Dataquest had a chance to interact with Gaurav Hinduja, MD and Cofounder of Capital Float. Started in 2013, the company claims to provide easy capital to IT businesses in India and hence them scale up. Excerpts:
Can you explain the objective behind starting Capital Float?
When we started Capital Float in 2013, we aimed to build a large, sustainable business in terms of scale and reach. SMEs in India have largely been under-served by traditional financiers in India. This is due to the lack of required documentation, inability to pledge collateral and ineligibility to conventional credit parameters. Amidst these short-comings, we understood that SMEs have a wealth of data, which if utilized smartly can be used to understand their working capital needs better and design highly customized credit products.
By doing so, we believed that we can work towards bridging the credit gap in the market. With the intelligent use of technology, we could enhance the borrower experience while retaining unit economics and widening our reach. Technology has also helped reduce wait times for SMEs, as we are able to disburse funds in just 3 days.
In essence, if a user can order food, book tickets and hail a cab using apps, why can’t users apply for loans using apps? With Capital Float, we’ve enabled SMEs across India access funds on their fingertips.
What is the main reason for providing loans to the IT sector?
The IT sector is a high churning industry; stock is purchased and sold immediately. Since IT distributors operate in long credit circles, the cash gets locked with clients in the value chain, causing a gap in working capital.
Due to factors like seasonality, huge cash discounts from brands and new brand launches, distributors have to purchase inventory in bulk, for which they would need quick and flexible finance. In such cases, our product called ‘Pay Later’ is an appropriate fit, as it helps distributors make supplier payments within 24 hours.
How is your lending different from the banks?
Our lending Is different from banks, as we primarily target segments that have been traditionally under-served. We design unique, highly customized credit products for separate SME segments. For instance, we have a loan called Online Seller Finance which is exclusively for eCommerce merchants and we have a loan designed specifically for retailers using POS machines, called Merchant Cash Advance. We don’t follow a cookie-cutter approach in offering loans, as we believe that each SME segment is different and has unique working capital challenges.
We are a data-driven company. We take an ecosystem led approach to target SMEs and have partnerships with leading companies across various verticals. The company has partnered with ecosystems across various verticals such as e-commerce (Amazon, Flipkart, Snapdeal, PayTM, Shopclues, eBay, Alibaba, etc.), travel and hospitality (VIA and Yatra), retail (Mswipe, Pine Labs, Bijlipay, ICICI Merchant Services) and taxi aggregators (UBER) etc. The data gathered from these ecosystems helps us underwrite the SMEs more accurately and significantly helps in loan decisions. Our NPAs are under 1%, which indicates that these underwriting methods are proven and efficient.
What’s your roadmap for the future?
We will continue to identify and serve under-served SME segments. We have also ventured into financing micro-entrepreneurs like taxi drivers, travel agents and Kirana store owners. Although these are small-ticket loans, the sheer size of these segments indicates immense potential. We have disbursed the fastest SME loan in the country, clocking under 90 seconds. Our intention is to continue to reduce wait times for SMEs and offer the best-in-class borrower experience with our cutting-edge products. Innovation is at the heart at Capital Float and we will continue to create new products for unexplored SME segments.
How can IT SMEs approach you? What is the criterion to disburse loans?
Capital Float has partnered with large IT national distributors such as Savex, Compuage, Rashi Peripherals, etc to service their channel partners. These channel partners/distributors can approach their local branch to avail of our loan products. Alternately, they can log onto our website apply for a loan online. The application process takes no more than 10 minutes. The borrower can apply using a mobile device as well. We have a toll free number (1800 419 0999) as well with representatives who would be happy to answer any query that the applicant might have.
The eligibility criteria depend on factors such as the borrower’s line of business, operational vintage, loan amount, etc. Basis the completed application, we offer the relevant loan product to the borrower.
How are you planning to enhance your presence in various SME clusters?
As we are an ecosystem-driven company, we will continue targeting ecosystems and leading members of those ecosystems. This will help us achieve scale and reach without increasing headcount internally. We let the machines do the hard work for us and strive to leverage technology to maximum effect.