Get loans faster, even without credit score

(From left) Abhishek Kothari, Ritesh Jain, Deepak Jain and Manish Lunia, founders of Flexiloans
Low CIBIL score? No collateral or income tax return (ITR) to show to banks but need urgent working capital?  Flexiloans could be your answer.

With home-built technology that assesses the creditworthiness of an applicant within 24 hours, Flexiloans has been trying to create a niche in the rapidly crowding financial technology or fintech market.  Founded by four Indian School of Business (ISB) graduates — Abhishek Kothari, Ritesh Jain, Deepak Jain and Manish Lunia — in late 2015, it was incorporated in February 2016. 

The start-up has serviced working capital for about 750 customers and is growing rapidly. Tapping small and medium enterprises and e-commerce merchants looking for quick working capital, it follows, for now, an entirely digital model. Customers have to fill a form, upload supporting documents and bag loan approvals, all within a window of 24-48 hours.

Having proved its mettle in a short span, the start-up attracted Rs 100 crore of funding from sector veterans like Sanjay Nayyar, chief executive at KKR; Vikram Sud, former head of operations and technology at Citibank; Anil Jaggia, chief investment officer at HDFC Bank; and Narayan Seshadri, former managing director of KPMG’s advisory business. 

Among the founders, Deepak was an  investment banker at Axis Capital. While  Ritesh was chief financial officer at Manish was executive at Aditya Birla Group’s mergers and acquisitions unit; Abhishek was in data science and analytics. Deepak said it was this experience of the financial sector and of start-ups that helped the founders to come together and start Flexiloans.

“After graduating from ISB in 2009, we were in different professions for a while. But, then, one thing led to another and we came to start this business. However, we were clear since the beginning that we would do lending which is 100 per cent digital and not hard copy-based,” said Ritesh.

Business model

The company taps most of its customers through institutional partnerships. It has tied up with e-commerce entities Flipkart, Snapdeal, Amazon, Jabong, and ShopClues for extending business loans to their merchants. “By April 2016, we had launched our operations. We started our first partnership with ShopClues, which has now grown to other players,” said Manish.

Once the merchant uploads his application with documents online, the technology platform scores the applicant by using traditional and non-traditional sources of data, to gauge his credit worthiness. What began with ShopClues has grown to 20 such partnerships across 18 cities, growing rapidly.

More, from servicing of term loans to businesses, Flexiloans has gone on to add verticals which include offline point of sales (PoS), where loans are extended to offline retailers who use credit card PoS, in addition to corporate supply chain vendors.

“Over 90 per cent of Indians don’t have a CIBIL score and a large percentage doesn’t have an ITR. We have developed a software in-house that uses various methods to still assess their creditworthiness based on the data provided by the applicants.  Our target is to serve those who do not make it to the traditional banking system which is a large market out there,” said Ritesh.

Today, Flexiloans processes 3,000 files month-on-month, with a conversion rate of 30-40 per cent. Loans are Rs 5-10 lakh. The bulk of the customers come through partnerships but it also sees 25 per cent of direct walk-ins on the website.

Investors show confidence

Being from the finance industry, the investors had found value in the start-up early on and say they have not been let down. According to Jaggia, a combination of youthful energy, aptitude and a decent amount of experience in the sector before launching a start-up was the right recipe for funding Flexiloans. “Lending is a business where you put your own capital out. We saw great potential in working with Flexiloans’ founders. Since September, we are scaling up and doing more loans. We are at best only a month behind our business targets. The most important thing is that most of the investor group are seasoned bankers. Each of us has 30 years experience and we believe we can add a lot of wisdom to this young group, mentor them and lead them to success,” he said.

According to the investors, the business has shown strong origination, with good customer experience and robust technology. They are also patient. “We know that credit models have to stand the test of business cycles,” said Jaggia. “Flexiloans is yet to experience that and, therefore, a seasoning of the book has to happen. We don't want Flexiloans to run ahead but rather have balanced growth. We are not playing a valuation game and Flexiloans is well-funded.”

Road ahead

The start-up has set its eyes on reaching to as many aspects of business lending as possible. Flexiloans not only began offering line of credit to merchants but recently acquired CreditPeriod, a supply chain financing platform. “Going forward, our core products will include term loans, along with line of credit to customers who have daily inflows, apart from PoS-based funding and now supply chain funding, as well as discounting. We acquired CreditPeriod because we know the supply chain market will be substantially developed in the near future. Our target still remains the same Indian retailer who needs working capital,” said Ritesh. The acquisition had, he said, given Flexiloans six to eight months of headway in supply chain financing.

From servicing two million customers through 50-odd partnerships across 80 cities, Flexiloans is looking to expand to 200-250 cities in another 12-18 months. 

As it does so, the start-up is open to looking at offline ways to service loans. And, further funding, if required. Ritesh and Manish said the start-up wants to keep the lending flow. Not only through equity — it might also leverage in the near future.

EXPERT TAKE: Geographical expansion will be a challenge
Mihir Joshi, CEO, GVFL

There have been several start-ups mushrooming in the fintech space.  Start-ups like Flexiloans are well funded in their initial run that would help their lending. There is also growing interest among institutional investors in the segment. If the technology, systems and processes are right, then there is a long way to go in such lending. For Flexiloans, the business model of being completely on digital could help it to scale up quickly. After demonetisation, digital emphasis even among small businessmen has grown. In addition, the market is ripe for merchant lending in the ticket size of Rs 2-10 lakh.

Is there a market that can easily absorb Rs 100 crore of funding? Yes, there is. There is a lacuna among small business owners who are unable to secure working capital from the traditional sources. Where Flexiloans would have to work is on tapping variety of geographies.  The other way that it could increase its loan book is by leveraging. To tap the larger market, Flexiloans may have to look at some offline mode, too. Going forward, however, the challenge for Flexiloans will be in terms of the pressure to put the investors’ money to use as well as geographical expansion.

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