Redefining SME Lending: FlexiLoans

Technology is an enabler for most of the industry segments in todays’ time. Infact, in many cases, technology has proven to be a disruptor for several industry verticals. SME lending could be considered as one such segment. In an interview with Mr. Faiz Askari of SMEStreet, Mr. Manish Lunia, Co- Founder, Flexiloans.com explained trends, opportunities and challenges in the SME lending domain. As a FinTech disruptor, FlexiLoans has an important role to play in the lending domain.

Edited excerpts:

How Flexiloans works? What are the key uniqueness in your offering?

FlexiLoans.com caters to the working capital needs of unserved and underserved small and medium businesses across the country. Flexiloans.com was started in April 2016 by 4 batch-mates of ISB, Class of 2009. We are solving the problem of ‘Jaan-Pehchaan’ based social borrowing in the SME segment. FlexiLoans.com aims at using new-age technology to provide quick, fast and transparent funding access to millions of deserving small businesses, who are currently underserved and rely on informal sources of funding.

We are a digital lending platform and we measure our success by automation and pure digital processing to the underserved segment. We have digitally processed more than 10,000 applications till date with an average ticket size of Rs 5L.

Technology is an enabler that runs across all parts of our venture allowing us to acquire digitally, process efficiency and service smartly. It allows us to be faster, cheaper and better at the same time.

The platform uses several traditional and non-traditional sources of data to score an applicant, which means that each applicant's score is unique in keeping with the loan amount and profile of the applicant. This proprietary credit engine clubbed with the simple application form and ability to make the loan decision within 24 hours is what distinguishes FlexiLoans from traditional credit scoring methods used by other financial institutions.

We are trying to create a pure form of fintech lending company and following differentiates us:

1. A Founding team of 4 IIT and ISB alumni with combined experience of 45+ years in financial services. This is a dream team that has diversity and vision in one package. See more details at the end of document
2. Industry stalwarts as investors and mentors - Backed by marquee leaders like Sanjay Nayar, VikramSud, AnilJaggia in their personal capacity.
3. Strong focus on data and technology - 100% of the acquisition at FlexiLoans.com is digital and a variety of data sources are used to score, filter and assess. We are committed to bringing the loan processing cost down to levels where as 10,000 loan is also economically viable.

How do you look at Small Businesses Loans as a segment? What are your opinion on the same with respect to today's hype given on this segment Vs. the ground reality?

SME Lending – Over $300Bn Market Opportunity

• 48Mn SMEs contribute 45% of GDP
• Less than 3% of SMEs have access to formal lenders
• 50%+ SMEs require but don’t have access to credit
• 94% of Indians have no credit score

Over 80% of Loan proposals from SMEs currently are rejected by institutional channels on account of inadequate financial history or collaterals.

India currently has over 50M SMEs that contribute to 45% of nation’s GDP. This is as per the latest reports by the Ministry of Micro, Small and Medium Enterprises.

Of these, more than 85% are underserved as per our research and more than half will have some digital or online footprint by 2020.

What are the challenges you try to resolve while entering into this segment?

The Company aims to transform small business lending by making it convenient for SMEs to access credit easily. The Company uses technology and analytics tools, analyzing thousands of data points from various data sources to assess the creditworthiness of small businesses rapidly and accurately.

Our focus is strictly on the SME segment which is credit starved and needs to be pulled into formal economy in order to grow faster. We may acquire customers through various channels and partnerships but our focus will continue to be on the core Indian SME. We are trying to solve a problem that exists rather than compete in a segment that is already served by banks.

What are your core products?

There are two segments in our country – India which is online savvy, digital and ahead in the journey towards a cashless society and Bharat which is hands-on and needs more time to join the formal economy. We currently offer below products which cater to both these segments:

• Working Capital Loans
• Loan against POS transactions
• Supply Chain Finance
• Line of Credit

The above products focus on providing credit to all sectors in SME category at the same time we try and ensure digitization by the in-house technological capabilities we have.

How is the business journey so far? Please share some milestones which you achieved?

The company gets more than 3000 applications and disburse around 20 crore every month. The platform has already processed about 5,000 loans (of ticket size ranging from Rs 20,000 to Rs75 lakh) to small businesses. From servicing two million customers through, 50 odd partnerships across 80 cities, the company is looking to expand 250 cities in next 12 months. After we raised 100Cr from a marquee set of investors, our growth has been skyrocketing. We currently lend to SMEs in 70+ cities with a 48 hr processing time and our aim to dramatically increase our distribution to more than 500 cities with an average processing time of less than 24 hours. With the right partnerships and investments in technology on our side now, we aim to have a platform and an algorithm that will allow us to scale in a risk controlled environment and run experiments like a true FinTech disruptor.

Also share some glimpse about your plans for the near future.

Our long term vision is to provide financial access at a click to small business owners.In next few years, we aim to be a data science and machine learning enabled lending company with a deep penetration in Tier 2 cities.We will be a brand synonymous to pure digital lending that gives real time approvals and economic viability on small value loans.

We also aim to be an employer of choice by making it a place where learning and innovation come first and we are able to provide a rewarding career. In order to scale, it's sometimes easy to forget about the culture of trust and respect, but for us that comes above everything else.

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