Credit and Finance for MSMEs: New Delhi-based B2B marketplace TradeIndia ventures into MSME loans with the launch of TradeIndia Lending, a digital lending solution for small businesses.
On the rationale behind the launch, Sandip Chettri, CEO, TradeIndia told TheSpuzz Online, “Last year in June, post the second wave of the Covid pandemic, we did a survey of 50,000 SMEs and found 83 per cent of the respondents confirming their inability to raise timely credit. This made us introspect if we could be a one-stop solution for the SMEs, where we go beyond providing access to a marketplace by also supporting them in raising funds to meet their next big order.”
MSMEs in India face the colossal credit gap of Rs 20-25 lakh crore and some of the key reasons behind the lack of access to capital is the absence of collateral, incomplete books of accounts, preference for cash transactions and lack of credit history.
“Given we have the transaction history of buyers and sellers on our platform, we can act as guarantors for them,” said Chettri. TradeIndia didn’t disclose the names of any lending partner but said they are currently in talks with multiple NBFCs and banks.
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The B2B e-commerce platform would do the initial screening of the MSMEs’ eligibility for the loan based on their transaction history, business turnover, its CIBIL score and balance sheet. It would also charge a processing fee for the loan screening and also a part of the interest from the debtor. “There will be intangible benefits too as MSMEs will find more value on TradeIndia and their stickiness towards our portal will increase,” said Chettri.
TI Lending will start with three products during the first year: working capital loan, supply chain financing loan and a subscription-based offering for MSMEs who opt for TradeIndia’s products for digital transformation. The loan value for all these products can go up to Rs 25 lakhs with the interest rate starting from 16 per cent. “We suspect most of the small businesses applying for these products would be from tier 2 and tier 3 markets as MSMEs in metros usually seek higher value loans,” added Chettri.
A pilot was done to test the waters and TradeIndia received a total of 2,000-plus applications during the first 10 days for which they dispersed an amount of Rs 55 lakhs. The number of MSMEs Rs 55 lakhs was given to was not shared.
On growth plans, Chettri said, the aim is to disburse Rs 100 crore to over one lakh MSMES by March 2023.