Capital Float is an online lending platform which provides collateral-free working capital loans to small-time entrepreneurs, with a focus on Tier II and Tier III regions as well.

Gaurav Hinduja and Sashank Rishyasringa founded Capital Float in 2013, taking inspiration from the US-based Lending Club, which enables businesses to obtain loans and investors to purchase notes backed by payments made on loans. It was founded as an online lending platform to support small time entrepreneurs in India. “The SMEs we address lie in the interim, between ones supported by MFIs and ones supported by large banks. They face several challenges in accessing finance, and our goal is to actively reach out to these segments, particularly in the Tier II and Tier III regions,” indicates Rishyasringa.

The company currently offers four products; online seller finance for merchants transacting with ecommerce companies, term finance for manufacturers, traders and distributors, invoice finance and merchant cash advance.

Typically, the company follows a three-step process to disburse loans to its customer. First, the customer files an application online, one that the founders say doesn’t take more than ten minutes. Then, its team underwrites the customer’s business, analyses data sets provided by the company and from external sources, to determine the feasibility of the business. Lastly, it approves the loan, depending on the customer’s nature of business and requirement.

Unlike traditional lenders, who rely on experience, profitability and collaterals to determine loan processing, Capital Float analyses the credit worthiness of a business by understanding the profile of the promoter (their personal attitude towards business, their past business decisions and responsibility towards managing credit), their customer sentiment (reviews on online and offline platforms) and psychometric tests, to name a few.

Carving A Niche In The Market

Unlike traditional lenders, who rely on experience, profitability and collaterals to determine loan processing, Capital Float analyses the credit worthiness of a business through multiple other parameters. For example, it understands the profile of the promoter (their personal attitude towards business, their past business decisions and responsibility towards managing credit), their customer sentiment (reviews on online and offline platforms) and psychometric tests, to name a few.

Being a relatively new player in the lending space three years ago, what helped Capital Float earn its first customers was Hinduja’s prior experience in Gokaldas Exports (a garment business run by his family) and his networks within the industry, and feet on street marketing. Once the platform started gaining traction among its customers, the company later partnered with ecommerce portals such as Flipkart, Myntra and Snapdeal, and more recently with Via.com, IDFC Bank and PoS vendors such as mSwipe and Pine Labs to understand the challenges faced by them and provide them with collateral-free working capital.

Till date, the company has extended financial support of Rs. 1,000 crore to over 6,000 customers. Its loan size ranges from Rs. 2 lakh to Rs. one crore, with the average loan size being around Rs. 10 lakh to Rs. 15 lakh. On this, it charges an interest rate of 16 per cent to 20 per cent.

In the next three years, the company has set clear goals for itself; to further scale up the business across the segment and customers, to sustain product innovation and launch new features (such as loans for Uber drivers, travel agents and such) every quarter, and improve its tech platform to provide greater customer experience. “In such a complex ecosystem, our one big challenge and ambition is to be a one stop shop for SMEs and offer them financial assistance for every conceivable scenario.”

Snapshot

Founders: Gaurav Hinduja and Sashank Rishyasringa

Year: 2013

City: Bengaluru

Investors: Creation Investments Capital Management LLC,Sequoia Capital, SAIF Partners and Aspada Investments

Products: Online seller finance, term finance, invoice finance and merchant cash advance

Policy Recommendations

The Centre has already taken great strides to ensure ease of business in the lending segment, such as the introduction of the credit guarantee scheme (in December 2016) for small, medium and micro enterprises (SMEs) for loans up to Rs. 2 crore. That being said, we would like to see more policies introduced to specifically reinforce the transition to cashless economy. Meaning, can merchants and customers be incentivized to stick to digital transactions even well- after the demonetization move?