The e-commerce market in India is booming and everyone wants to a piece of it. But startups need funding and that's where the lending market has stepped in to give the small business industry a boost.
Indian financial tech startup Capital Float, which aims to help small businesses get loans, received $13 million in funding from SAIF Partners and Sequoia Capital to help continue its mission, TechCrunch reported. That brings its total funding raised to $17 million in the past year since it launched in 2013. Capital Float is expected to use the most recent surge of funding to launch into more cities, enhance its tech platform and introduce new products to its customers.
“The entire financing industry in India is based on very traditional, rigid processes,” Co-founder Sashank Rishyasringa told TechCrunch about assisting small businesses in India. “If you are a young, fast-growing business with an emerging financial model like an e-commerce model or startup, it is an uphill battle to get funding.”
Capital Float has provided more than $6 million in loans to small businesses, Rishyasringa said, and the amount of businesses looking for funding has increased 10 times in the past year, bringing the total requests to about 200 loans a month. The company has roughly a 20-30 percent approval rate for applications. Applications for e-commerce ventures are the company's biggest request, though they also work with smaller business providers that don't offer online options, too. Like Alibaba's Ant Financial, Capital Float uses online data from e-commerce marketplaces through a credit-scoring program called Sesame Credit that works by reviewing user profiles and behavioral data from online sources.
Rishyasringa said that there is a funding gap in India that the startup lending companies like Capital Float are trying to help fill. Lending institutions in the region account for about $140 billion in small business loans, he said, but that leaves a $200 billion gap. Securing capital isn't always easy in India since long-term loans are hard to secure in the conservative market. That's where Capital Float attempts to step in and streamline a process the company claims is faster than most banks.
“Our objective is for these businesses to access financing as easily as they would be able to sell on Amazon or eBay,” Rishyasringa said.