Another trader, Rajesh Dhingra, who runs a utensils and home improvement shop in the old Delhi area of Sadar Bazar, wanted to sign up for a dealership of a branded home improvement enterprise. He urgently needed funds to pay a security deposit to the company and for financing the stocks needed to meet immediate demand and prepare for the festival season. Prest Loans provided Dhingra with a loan within five workings days.
There are many traders like Singh and Dhingra who are ill-equipped to secure a loan from traditional financial institutions, and fintech NBFCs are coming to the rescue. Fintechs have the capability to assess, process and disburse loans online, with little or no face-to-face meeting. “In the span of one year, we have helped more than 300 small businesses and MSME units from various sectors like auto ancillary, textiles, education & training, food processing, etc in tier-I and II cities,” says Prest Loans founder and CEO Ashok K Mittal (Third from Left in Photo).
Prest Loans’ clients, Mittal elaborates, are “typical” small business units that do not have sufficiently formal financials to show. These units include smalltime traders like grocery stores, cloth merchants, tea shops, sweet shops, bag manufacturers, building material traders, home improvement sellers among others. Due to a lack of financial documents, they are unable to obtain credit from their banks. This is in spite of their having good cash flow and healthy profit margins. They are also not able to hire accounting firms or professionals to manage their accounts. “We collect a lot of alternate data from them. These data are related to their personal and social life, business nature, vintage of business and experience. This informal or non-financial data is converted into credit scores, based on which we finance them,” says Mittal.
Another issue, according to Mittal, is of timing. Small businesses may need funds on a short notice basis due to a sudden increase in demand or a festive season. While traditional lenders have a long turnaround time (TAT) for sanctioning and disbursement, Prest Loans can approve and disburse loans in three days.
“We also come across clients who have no banking habit and do not maintain proper financial documents. For these profiles, we have our expert credit team that understands the alternate data and assessment of cash flow for funding requirements.”
Prest Loans’ lending procedure, Mittal stresses, is simple and effective, right from the login to disbursement. The procedure involves file login with uploading of documents, CIBIL score generation, credit visit and third-party verification. The company has an internal credit score called ‘Prest Score’, which is based on alternate data that runs on an in-house algorithm. Prest Score decides the interest rate and tenure of the loan based on a risk matrix. Following a satisfactory report, loan documents are automatically generated and executed for disbursement. The fund transfer is initiated through online banking channels.
And all the while the company ensures transparency, Mittal avers. “We maintain transparency in the process and have various checkpoints; each client has a unique user ID and password. The client can check the loan status, ledger and other information online anytime during the process and even after the disbursement throughout the loan lifecycle. Despite being a Fintech NBFC, visiting clients at their business premises is one of our policies wherein our credit team conveys all the details of loan amount and deductions. There are no hidden charges or costs. Our loan ticket size is Rs 50,000 to Rs 25 lakh within various products. With an average ticket size of Rs 5 lakh, we have disbursed new loans worth Rs 15 crore in a year.”
Since most of Prest Loans’ target clients are small businesses with little or no tech savvy, Mittal informs that it has devised a simplified marketing technique. “Client experience is our prime marketing strategy. Our clients just need to give a missed call on our universal number or leave a message on social media. Our missed call number enables us to be reachable to our target segments. Besides, we are also undertaking outdoor and social media marketing campaigns to create our brand presence.”
With wide geographical reach in mind, Mittal says the company has developed a “very high-end” technology-driven platform, which is not dependent on geography and is highly scalable as it continues to grow. “Technology up-gradation is an ongoing process for digital lending institutions. We shall keep adding more features based on machine learning of the system and on-field experience. RBI also has issued guidelines related to outsourcing and technology that we are fully complied with. In the last 15 months, we have added many new features to our technology platform.”
Prest Loans’ website is available in Hindi and English, and its virtual chat facility supports 100 different languages. Mittal informs that the company is also developing a mobile app in Hindi and English. “The small business and MSME segment is very large; we want to touch base with at least 5,000 of them in the current financial year in Delhi-NCR and Rajasthan, where we have our offices. In the next three years, we shall reach at least 30,000 businesses in the regions of Delhi-NCR, UP, Punjab, Haryana and Rajasthan.”
This article was originally published in May-June 2018 print edition of ‘Sourcing Hardware’ magazine.