Lend­ing for Small Cos is a $300-m Busi­ness

There is no short­age of funds for ideas that mat­ter. While a host of smaller play­ers are en­ter­ing the SME sec­tor, some Val­ley big­wigs are board­ing fin­tech startup

The Economic Times - - Disruption: - Shash­wati.Shankar

Bengaluru: While big­ger SME lend­ing play­ers like Lend­ing Kart and Cap­i­tal Float aim to close their next fund­ing rounds, a slew of smaller play­ers have emerged in the last year view­ing the space as a seg­ment where at least 10 strong play­ers can co­ex­ist.

Amongst the new play­ers, Puneet Dalmia-backed CoinTribe, which was launched in Fe­bru­ary, uses a pro­pri­etary al­go­rithm to link up mul­ti­ple data sources rang­ing from the credit bu­reau to so­cial me­dia de­ter­min­ing the credit wor­thi­ness of an SME within min­utes. The startup has tied up with pri­vate sec­tor banks that use their plat­forms to process SME loans.

“Our ticket size for loans range be­tween .₹ 30,000 to .₹ 20 lakh. We of­fer an in­ter­est rate of 13-18% and re­ceive upto 30 ap­pli­ca­tions on a dai- ly ba­sis,” said Amit Sachdev, co­founder at CoinTribe. The fin­tech player has an ac­cep­tance rate rang­ing be­tween 25 and 30% for all of its ap­pli­cants. Tracxn Labs-backed LoanZen has not tied up with any banking part­ners yet and fo­cuses on dis­burs­ing its loans from the cap­i­tal raised in its first round. The startup, which claims that it re­ceives up to 20 ap­pli­ca­tions daily, of­fers loans up to .₹ 10 lakh at an in­ter­est rate, rang­ing be­tween18 to 24%.

“We aim to com­plete the credit risk eval­u­a­tion in a mat­ter of min­utes and dis­burse loans within 3 days. Since sec­tors like ki­rana stores and bud­get ho­tels can­not avail of loans from tra­di­tional banks, there is a lot of room for sev­eral play­ers to emerge in this space,” said Madhu Sud­han, co­founder of LoanZen. The startup uses an ar­ti­fi­cial in­tel­li­gence-based sys­tem to carry out the credit risk eval­u­a­tion and looks at pa­ram­e­ters like bank, tax­a­tion and ac­count­ing data. LoanZen claims to have dis­sem­i­nated loans up to .₹ 50 lakh in the month of March.

Ac­cord­ing to Gau­rav Hin­duja, the co­founder of Cap­i­tal Float, SME lend­ing is a very deep ver­ti­cal in In­dia, de­spite banks and NBFC’s lend­ing ap­prox­i­mately $150 bil­lion to this sec­tor.

The un­met need is still over $300 bil­lion and at least 20% of this can be tapped by new age tech lenders.

“It’s def­i­nitely not a win­ner take all mar­ket and we will see sev­eral star­tups at­tack­ing dif­fer­ent niches in the mar­ket. We are likely to see at least 10x growth in fin­tech al­ter­nate lenders. There will also be a grow­ing num­ber of in­ter­est­ing part­ner­ships be­tween in­sti­tu­tions and new fin tech lenders,” added Hin­duja. Ab­hishek Goyal, the founder of Tracxn, be­lieves that de­spite sev­eral play­ers en­ter­ing the SME lend­ing sec­tor, few will sur­vive the cur­rent fund­ing cli­mate.

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