SMEs must choose right mix of loans to help grow business: Alok Mittal

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SME Times News Bureau | 22 Dec, 2015
Small and Medium Enterprises (SMEs) must choose right mix of debt financing products available in the market (loans) so that those loans help them grow the volume of business, and hence generate additional income, CEO & co-founder of Indifi Technologies, Alok Mittal told SME Times in an interview.

He further said that the specific cash outflow in terms of principal and interest repayment must be matched with the cash flows expected to be generated from the business.

Indifi Technologies is an unique concept that has been initiated and implemented by three co-founders: Mr. Alok Mittal, Mr. Siddharth Mahanot and Mr. Sundeep Sahi. Unlike traditional lenders, Indifi helps SMEs to get a loan easily and quickly.

Excerpts of the interview...

Tell us something about your group Indifi Technologies Private Limited?
Alok Mittal: Indifi Technologies is a platform that enables access to debt-financing for small businesses. Indifi seeks to improve access to SMB financing in India by providing small businesses access to multiple lenders. It aims at solving credit access issues for small businesses while providing a zero operating cost model for lenders. The unique concept of Indifi has been initiated and implemented by three co-founders: Mr. Alok Mittal, Mr. Siddharth Mahanot and Mr. Sundeep Sahi, who come from diverse fields of finance, business and technology.

You are in 'Debt Financing'. For a layman, what exactly is 'Debt Financing'?
Alok Mittal: It is a process of financing wherein an enterprise gets a loan or raises working capital and is required to repay the loan at a certain stipulated time. This kind of financing encompasses both secured and unsecured loans. The secured form of loan is arranged after formal acceptance of collateral between both the parties ensuring that the loan will be repaid. If the debtor defaults on the loan, that collateral is forfeited to satisfy payment of the debt. Most lenders will ask for some sort of security on a loan. Unsecured loans, on the other hand, mean lenders lend money based on the brand name or simply on the basis of the potential of the idea.

What is the difference between equity financing and debt financing?
Alok Mittal: 'Equity financing' means issuing additional shares of common stock to an investor. With more shares of common stock issued and outstanding, the previous stockholders' percentage of ownership decreases. 'Debt financing' means borrowing money and not giving up ownership.

Small and medium enterprises (SMEs) face a number of problems, but absence of adequate and timely finance/ capital is the biggest one. How can the (SMEs) benefit from you?
Alok Mittal: Indifi's approach to SME lending is oriented towards leveraging the growing trend of supply chain consolidation in various industries. We believe that it provides leverage on both origination and underwriting. Due to increasing automation and availability of electronic data, it is now becoming feasible to systematically use business data for credit evaluation. This approach can bring the benefits of credit to a much wider range of SMEs, and help power their and the country's growth.

How you work? Like how SMEs can take loan from you? What is the time and cost of getting your services? etc.
Alok Mittal: It's a simple, three-step process one needs to follow at Indifi. SMEs who are affiliated with Indifi supply chain partners, are just required to submit their documents stating their requirements either online or through a phone call. Following which, our team intercedes and finds a lender that fits the bill.

This is done through an accurate information collection process during the documentation stage. The whole process takes a maximum of 5 working days. Indifi automates everything from data collection to approval and the borrower can get loans ranging between Rs 1 lakh to 50 lakhs.

What are your criteria of selecting a borrower that SMEs should fulfill?
Alok Mittal: Indifi works only through existing supply chain relationships, and hence only those SMEs can access loans through Indifi - currently, Indifi has several partnerships including TravelBoutique Online, Shopclues, PayTM, Ola and others. For each of the segments, there is a list of criteria depending on loan amount that SMEs need to fulfill.

What are the advantages of choosing tech enabled Debt financing over traditional?
Alok Mittal: Indifi's process offers a far better experience than conventional methods. This includes minimal submission of documents, ability to submit information electronically, fast turnaround time, and a single point of contact even while accessing multiple lenders.

How to choose right mix of debt financing products available in the market to reduce interest outgo?
Alok Mittal: SMEs must choose loans so that those loans help them grow the volume of business, and hence generate additional income. Further, the specific cash outflow in terms of principal and interest repayment must be matched with the cash flows expected to be generated from the business.

How to effectively use the various financial products at different stages of the life cycle of a business?
Alok Mittal: Normally, for asset light businesses, initial financing has to be provisioned in form of equity, either from the promoters or external equity financiers. As the business grows, various kinds of loan products may be used, including for expansion, working capital, and other purposes.