Gaurav Hinduja, founder of SME-focused online lending platform Capital Float, says while a robust digital ecosystem is necessary for SME lending to pick up in the country, the problems that SMEs face in raising working capital can only be solved by digital and traditional banking channels working in tandem.
Founded in 2013 by Sashank Rishyasringa and Gaurav Hinduja, Capital Float, offers unsecured loans to startups, manufacturers and e-commerce merchants. Capital Float is the trade name of Zen Lefin Pvt. Ltd., a non-banking finance company (NBFC) registered with RBI. The company, which has raised $13 million in funding from Sequoia, SAIF and Aspada, is looking to expand its purview of leading from e-commerce players to travel and hospitality and B2B e-commerce channels.
In a conversation with VCCircle, Hinduja, an alumni of Stanford Graduate School of Business, discusses the challenges to formal lending and the evolution of online SME lending systems in India. He also talks about the allure of B2C lending and believes that while the Flipkarts and Amazons of the e-commerce world have led the way, it is B2B e-commerce that will see maximum growth.
Though it may take three to five years for more formal lending ecosystems to develop, the space will soon see cut-throat competition given the flow of foreign funds in the sector. On State Bank of India getting into SME and start-up lending, Hinduja says there is nothing to be afraid of as the public sector bank's activities will be complimentary to the system.
"It is difficult to go the e-commerce way as ours is a regulated space. So we won't see a huge wave of startups as one requires a non banking finance company (NBFC) licence to start lending operations," he says.
The article has been modified to correct funding details.
The interview was recorded in August 2015.