Fintech lender, Ftcash plans to introduce new supply chain financing product

by James · March 17, 2023

Ftcash is an RBI registered NBFC with an aim to empower over 60 million micro retailers and small businesses by bridging the lending gap with accessible loans. Ftcash uses a proprietary algorithm to analyze creditworthiness and provide underserved MSMEs, including retailers, pharmacies, clothing stores, auto dealerships and mom-and-pop shops, with institutional finance. Headquartered in Mumbai, ftcash is founded by Sanjeev Chandak, Deepak Kothari and Vaibhav Lodha. The company is supported by investors such as Accion, FMO and IvyCap Ventures.

Startup and travel so far.

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A responsible lender to MSMEs by combining loans with digital payments. We enable them to increase their disposable income and give them the opportunity to scale up. ftcash started in 2015 by enabling digital payment acceptance in less than five minutes anywhere in the country. We were able to make the process of digital payment acceptance “merchant centric” and made it very easy. Our products enable MSMEs to increase their business income while building their credit profile.

Since 2019, AUM has grown by 22X despite Covid-19 and currently AUM is ~ INR 360 crore, up from INR 175 crore over a year ago.

Can you tell us the growth of the startup in terms of revenue and what will be your revenue target for the coming year? How do you intend to reduce the losses?

ftcash has consistently grown 2.5-3X per year since 2020. Our payouts continue to grow 10-15% monthly and we expect a similar increase in revenue in 2023-2024 as well. Over the past two years, we have focused significantly on productivity and profitability to reduce our losses. According to our current project, we should break even in the next three months (Q2 2023).

What were the challenges you faced when starting ftcash and how did you overcome them?

Only 4% of micro-retailers have access to capital across the country and the lack of financial literacy, especially in tier 2+ cities, is one of the main reasons for this. The estimated amount of the current addressable credit gap is $397 billion. Typically, small business owners borrow money from local moneylenders, which often trap them in a cycle of debt. The difficulty in financing MSMEs can be largely attributed to risk aversion of traditional lenders such as banks, accessibility issues with documentation, language barriers and lack of adequate support systems for last mile borrowers.

Therefore, the biggest challenge was to develop a business model that helps MSMEs meet their credit requirements in the most convenient, fast and risk-free way, while scaling up the business. Since its inception, ftcash has focused on building trust among MSMEs and helping them scale their businesses. The company ensures that the loans are given to MSMEs as a win-win solution for both borrower and lender.

What are ftcash’s current offers and prospects?

We provide working capital loans and digital payments to them. It helps them increase their disposable income and gives them an ability to scale up. A number of them are excellent entrepreneurs, but unfortunately have not been able to scale up due to lack of credit.

ftcash has experienced phenomenal growth since its inception, growing more than 3X in 2021. Our 90+ crime rate is the lowest in the market at 4%, which is much lower than the market standard in this target segment.

We have over 60,000 merchants in our network and have so far disbursed INR 600 crore of loans. We expect payouts to grow 3X by 2023. ftcash plans to maintain portfolio quality and grow 3X every year to a book size of INR 8000 crore over the next five years.

Please tell us about your service portfolio and customer base.

ftcash utilizes technology to a great extent so that we can serve the sellers efficiently and at the same time make it convenient for them. We have built a proprietary platform called “Daily Health” which measures the creditworthiness of the borrower every single day after disbursement of the loan, and appropriate interventions are made if we find that the customer’s creditworthiness is deteriorating. 70-80% of sellers in our network take advantage of the Daily Health option and pay installments on a daily basis.

We have a customer-facing app where they can view their transaction history, loan repayments, etc. All our data is stored in the cloud with appropriate security measures because customer privacy is paramount. Our field staff have an ftcash Agent app that is used to enter loan application data.

We cater to retailers, pharmacies, clothing stores, auto shops and mom-and-pop shops, with institutional finance. The company has partnerships with Northern Arc, Ugro and Ambit to provide credit offers to its customers.

Can you share some insights about the market you are currently in?

NBFCs are now working to strengthen their presence in rural areas as consumers do not have access to commercial banks and it often becomes difficult to get loans from banks. Since the loans are usually smaller ticket sizes, NBFCs with a digital stack can reduce the cost of servicing a loan and thereby profitably lend to borrowers in rural India. Also NBFCs can utilize alternative data for credit assessment as these customers may not have a rich credit history. Credit demand in the MSME sector has already picked up, and we expect that to continue into next year.

Will you be raising money anytime soon?

We are not currently planning to raise any money, at least not until the end of the year. So far we have raised equity capital of $15 million from FMO, Accion and IvyCap Ventures. In 2022, we raised $2 million in debt from Northern Arc and Caspian.

What are your future plans?

We currently lend in 18 cities in India. Our expansion is targeting West and South India within three categories: 1. Hardware & Electrical 2. Health & Wellness 3. Apparel. We believe we have an undue advantage in these segments with our experience and expertise. It has enabled us to keep our NPAs lowest in the market. Our next step is to expand our product portfolio with supply chain financing, which will be launched within a month. As a lending-first company, it will remain in our mindset by enabling merchants with small-ticket payday loans and using that pipeline for longer term loans.