VCs Back Aye Finance’s Old-School SME Loan Approach

India’s alternative finance market continues to grow, and investors are taking note.

Aye Finance revealed $10.3 million raised, reports said Tuesday (Nov. 22). LGT and existing backers SAIF Partners and Accion led the round.

The company, which has operated for two years, offers financing for small and medium-sized businesses. Typical loans are about $2,900 to $4,400, the company told TechCrunch, and aim to fill in a gap left by traditional banks as some small companies struggle to get financed.

Aye Finance is part of the alternative lending landscape but has taken an approach to the market reminiscent of more traditional services. The company operates 31 branches across India where borrowers can meet with a representative in person. That representative collects information on the applicant, and that data is stored in the cloud and linked to Aye Finance’s platform.

In an interview with the publication, Cofounder Sanjay Sharma said the company focuses on clusters of SMEs operating in the same industry so it can aggregate the necessary information to understand the space.

“We understand dynamics of each industry and use eight indicators to do so,” Sharma said.

And while alternative lending has risen as a predominantly digital space, Aye Finance also uses an offline approach to pursue leads with the understanding that many potential small business borrowers aren’t using the internet to access funding.

Reports said the company expects to become profitable by the end of next year — at present, the company breaks even month to month, it said. It will also seek its next funding round over the next two years as it explores new loan products for SMEs.

India’s alternative SME finance space has blossomed in recent years, enough to make the Securities and Exchange Board of India consider new regulations to protect borrowers. Venture capitalists continue to be interested in the industry, however. Earlier this year, another player, Capital Float, raised funding to the tune of $25 million.