Digital lenders step up to help early-stage startups

In order to make it hassle-free, various start-up support groups such as TiE (The Indus Entrepreneur) and India Angel Network (IAN) are partnering with the digital NBFCs to extend debt finance to their member companies. 

Illustration: Xavier/Rediff.com.

 

At a time when the start-up segment in the country is undergoing liquidity crisis owing to business disruptions caused by the Covid-9 pandemic, new age digital lenders are attempting to help them with debt financing. 

In order to make it hassle-free, various start-up support groups such as TiE (The Indus Entrepreneur) and India Angel Network (IAN) are partnering with the digital NBFCs to extend debt finance to their member companies. 

 

IAN for example, has tied up with digital lender Indifi Technologies to avail growth-debt capital to its portfolio start-ups. Similarly, SaaSBOOMi, another support community for around 700 Software as a Service (SaaS) start-ups across the country, had partnered with non-banking lenders such as KredX, Getvantage and Indifi to help its member meet their immediate working capital needs. 

But how is this different from the lending made by digital lenders in the normal course of business for micro, small and medium enterprises (MSMEs)? 

“We consider two metrics for credit analysis here — their short-term cash conversion cycle and monthly revenue threshold,” said Alok Mittal, co-founder and of Indifi Technologies. 

The early-stage start-ups were lent on these “innovative criteria” and not the usual profitability metrics it considers for lending. “Many of these start-ups may not be even profitable (at present),” said Mittal. 

The start-ups can avail collateral-free debt in the range of Rs 10 lakh to Rs 2 crore while loan repayment duration will range between 18 to 36 months. 

This comes as start-ups are facing liquidity crunch due to an unforeseen situation that forced the entire country to be under lockdown for over two months. 

According to Nasscom, 70 per cent of start-ups have cash reserves to last for less than three months and 40 per cent of start-ups have either temporarily halted operations or are in the process of shutting down. Also, many start-ups are postponing their big-ticket equity rounds to seek better valuations. 

“We saw venture capital funding slow down during the pandemic and SaaS companies are a relatively better position due to their recurring revenue,” said Manav Garg, co-founder of EKA Software Solutions and is part of…

Related posts

Add a Comment

Your email address will not be published. Required fields are marked *