The two-year-old company offers financing to small businesses across India that would otherwise not appear on the radar of banks and traditional financing institutions. Founders Sanjay Sharma and Vikram Jetley are former bankers who returned to India with the intention of starting a project with “social impact.”
Sharma told TechCrunch in an interview that typical loans are 200,000-300,000 INR ($2,900-$4,400) in size, and are aimed at businesses and business owners who aren’t able to raise capital through regular channels. That doesn’t just mean Aye Finance goes below the level of banks and loan firms, it also targets customers that, he said, are below the radar of e-commerce businesses like Flipkart, which offer floats to support micro-entrepreneurs making a living on their platform.
“How do you underwrite [a business owner] when they don’t have documents that classic finance companies are used to seeing, while they do not maintain tax returns or book?” Sharma said of the challenge.
To tackle that challenge, Aye Finance operates a network of 31 small but staffed branches across seven states, predominantly in the north of India, where prospective customers meet a representative who completes their financial information using a digital platform which syncs to the cloud. Because these are outlier cases, Aye Finance specializes in what Sharm calls “industry clusters” — specific types of industry — which, he said, allows them to generate accurate metrics to assess a business. The case of shoe manufacturing, that might be the number of units produced per day per employee, or other financial data outside of what banks usually seek.
“We understand dynamics of each industry, and use eight indicators to do so,” he explained.
The company uses a local and offline approach to finding its leads, since most are not savvy to already use the internet.
“Clusters tend to be densely popularity around particular geographies,” Sharma added. “There may be 15,000 prospects in a 2km square area — we only need only 1,000 (signed-up) customers to make a branch.”
The company said it is currently at break even on a month-to-month basis, but it plans to become overall profitable before the end of 2017. Sharma is also targeting the next round of funding in 18-24 months which would help the company move into different kinds of financing products for businesses.
“We [hope to] offer them financial services with links to their cluster. For example, for some, there are large buyers in Delhi that they can be introduced to, we can make marketplace for them, for offer advisory and market aggregation services,” Sharma explained.