Finovate Capital: Providing Working Capital Financing to SMEs

The SME sector plays an important role in the economic development of a country, contributing in terms of employment generation, production, income distribution, exports, etc. According to a recent report by Nomura Research Institute, India's micro, small and medium enterprises have potential to create over 1 crore new employment opportunities in the country in the next 4-5 years. However, despite the immense contribution to India’s GDP, the SME sector still continues to face several challenges particularly in terms of working capital financing.

According to Ravind Mithe, ex. Partner KPMG, “The recent GST data itself show that over 1.25 crore entities are registered on the portal, and most of them can use this data to get access to formal lending. However, the challenge lies in serving the 5+ crore SMEs outside of this purview who the traditional lenders find difficult to reach, for the lack of efficient origination, distribution and collection. This is where Fintechs fill the gap.”

Finovate Capital focuses on third party partnerships that unlock significant SME customer pools, while continuing to service large corporates who have SME suppliers and distributors

Independent market expert Ambareesh Baliga also observes, “Lenders require ‘Security’ for every loan to SMEs especially in cities that are Tier 3 and beyond. Borrowers without the ability to provide this collateral are unfortunately left out of the credit cycle. Hence, it is important for Fintechs to step-in and ring-fence working capital flows that already exist, as an alternative security, to derisk lending.”

CombiningTraditional Credit Distribution System with Technology
Finovate Capital addresses the INR 25 to 30 Lakh crore funding gap in the SME segment by providing short-term working capital financing in collaboration with banks and NBFCs. The Mumbai-based Fintech enables digital origination, credit assessment, partnership led distribution and collection of financial products through a state of the art proprietary integrated digital platform that helps SMEs get finance in a seamless
manner. “SMEs have grown accustomed to the cumbersome process followed by traditional lenders and are used to being burdened by collateral requests. Easing the process to provide them quick access to unsecured working capital loans will be the greatest enabler to increase percolation of credit to the approximately 5+ crore SMEs in the country, not covered under GST,” says SKV Srinivasan, ex Executive Director at IDBI.

Finovate team

“By offering programs for Invoice discounting, Sales Bill discounting and Distribution Finance, we create cash flow visibility on purchases and sales for our SME borrowers. This over time has helped build lender comfort to take additional limits. The digital platform that we have built over time is continuously evolving to incorporate solutions that allow seamless, quick and easy collection of borrower history that lends credibility for lenders to take well informed credit decisions,” says Akshat Birla, Founder and CEO, Finovate Capital, an ex-banker and supply chain industry specialist with experience across multiple geographies, having worked for reputed companies like Samsung, Credit Suisse, and led the launch of Samsung Pay in South East Asia and India.

On the possibilities and reach already achieved, Aljo Joseph, Co-Founder and Chief Business Officer at Finovate Capital says, “An adaptive technology backbone that allows fast development and roll-out of tailored financial products builds a fast mover advantage in the SME segment. In less than 1.5 years, we have managed to deep root ourselves across India in newer sectors not limited to our existing reach in auto, pharma, logistics and retail. Additionally, Finovate Capital through blockchain and analytics has carved a niche in thesupply chain finance space.”

A purpose led evolving technology roadmap and team that is in-tune with SME financial needs provides Finovate Capital the ‘edge’ to find ‘right-fit’ solutions to unlock growth.