SME Times News Bureau | 30 Apr, 2018
In an exclusive interview with SME Times, Founder
and CEO of Loans4SME, Simmi
Sareen, said that unavailability
of access to unlock new capital and working capital requirements for
scale up operations are major problems for Small and Medium
Enterprises.
Excerpts
of the interviewâ¦
Please tell us about Loans4SME and your entrepreneurial journey.
Simmi
Sareen: In
2016, a new supply of capital had started to come into the market in
the form of digital lenders, impact debt and venture debt funds. Yet,
most entrepreneurs I met didnât have the knowledge or the skills to
navigate the complex financial markets and needed help in getting
access to capital. With a career focused entirely on SME financing, I
understand that financing is one of the biggest growth challenges
faced by SMEs. Someone had to build something to fix this huge $400
billion market gap so I figured it may as well be me. Thus,
Loans4SME was incorporated in February 2016 and we started operations
in April 2016.
Loans4SME
is a trusted advisor for high-growth SMEs looking for debt financing.
We cater to the capital needs of SMEs by finding the right financing
options and facilitating cash-flow based loans through our network of
lending partners.
What are the products and services you offer?
Simmi
Sareen: Our
aim is to expand the source of debt capital for SMEs beyond banks, to
include venture debt funds, impact lenders and family investment
offices.
Along
with providing advisory solutions, we also help the SMEs in obtaining
the following types of loan products from our curated Lenders:
(i)
Work â order Finance (ii) Invoice Discounting (iii) Unsecured
Business Loans (iv) Vendor Finance (v) POS based Finance (vi) Cross
Border Invoice Discounting (vii) Venture Debt (viii) Operating Lease
(ix) Loan for Solar rooftop (ESCO MODEL) (x) Loan for Solar rooftop
(CAPEX MODEL)
The
factors that differentiate Loans4SME from other lending platforms/
debt solutions are:
ASSESSMENT:
Our proprietary algorithm uses decades of academic research to
calculate a score that indicates the risk profile of the loan. Every
investor who accesses the platform gets access to complete accounting
data, credit history, and business metrics from the borrower. In
addition, to generating the credit score, the information is
organised so that the most relevant data for lenders can be made
available in one go, thereby saving time on processing a loan.
STRUCTURING:
Through Loans4SME, borrowers can access not just traditional lenders
like banks but also NBFCs, impact debt and venture debt funds. We
have built the widest range of alternative lending options as our
supply of capital. Not only the companies who come to Loans4SME have
a higher probability of getting a loan, they get a loan that is most
relevant to their business and cashflow.
Please tell us about the SME loan scenario in India.
Simmi
Sareen: India
has more than 48 MN small and medium businesses with a current
debt-financing gap of USD 380BN. Unavailability of access to unlock
new capital to SMEs and working capital requirements for scale up
operations are the major problems that require highest attention.
Traditional lenders like banks are focused on past track record and
collateral as decision factors which means that few new age companies
qualify for funding. If we canât find means to unlock debt capital
for these businesses, India will not be able to meet the targets it
has set itself under the Paris Accord.
What are the major challenges the SME sector is facing in this
regard?
Simmi
Sareen: Availability
of working capital is the key challenge and barrier to growth. SMEs
and new age businesses do not understand the variety of funding
options available to them and have a limited understanding of
debt-financing products at different stages of their businesses.
While equity capital has seen a significant growth, innovative debt
financing has seen limited progress. Traditional funders offer
collateral based loans and do not focus on cash-flow based credit
assessment. New age lenders do not participate in debt funding due to
the loan size. Regulatory challenges lead to complex structures for
Investment Funds and Angel Networks, tedious legal processes are a
deterrent for them.
Bankers' unwillingness or SMEs's unawareness, what is mainly
responsible for loan rejection to SMEs?
Simmi
Sareen: The
loans that SMEs need range from â¹20 lakh-â¹1 crore, which makes it
non-viable for banks to build their own origination teams and risk
assessment models. They have built risk assessment models around
traditional manufacturing businesses and asset-based lending and lack
expertise in assessing risk for new, emerging sectors.
