Why FlexiLoans decided to focus on digital loans for SMEs

Founded by Deepak Jain, Manish Lunia, Ritesh Jain and Abhishek Kothari, FlexiLoans provides fast and transparent access to financing to millions of small businesses.

Since its launch in 2016, FlexiLoans has issued over 30,000 loans worth around Rs 1,700 crores directly and through 50 partners serving over 1,600 cities nationwide. Its average loan size is Rs 5 lakhs with interest between 1-2%.

Its co-founders attribute its growth to macroeconomic challenges and FlexiLoans’ focus on catering to a segment – ​​small businesses – that often suffer from limited access to capital.

“FlexiLoans was the result of multiple series of events, including what was happening in the economy that helped create the company,” Ritesh said. Your story.

LR – Manish Lunia, Deepak Jain and Ritesh Jain, co-founders of FlexiLoans

The idea that led to FlexiLoans

After graduating from ISB Hyderabad, the co-founders moved to different parts of the world to pursue their careers. Ritesh was in Delhi, Manish and Deepak were in Mumbai and Abhishek was in London.

For Ritesh, an incident with his Uber ride to the office sparked the idea for a digital lending platform for small businesses. He says one of the Uber taxi drivers who usually drove him to work was suddenly unavailable for a week. Ritesh later discovered that the driver had been unable to work due to water damage to his phone.

“It surprised me when a mobile phone that cost Rs 10,000, when not working, cost Uber drivers their daily income of Rs 4,000 or even 5,000 per day and until the phone worked “, he adds.

“When it correlates with businesses, due to lack of working capital, they are not able to grow. They don’t have money to invest in working capital,” Ritesh said.

Co-founder Deepak, who comes from a family of jewelers, found his inspiration for the startup when he saw business owners pawning jewelry for loans. Similarly, Manish and Abhishek, who also came from entrepreneurial families, found that people were not investing in businesses due to a lack of capital.

“We put it all together and saw the huge need for people not to invest in working capital. Moreover, this need had not been met by banks and financial institutions,” Ritesh said. “It made them turn to pawnshops and pawnshops for cash.”

Their market research in 2015 showed that almost 90% of SMEs (small and medium-sized enterprises) do not receive financing from organized actors because they are smaller loans.around 5 lakh and below. Indeed, the process of the bank and the financial institution was longer and more complicated.

Mumbai-based FlexiLoans started with the BBC’s catering business model (Business-to-Business-to-Consumer), with C being merchants, as he wanted to cater to merchants associated with large corporations.

The evolution of the platform

“The problem we are solving is a hard problem to solve,” says Ritesh. “There are a lot of parameters to determine, as some industries can be very seasonal while others would need a longer gestation period.”

Initially, FlexiLoans partnered with companies like Amazon, Flipkart, Shopclues that had a large pool of SMEs. This was the company’s initial customer acquisition strategy.

She then launched a direct editing channel via her website.

“The first change happened for us when we started approaching customers directly, it slightly changed the DNA of the organization at that time, because when you go directly to customers, all of a sudden, our funnel has multiplied,” says Ritesh.

FlexiLoans has about a million customers applying directly through the website in a month, says the co-founder.

“But we have to stay true to our DNA to be a technology company and to be digital first. We have been 100% digital, whether through our partners or sourcing directly from us,” he adds.

After the expansion in the origin, the second evolution occurred in the product. FlexiLoans began offering premium overdraft and invoice financing solutions, to name a few.

According to the co-founder, macroeconomic challenges since 2016, including demonetization, introduction of GST, IL&FS crisis, COVID-19 pandemic and now inflationary situation, have helped the startup grow.

“But these macroeconomic challenges that we faced were very important and taught us a lot about managing them. But I have to say that every challenge has made us stronger,” he said.

In particular, it was the Infrastructure Leasing & Financial Services (IL&FS) crisis in 2018 that opened up opportunities for FlexiLoans.

The startup has reoriented its strategy towards co-lending.

As capital was very limited during this period, co-lending was introduced as a risk mitigation and diversification measure. So now, instead of accounting for 100% of loans in the FlexiLoans book, it has partnered with banks and NBFC and listed loans on their balance sheet.

Amid the pandemic, FlexiLoans decided to invest in technology to streamline their processes.

Currently, the company aims to improve its user experience by becoming a player in embedded finance for SMEs. For example, a small business owner who takes out credit to purchase goods could pay through FlexiLoans credit.

The future

“We are a technology company because we wanted to meet the regulations that we converted to NBFC, but our heart is still technology,” adds Ritesh.

In early June, the startup raised $90 million in its Series B funding round from Danish private equity firm Maj Invest, UK fintech investor Fasanara Capital and a few others.

“Most of these funds will be used in two ways,” says Ritesh. “One will be used to develop our loan portfolios and also for the launch of our BNPL service. The other is an investment in technology and scaling up operations.

Edited by Affirunisa Kankudti

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