is already allowing the company to expand operations into new market spaces. In the second half of 2018, it is launching a consumer lending platform in the Indian market in conjunction with the largest DSA in the country. It feels that self-employed business owners who are using their own personal credit to borrow on behalf of their businesses is a major reason this is needed. Arora feels this will bring more simplicity and intelligence to that convoluted process and help consumers who want to be in business for themselves take advantage of the financial tools that will help them succeed.
Arora explains the challenges he faced as a startup: “Having been a small business/ startup itself, we felt that we were the perfect company to provide financing to small businesses. In the early days, credibility was a major challenge for us, like it is for just about any small business. Customers are always wary about something new, and they don’t always take you seriously when you’re just starting out. In our case, it certainly didn’t help that the space of digital lending was in its infancy and that people really didn’t understand how it compared to traditional financing methods. Not only did consumers not understand it, but even technology providers were mystified. There were not the same kinds of integration and ecosystem opportunities as we’ve been able to develop recently. Companies simply hadn’t caught up yet.”
GO-TO-PLATFORM FOR SMB
Arora is confident that by 2023 Biz2Credit will be the go-to platform for SMB lending across the global market. “Our plans are already underway. We are doubling our investment in technology at exactly the right time. Artificial intelligence and machine learning are at the forefront of our development plans. Our goal is to transform what customers expect from their lending platform, with a major emphasis on creating predictive solutions within the platform. In addition, multiple new product offerings are just over the horizon for us. Our ecosystem-oriented approach is getting stronger and will continue to be a differentiator for us. This will bring even more intelligence into the risk management process, and we expect our already industry-leading default rates to move even lower with our enhanced predictive tools,” he reveals.
Ramit Arora highlights the intention to make Biz2Credit the go to platform for SMEs globally
Operations team at a Biz2Credit office