Indian Angel Network (IAN) and Indifi Technologies have partnered to launch a growth stage debt fund to help its portfolio companies get working capital.
Through this fund, startups will be able to avail debt in the range of Rs 10 lakh- Rs 2 crore based on the revenue pattern of the business and will benefit with no equity dilution or other equity-related rights for the lender, a statement released by IAN said.
Depending on product structure and growth periodicity of business, loan repayment duration will range between 18 and 36 months.
The debt fund will provide support to startups in areas such as software-as-a-service (SaaS), direct-to-consumer online brands, enterprise services, edtech, digital media/advertising-driven businesses and leasing businesses.
Gurugram-based online lending company Indifi Technologies aims to provide growth debt capital to support startups to pull through the slowing economy and continue their business operations.
Among other criteria, startups in the B2B (business-to-business) space applying for a loan should have minimum recurring revenue of over Rs 10 lakh per month and those in the B2C (business-to-consumer) space should have a recurring revenue of over Rs 5 lakh a month.
Eligible startups should also have at least 12 months of stable revenue history. The sanctioned amount of loan would be equivalent to 2-4 times of monthly revenue, depending upon the margin profile of the business. Businesses hit by Covid-19 should have had high growth rates in the range of 40-50% or more in the normal course of business, the statement said.
The announcement comes at a time when most of the businesses, especially startups are facing liquidity crunch due to the unforeseen lockdown of over two months due to the Covid-19 pandemic.
Some 70% of startups have cash reserves to last less than three months and 40% of startups have either temporarily halted operations or are in the process of shutting down, with around 70% having cash reserves to last less than three months, according to information technology industry body NASSCOM (National Association of Software and Service Companies).
“Several startups with a sound business model are struggling to keep up with their working capital needs due to a sudden impact on their business induced by Covid-19. We felt there was a requirement of a financial facility that addressed the needs of startups that did not want to dilute their equity at the moment,” Padmaja Ruparel, co-founder of Indian Angel Network said.
In November 2019, IAN closed its maiden seed and early stage fund at about $53 million. Dubbed, IAN Fund, it exceeded its target of about $50 million.