SME lending start-up Capital Float raises $25 mn led by Creation Investments

Company has so far facilitated loans of over Rs 400 cr to entrepreneurs and small businesses, while registering a 20 fold growth in past one year

Bengaluru-based startup Capital Float, which lends to small and medium enterprises (SMEs), has raised $25 million in series B funding led by Creation Investments Capital Management, while existing investors SAIF Partners, Sequoia India, and Aspada also participated in the round.

The company has so far facilitated loans of over Rs 400 crore to entrepreneurs and small businesses, while registering a 20 fold growth in the past one year. Capital Float typically looks to lend to e-commerce vendors by partnering with players such as Snapdeal, Paytm, Alibaba and has even lent to driver partners of Uber.

"Today, a customer can apply from anywhere through the web or smartphone, and have their creditworthiness analyzed within minutes using sophisticated algorithms that draw on financial and alternative data. In many cases, we are able to approve and disburse a loan in less than an hour," said Gaurav Hinduja and Sashank Rishyasringa, co-founders of Capital Float, in a joint statement.

Capital Float relies on financial data from individuals and SMEs in order to process their creditworthiness and disburse loans at appropriate interest rates. E-commerce sellers and drivers for taxi hailing services are obvious candidates given that there's a complete record of their earnings, in many cases which is shared directly by the company.

Traditional lenders such as banks don't often lend to such individuals or businesses given the lack of creditworthiness reports. Capital Float's IP lies in being able to analyse a business or individuals bank statement and other basic information in order to determine if they are indeed good investments.

"SME lending represents a very large, underserved, and growing market opportunity in India. By leveraging technology, Capital Float has built a differentiated model that is able to deliver credit to the smallest of businesses in a scalable and efficient manner," said Patrick Fisher, Managing Partner & Founder at Creation Investments.

While the latest fund infusion will help Capital Float lend more money from its own balance sheet, it also runs a marketplace for lending of which banks and other non-banking financial corporations (NBFCs) are part of. The company also plans to utilise the money to grow its presence to 100 cities across India and grow its base to 20,000 SMEs.

Capital Float had raised $13 million as part of its Series A funding in February last year, bringing the cumulative to $42 million along with its seed investment and the latest round.