This digital lending platform, started by four ISB-alums including the ex-CFO of Housing.com, disburses loans to SMEs within 48 hours, and claims to have processed over 12,000 applications so far across 90 tier-1 to tier-3 cities.
Forty-one-year-old Neelam Kuk’s enterprising spirit was getting too grand for the small alleyways of Agra. Determined to scale her business, she set up her store on online marketplace Shopclues by opening a seller account and listing her products on it. But just when she looked to add new products on her store, a lack of funds brought her dream run to a screeching halt.
Flexiloans came to her rescue. After vetting her case thoroughly and seeing that she had been amply supported by her husband till then, the financial services startup approved the Rs 1 lakh loan she sought. The funds were funneled to her within two days, in Agra, where even large NBFCs are yet to consolidate their presence, and all at the click of a button.
Founded in November 2015 by Abhishek Kothari, Deepak Jain, Munish Lunia and Ritesh Jain, Flexiloans is a digital lending platform that provides quick, fast and transparent funding access to millions of deserving small businesses. They formally launched operations in April 2016 with Uber and Shopclues as partners to reach out to their target customers.
Starting out with working capital loans and line of credit, their system needs the customer to go to their website, fill out an application form, and submit the necessary documents online, following which, a credit analysis is performed on the customer profile through their in-house scoring model. Once approved, the customer is offered a loan which is disbursed as soon as they accept the terms and conditions. “Our TATs is below 48 hours in most cases,” says Deepak.
Convincing customers to send their documents digitally was a challenge, so subsequently, they made tweaks like incorporating the Aadhaar QR code scanning mechanism which scrapped and auto-filled the demographic information.
“We are currently lending through our partners and associate NBFCs. The revenue we earn is primarily from the financing and processing fees. At the right time, we will use our partner network to grow our bouquet as a marketplace as well,” says Deepak, co-founder of Flexiloans.
The firm uses multiple sources of data to score an applicant, most of which are non-traditional credit scoring parameters. This proprietary credit engine and ability to dispense the loan decisions within 48 hours is what distinguishes FlexiLoans from traditional credit lending organisations.
By July 2016, they had already processed over 500 applications. In September last year, marquee names in banking like Sanjay Nayar, CEO, KKR India, Anil Jaggia, Ex-CIO, HDFC Bank, VikramSud, Ex- COO, Citi Asia-Pac pumped Rs 100 crore into the company to fuel their next phase of growth. This was one of largest first rounds raised by a startup in India. In fact, they had been targeting bankers for this round specifically so that they would double up as advisors
The dream team & how they started up
Flexiloans’ founders are an illustrious lot. Abhishek, 36, is an IIT-Bombay and ISB-alum with 12 years of experience in building data and analytics-led strategies for financial institutions. Deepak, 35, is a certified CA who also went to ISB, holds 11 years of experience across investment banking and management consulting with Axis Capital (Enam) and JSW, and has worked on multiple top banking deals like Axis Bank QIP, RBL IPO, Capital First QIP, HDFC NCD and warrants, Mannapuram QIP, etc.
The third and fourth partners, Manish and Ritesh, also hold the same credentials as Deepak, and while the former comes with 12 years of experience in M&A, NBFC, wealth management, telecom, the latter worked with various startups in the finance and technology domains – and also served as the CFO at Housing.com.
While most of them came from business families with an inherent entrepreneurial temper, taking the plunge was still a decision riddled with apprehensions as they all held senior positions and had glowing prospects in the corporate sphere.
“However, the opportunity we saw in creating something very big in SME lending made our decisions easier,” says Deepak.
Flexiloans.com was conceptialised when a few of them met a friend who was seeing good traction in her business and wanted a business loan to expand her supplier base beyond her father’s store.
“Banks either required documents like three years’ ITR returns and a good credit score (she didn’t have a score yet) or collateral-like property and guarantee from family, etc. All of these options were either not available or did not fit well with the mindset of a young entrepreneur of today’s India. Another challenge was the low ticket size of the loan which wasn’t big enough for most banks to get excited about,” Deepak explains.
Upon further brainstorming, they came to the conclusion that this loan could have been granted simply based on her financial track record over the past 12 months. Further overlaying her demographic data - in terms of her educational qualifications and social network -- would make the transaction airtight.
Sensing they might be on to something, they went out and met more than a hundred small entrepreneurs to see if timely access to finance through formal channels was a big concern, and all of their experiences validated their hypothesis.
“The SME segment is credit-starved and hence, to get adequate funds, they turn to informal sources of credit,” says Deepak.
By February 2017, they had partnered with all major e-commerce players in India like Amazon, Flipkart, Snapdeal, Shopclues, Jabong, Voonik, etc, and went live with a brand new offering: loans against POS transactions, which caused a major spike in volumes. In the same month, they also acquired Creditperiod.com which helped them launch the supply chain finance vertical.
In April 2017, they started receiving more than 2,500 applications in a month, taking their tally to more than 8,000 processed applications. By now, they have processed over 12,000 applications, with an average ticket size of Rs 5 lakh, across more than 90 cities — a number they intend to turn to 500 soon, while reducing the processing to less than 24 hours.
They decided to acquire customers using the B2B2B approach where they partnered with platforms or corporates that were associated with over a thousand of their target customers.
“We partnered with major e-commerce players to reach out to vendors selling online on these platforms. Similarly we partnered with POS providers to reach out to offline Retailers associated with these platforms,” reveals Deepak. Recently, though, they also tapped into digital marketing channels to acquire customers.
In conquest mode
As per the latest reports by the SMB Chamber of Commerce and the Ministry of Micro, Small and Medium Enterprises, India currently has over 50 million SMEs that contribute to 45 percent of the nation’s GDP. Of these, more than 85 percent are underserved as per Flexiloans’ research and more than half will have some sort of a digital footprint by 2020 – which is the potential serviceable market for them and their competitors.
A lot of alternative lending firms have entered the space lately, like Capital Float, Neogrowth, Lendingkart, etc. But their market-leading volumes in the e-commerce and POS segments, their underwriting model backed by more than 2,000 variables customised for the SME segment, and lastly, completely digital acquisition which brings down the loan processing cost such that even a Rs 10,000 loan is economically viable, are what sets Flexloans apart, in Deepak’s opinion.
In the next few years, they want to be a data science and machine-learning-enabled lending company with a deeper penetration in tier-1 and tier-2 cities.