Lendingkart: Helping Small Businesses in India to get loans

Lendingkart Group is a fin-tech startup company in the working on capital space in India, striving towards providing financial inclusion to MSMEs across India by providing short term working capital loans under Lendingkart Finance Limited – a non-deposit taking NBFC arm of Lendingkart Group. Thus, contributing towards building entrepreneurship and a strong Indian economy.

The company was co-founded in 2014 by Harshvardhan Lunia and Mukul Sachan. It all started by Harshvardhan during his employment with large private sector and multinational banks in their small loan divisions, he realized how many small business owners were denied financing despite being creditworthy and noticed the pain area where new small businesses, MSMEs [micro, small and medium enterprises] and startups are many times unorganized and hardly maintain their books of account, and so they do not get loans from conventional channels like banks. In 2010, when he returned to India after a successful stint in London with the aim to build a platform that makes Indian MSMEs bankable.

He started with an advisory business and realized the various inefficiencies that marred the MSME lending space in India. The credit decisions in banks took months. Any potential analysis was hindered by a lack or complete absence of data. Information asymmetry was widespread. MSMEs had few resources to execute financing transactions and the ones which did, needed hand-holding with processes. Despite doing well in the business and he realized such a business would be scalable only when the entire process was taken online and a means to arrive at a credit score to make decisions could be created.

He met his old school friend Mukul, who is working as a finance director in a private company and joined hands with him to give shape to his business plan. In the beginning, actively interacted with small business owners to understand their needs better. The pilot loans helped them to realize that there is a big subset of small business owners who do not have access to organized finance. India is a hugely under-served lending market for MSME.

Formal sources only cater to 22% of the total MSME debt financing. Lack of credit history, collateral and accounting discipline further harm their capacity to procure funds from sources other than money lenders and friends and family. What they learned from these interactions helped them to identify a niche and design the product our borrowers wanted and formed the underlying principles that continue to guide them today.

There was an unmet demand of short term (up to 36 month), small ticket size (Around $700 – $1400) loans for these MSMEs. We then ventured on to build a comprehensive online lending institution dedicated to help MSMEs with working capital finance and that’s how Lendingkart came into existence. Said Harshvardhan

Over the last five years, they have grown at a healthy pace. From disbursing loans in a few locations to creating a strong SME customer base in tier 1 to tier 5 cities in India. The Revenue and loan book have been growing at approximately 3 times year-on-year and business is profitable since Apr 2018. They have a great bunch of investors supporting right from the seed funding. Given them healthy unit economics and the huge market opportunity that lay ahead and have a fair amount of traction from the investor community.

Lendingkart Finance (the NBFC arm of the Lendingkart Group) has evaluated nearly half a million applications and disbursed more than 70,000 loans to more than 60,000 MSMEs across 28 diverse business sectors such as – apparel, textiles, electronics, manpower services, FMCG etc. While they had revenue growth of 168% for FY 2017-18; our last year’s revenue growth rate (2018-19) was more than 200% and our book outstanding grew by 2.9x in 2019.

In terms of accolades Lendingkart has been identified as a “Soonicorn” by Inc42 in the digital lending space for possessing the potential to become a “Unicorn” by 2020 and has also won the title of “Best Fintech Company” in the Lending category, organized by KPMG in India along with Business Today.

Technology and analytics are at the core of their business, they do fully digital customer origination and automated credit decisioning. have collected relevant data from customers and extract up to 8,500 data points to assess the intent and ability of the customer using a machine learning model. They have been identified various proxies for credit comfort to determine a customer’s intent to pay back a loan, the quality of his product/service, the financial health of his business, and ability to survive with the competition, etc. Hence the application process is simple and requires only Bank statements and VAT/Service tax returns of the business as documentation.

Self-learning algorithm improves them with repayment, delays and delinquencies data making it more robust with every repayment collected. Use of technology not only removes likelihoods of last-mile fraud and individual biases while sanctioning loans but also significantly reduces time and costs of credit appraisal, thus, making the unit economics quite attractive.

With 80%, first-time unsecured business loan borrowers on the platform, Lendingkart is refueling the growth of the country’s lending ecosystem by catering to startups & MSMEs with little or no credit history at all. They have disbursed more than $542 Million loans to small businesses in a short span of ~4 years by using the technology-based model with minimal delay and delinquencies experienced, which further proves the soundness of our model.

The Micro Small & Medium Enterprises (MSMEs) are the core customers. The MSME sector is the backbone of the economy. With more than 50 million MSMEs in India contributing to 6% of Manufacturing GDP, 25% of Services GDP and 33% of Manufacturing output, they are aptly known as India’s ‘Engine of Growth’. However, despite their significant contribution to Indian economic growth, the MSMEs face a massive credit shortage with little or no avenues of capital injunction into their business. Hence, ever since we started Lendingkart, The mission has been to reach out to the MSME segment in every nook and corner of the country to bring them into the financial mainstream.

They have developed services on four key pillars – Without human intervention (subjectivity and last-mile fraud), Instant (money when needed), Simple (no dependencies on intermediaries); and Hyper-flexible (terms for repayment and renewal). These services stand on the bedrock of cutting-edge technology that has defined Lendingkart’s leadership in the fin-tech space in India. We strongly believe that our ability to constantly adapt to the changing needs of our customers will be a key factor to continue to be relevant in the sector. Customers dropping positive feedback on their products and services at various stages of processing funnel in order to better serve. 

One of the constant challenges while working with MSME group in remote towns and villages is these customers are only versed in regional language. However, our key USP lies in the way we have designed our products and processes that were formulated with the learnings from the pilot loans offered to MSMEs. Our ability to acquire and service MSME customers at the remotest places in India using data is our biggest strength. Lendingkart has developed a robust digital origination system and has industry-leading analytics in place which gives us a clear edge in this market. Said Team

Message from Founders

Lendingkart caters to MSMEs’ short term working capital requirements by offering flexible tenure & repayment options between 1 to 36 months and aims to disburse the loan within 72 hours. The loan application process is much easier than a bank. You can get your application evaluated almost instantly through a quick & easy online form. We use basic documents like PAN card, Business Registration Proof and Bank Statements/ GST returns to start off the loan process. We also allow several customizations to its financial products, making it ideal for today’s competitive business environments.

For a majority of MSME entrepreneurs, non-formal sources such as private money lenders still serve to be the go-to people for funds. With Lendingkart, aspiring entrepreneurs and MSMEs with little or no credit history can apply for loans through a simplified, digital application process with minimum documentation and need for collaterals. NBFC companies in India have simplified the business loan application process by offering loans digitally. If MSMEs are urgently looking for some working capital, applying for loan digitally is the best option.