Harshvardhan Lunia, at one point, worked in the small loan divisions of large private sector and multinational banks. It gave him an insider view of how many small business owners were denied financing despite being credit worthy. The problem was that these new small businesses, SMEs and startups were far too disorganised for the liking of large corporatised banks. “They would hardly have maintained their accounts,” recalls Lunia.
It was in 2003 that Lunia was first inducted into banking operations for small businesses. Seven years later, Lunia started an advisory business in the SME financing space. It would give him more insight into why SMEs he was consulting for don’t get loans in India. “The credit decisions in banks used to take months. Any potential analysis was hindered by lack or absence of data. Information asymmetry was widespread. SMEs had no resources to execute financing transactions and the ones which did, needed hand holding for processes,” says Lunia.
It made him realise such a business would be scalable only when the entire process, down to calculating a credit score to make a final decision, was taken online.
Lunia joined hands with Mukul Sachan, a school friend, ex-finance director at an international hospitality group, and a former ISRO scientist, to draw up a business plan for Lendingkart. Their value proposition would be the unmet SME demand for short term (up to 12 months) and small ticket loans (Rs 50,000-Rs 10 lakh). In April 2014, Lendingkart went live online as a comprehensive lending institution dedicated to helping entrepreneurs and small businesses with working capital. Lunia was 33 at the time.
Lunia knew it was an unmet demand but not even he could have known the impact disruptive NBFC fintech companies can have on the backbone of India’s economy. “In the first year of business, our NBFC team, Lendingkart Finance, celebrated the very first loan we disbursed in Guwahati, 2,000 kilometers away from where we were. That’s when we realised the potential of our platform and the disruption it could initiate,” says Lunia.
It has been an amazing journey from disbursing loans in a few sparse locations to creating a strong SME customer base in cities ranging from tier 1 to 5 in India. Lendingkart Finance, till date, has disbursed loans in over 700 cities across all 29 states of the country, influencing lives of over 9,000 SMEs despite having physical offices at only three locations – Bangalore, Ahmedabad and Mumbai. More than 50 per cent of their customers come from tier 2 and below cities.
Lunia is glad that his work with Lendingkart can make a real contribution in the lives of India’s estimated 48 million SMEs. “India continues to be a huge under-served lending market of SME borrowers. Formal sources cater to only 22 per cent or Rs 7 trillion ($140 billion) of the total MSME debt financing. There’s an urgent need for digital lenders like us,” points out Lunia.
He feels more entrepreneurs should start thinking about disruption in real terms and not just as the latest marketing buzz word. “Startups are springing up almost every few kilometers. It simply isn’t enough anymore for an entrepreneur to just have a great idea. It must also be sustainable and address a genuine need. Keeping all previous notions and understandings aside, you must learn on your feet and keep up with the demands of an ever-evolving market.”