Capital Float, an online lending platform for small businesses in India, announced today that it has closed a $25 million Series B.
Creation Investments led the Series B, with participation from returning investors SAIF Partners, Sequoia Capital and Aspada. Sashank Rishyasringa and Gaurav Hinduja, who founded the company in 2013, say the latest infusion of equity will fuel Capital Float’s ambitious expansion plans.
Over the next twelve months, Capital Float wants to add about 20,000 more customers and originate about $300 million in new loans. It will do so by reaching out to small business owners in Tier 2 and Tier 3 Indian cities (which the Reserve Bank of India classifies as cities with populations between 50,000 and 99,999, or 20,000 to 49,999, respectively).
The founders claim that over the past two years, Capital Float has made loans totaling more than $60 million to small businesses in more than 40 Indian cities. The company is now nearing a monthly loan origination rate of $10 million and expects to grow 20 percent month-over-month in fiscal 2017.
Its Series B will also allow Capital Float to continue updating financial products like its credit-scoring algorithms, and find new partners, including banks, for its lending marketplace, which means that the company does not need to provide the funds for every loan made through its platform.
Rishyasringa says that Capital Float’s credit-scoring algorithms, which lets applicants on its mobile app or website find out quickly if they qualify for a loan, uses hundred of data points from traditional sources like financial statements and bank account data, as well as other online platforms (including social media), which are “becoming increasingly available with the rapid pace of the digitization of the Indian economy.”
Capital Float currently claims a default rate on its overall portfolio of less than 0.5 percent, compared to the more than 2 percent to 3 percent rates seen by SME loan books in India, he adds.
The company tailors its credit-scoring model for each category of potential lenders it serves. For example, many of its customers want to grow businesses they have built on e-commerce platforms like Snapdeal, PayTM, or Alibaba or are planning to sell online for the first time and need startup capital. Other products include vehicle loans for drivers on Uber and other on-demand ride apps.