‘Working capital can be collateral-free’

Founded in 2017 by Ankur Bhageria and Dushyant Agarwal, Cashflo is an integrated, multi-funder platform for supply-chain financing. It intends to bridge part of the ~20-trillion gap in working capital owing to procedural hassles. Founder-chief Executive Officer ANKUR BHAGERIA spoke to

Raghu Mohan. Edited excerpts:

Is there case to revisit the way working capital is offered, especially for micro, small and medium enterprises (MSMES)?

A lot of MSMES which are suppliers to large companies have working capital challenges. Banks have always been a little conservative, especially towards MSMES — though on the corporate banking side it is a different story. There are some inherent challenges based on how underwriting has happened historically. And these legacy processes don’t sit very well with MSMES because of the documentation requirements.

Now, a lot of fintechs have realised that you don’t necessarily need historical balance-sheets to offer working capital. For term-loans, you need to do the standard due-diligence to secure it, which is fair enough. But as far as short-term credit or working capital lines are concerned, there are better, faster, and simpler ways of assessing credit and doing it in a manner that allows for a broader reach among MSMES. So, towards that end, underwriting processes have to change, and it is happening.

Do you mean to say that working capital can also be collateral-free?

Yes. When we started Cashflo, we asked ourselves why a business needs working capital. You need it because there is a gap between when you have to make payments and when you

receive money from your customers, right? As a lender, I have to basically understand why that gap exists and will an entity be sustainable over the next few months? Now, for that, yes, you can look at past data. But there are digital means of gathering the data, with account aggregators coming in. The process of acquiring data will become a lot simpler even as data itself becomes fairly commoditised. And there is a way for banks and non-banking financial companies (NBFCS) to extend working capital to MSMES

without collateral.

This data is not proprietary — banks have access to it. What stops them from doing what you are doing?

You are right — it’s not that the banks aren’t given, or can’t have, access to that data, but it’s the also the same reason why they need to partner with fintechs! It’s a question of core versus non-core capabilities around analytics and technology. I have in my past life served most of the domestic banks and NBFCS in a consulting career, and have seen some of the challenges that exist in being able to modify legacy underwriting processes and of having a completely new approach to it.

Has the company been imagined as a digital marketplace for invoice discounting? And can you give us a sense of the working capital trapped in the economy because of

procedural bottlenecks?

There’s well over ~20 trillion of receivables trapped in the economy, for an average of 70plus days, and these are pre-covid numbers. The pandemic has only exacerbated this. If a small-business owner wants to liquidate his receivables today, he has practically no easy avenues available. Supply-chain financing is still a nascent market in India, with under five per cent penetration. At Cashflo, we’re endeavouring to bridge this gap.

We do have a digital marketplace for invoice discounting, but we are a lot more than that. We are a payments and working capital platform for businesses, and invoice discounting is a key part of it. On our marketplace, we have over 50 different sources of capital and a network of over 125,000 businesses which can avail of invoice discounting with the click of a button, and we’re growing at well over 30 per cent month-onmonth. We’re solving a complex problem where we have to create adequate value for three different stakeholders — buyers, suppliers and capital providers — on our network in order for it to thrive.

Is it true that you are focusing on Indian languages so that MSMES are comfortable using the interface?

Absolutely correct. We support over 11 languages already. Very recently, we had a small business owner from Amta (a small town near Howrah) on our platform, who used to struggle to use the platform. He was unable to use any discounting facilities in the past due to this language barrier, but when we introduced Bengali as a language on the platform, he immediately became active and availed of ~7 lakh in funding with one click. Today he’s a regular transacting vendor and gets early payments via our platform any time he’s falling short of funds.

We cater to MSMES in more than 21 states and it’s a fallacy to assume that everyone’s well versed with English. Unfortunately, most technology solutions only have English as a language. Given India’s diversity, we challenged that status quo and have built multilingual capabilities to support such MSMES.