MAY 2016:
Receives $25 mn from Creation Investments and existing investors with conventional banks to take on debt and lend. “The current branch-led model of banks makes it unviable for them to lend small loans. Because we are an online-only lender, our cost of processing is infinitesimally small compared to banks. So it makes sense for them to partner with us as lending to the SME sector also qualifies as prioritysector lending on their books,” Rishyasringa explains, refusing to disclose the names of the banks.
The company claims it was one of the earliest to work with aggregators such as Snapdeal, Paytm and Uber to enable suppliers and vendors get instant online loans. “We look at their track record on the platforms, sales cycles, bank statements, and RoC and MCA data, if available. We also rely on psychometry and social media to decide on whom to lend. Our secret sauce is a unique blend of tech and data,” Hinduja says.
Capital Float lends amounts ranging from `25,000 up to `1 crore. The turnaround time (from loan application to disbursal) varies from 15 minutes to a couple of days. “This is significantly lower than that of a bank or a usual NBFC. Our aim is to be faster than the moneylender, but without that extortionate rate of interest,” he adds. The interest charged is between 16 and 19 per cent. It has an Android app on which 85 per cent of the documents can be submitted. For mandatory requirements such as KYC and legal documents, it has an offline footprint, too. With 250 employees at present, the company is unlikely to hire more people as it would remain technology-led.
“Unlike most other start-ups, we are profitable at a transactional level,” claims Rishyasringa, though he refuses to divulge the average cost of funds, citing confidentiality. The company claims that its NPA levels are less than 1 per cent over the 32 months of its existence; perhaps a function of its small loan book. “The current NPA issues of large banks, too, are not coming from SMES, but from large players. SMES are largely family-and entrepreneur-driven and are, thus, careful. Even in microfinance, if you look at smaller loans, the default rates are very low and that has been our experience too,” Hinduja says. MCA data for the year ending March 31, 2015, indicates that Capital Float had total revenues of `1.4 crore and net loss of `2.2 crore.
Patrick Fisher, Managing Partner and Founder, Creation Investments, which participated in the company’s latest round of fundraising, lauds Capital Float for the scale it has achieved. “SME lending represents an underserved and growing market opportunity in India. By leveraging technology, Capital Float has built a differentiated model that is able to deliver credit to the smallest of businesses in a scalable and efficient manner.” ~