Trade finance firm Drip Capital, in association with the Engineering Export Promotion Council of India (EEPC), conducted a seminar on the topic ‘Interactive sessions on Export Factoring: Easy access to unsecured finance for SME Exporters’ in Faridabad. Presented by Mr. Ishan Dadhich, Regional Sales Lead (West), Drip Capital, the seminar also saw the presence of Shri Pradeep Agarwal, Deputy Chairman, EEPC India; Mr. Rajiv Chawla, Chairman, IAMSME; Mr. Rakesh Suraj, Regional Director, EEPC India; Mr. Anil Chaudhury, Jt. Director, Department of Industries & Commerce, Govt. of Haryana; Mr. Sandeep Chilana, Chilana & Chilana Law Company; and Ms. Suman Sharma (IRS), Addl. DGFT, CLA North, Ministry of Commerce & Industry, Govt. of India. Many small and medium-sized enterprise (SMEs) exporters from Faridabad also attended the event.
In general, SMEs account for 45% of India’s total export volumes but are some of the most underserved when it comes to working capital provisions. Demands for collateral, long processing times, heavy paperwork burden, and other such factors contribute towards making working capital highly inaccessible for SMEs. Institutions like factoring firms and NBFCs offer alternative financing solutions; however, many SME exporters are unaware of these offerings and need to be educated about the same. One of the easiest such alternative methods is invoice factoring.
At its most basic, invoice factoring is a process of procuring finance by selling the invoices of your transactions to a third party known as the factor. Based on your transaction history and other parameters, the factor gives the seller (the exporter) a credit line which they can then use to finance further transactions to other buyers (importers). In most cases, the seller gets 80% of their invoice value upfront from the factor (often without the need for collateral), and the remaining 20% — minus the factor’s fees and interest — after the buyer transfers the value of the invoice to the factor.
Known as the industrial capital of Haryana, Faridabad accounts for almost 56% of the overall income tax collected in Haryana. The city is the largest exporter of Henna in India. As per the statistics from the Faridabad Henna Manufacturing Association, Faridabad produces and sells Rs. 250-300 crore worth of henna annually. The city is also home to several large-scale auto companies, with more than 5,000 units of auto-car makers based in Faridabad. Apart from this, other prominent exports from Faridabad include engineering goods, apparel and leather articles, and plastic and rubber articles.
Mr. Ishan Dadhich, Regional Sales Lead (West), Drip Capital said, “There are hundreds of small and medium industrial units in and around Faridabad. In fact, these SMEs contribute nearly all the city’s outbound shipments – but they also continue to face severe issues with working capital management. A prominent reason for this is a lack of adequate financing options. In order to solve this problem, Drip Capital provides collateral-free post-shipment finance to Indian exporters with instant approvals and minimal documentation.”
Drip Capital is a US-based trade finance firm that was founded in 2015 by Pushkar Mukewar and Neil Kothari to solve the financing problems faced by MSME exporters in India and abroad. Since its product launch in 2016, Drip Capital has seen rapid adoption by the Indian exporter community. The company has had exponential growth, growing over 20x times in terms of working capital financed in the last two years. The growth has been fuelled in part by an intense focus on technology and drive to productize trade finance by offering solutions customized to solve common issues and pain points faced by exporters.
Drip Capital has financed over $500 million worth of invoices till date, and currently works with over 400 exporters across various product categories and geographies across India and Mexico. Mr. Pushkar Mukewar, Co-founder and Co-CEO, Drip Capital, added, “A lot of Drip’s growth has been fuelled by increasing demand from labour-intensive and SME-dominated sectors, such as metals and handicrafts. As per our latest data, Faridabad has over 750 SME exporters who exported a combined total of nearly 20,000 shipments, worth US$356 million, in FY 2018-19 alone. Drip looks forward to helping these exporters push this figure even higher.”
Drip Capital aims to educate exporters across industries and verticals about the great potential offered by invoice factoring and other trade finance services. The Faridabad seminar, in conjunction with EEPC, served to reinforce the potential of the solutions provided to exporters by Drip Capital.
Drip Capital’s plans include expanding into new markets across the world and leveraging technology to solve multiple problems commonly faced by exporters. Moving beyond trade finance, the company aims to continue leveraging data, technology, analytics, and a team of highly motivated professionals to become a leader in the global export ecosystem.