New-age NBFCs fund e-commerce sellers

BENGALURU: When 32-yearold Samir Kazi, a first-generation Mumbai businessman, needed a working capital loan, he could not approach a bank as he had no collateral to offer. Instead, he got a short-term loan from Lendingkart, a non-banking financial company (NBFC).
The son of an autorickshaw driver, Kazi had quit his job as quality manager at a call centre to found Gadget Bucket Online, a business that started off selling consumer electronics on e-commerce platforms.It has now expanded into home decor, gifting items and apparel.
For Lendingkart, Kazi was the first customer. They loaned him Rs 10 lakh for a month last May . The loan was paid back in four weekly installments, with an overall interest burden of Rs 15,000.Now Kazi is eligible for a Rs 30 lakh loan with a repayment tenure of six months and fortnightly installments. “Working capital is the most important requirement in my business,“ Kazi told TOI. More than 70% of his sales happen on Flipkart, Amazon and eBay .
About a year and a half ago, new-age NBFCs like Lendingkart, Capital Float and NeoGrowth began to address the working capital requirements of small and medium enterprises that retail through online marketplaces. Snapdeal, Flipkart and Amazon have one lakh, 30,000 and 25,000 sellers respectively on their marketplace platforms. According to SMEcorner, an advisory and capital risk assessment platform for SME loan disbursements, the industry is adding around 30,000 to 50,000 new sellers every month.

Snapdeal, for instance, runs a programme called Capital Assist, under which more than 200 sellers have benefited with 10 NBFCs working with the company.“Lending companies have come up with a new credit appraisal methodology for sellers on our platform. The sellers are able to get funds in an efficient manner and the financiers are able to expand their coverage significantly through this platform,“ said Vijay Ajmera, senior vice president, Snapdeal. The NBFCs use analytics and other propriety software to analyse the credit worthiness of the sellers, apart from scanning metrics like their sales and fulfillment records on the e-commerce platforms. Harshvardhan Lunia, CEO and founder of Lendingkart, said that most of the credit risk analysis is done digitally so that loans can be disbursed in less than 48 hours even in tier-2 cities.The company, which started in March last year, has more than 100 customers. “Of our 48 employees, 24 are technologists. We have moved our headquarters to Bengaluru from Ahmedabad to attract talent,“ Lunia said.
Capital Float, also based in Bengaluru, has disbursed more than Rs 60 crore so far.
Lokesh Govindaramu, another seller on Flipkart got connected with Lendingkart by the e-commerce company after he failed to get loans from banks. The Bengaluru-based health and wellness product seller secured Rs 2 lakh last December and has seen his sales go up by ten times -from Rs 3 lakh then to Rs 30 lakh now.
The lenders have modelled themselves like microfinance institutions. They get funds from banks and other funders at interest rates that are slightly above the prime lending rate, and they charge their borrowers an interest rate of 18-24%. The lenders say the default rate is in low single digits.
However, for the lenders, this is a risky business, warned Samir Bhatia, founder and CEO of SMECorner.“There is no security and no way to monitor the end user.These sellers operate out of homes and there is no permanency of business,“ he said.
Sashank Rishyasringa, co-founder of Capital Float, feels otherwise. “Because of the amount of data that is available on these sellers, we are able to leverage and underwrite it. The sellers are seeing explosive growth and these are products devised uniquely for e-commerce merchants,“ he said.