2. The $200 Billion Problem
SMEs do not have access to Credit
93%
5.18%
2.05%
SME Financing in India
Self Financed/No Finance
Institutional
Non-Institutional
Causes of SME
lack of Credit
Access
Lack of access to formal
sources
Poor cash flow due to
higher cost of credit
Higher risk profile
Lack of hard asset
collateral
Lack of creditworthiness
for banks
There exists a $200 Billion
funding gap for enterprises
that the banks and NBFCs
do not lend to
Reserve Bank of India’s stance on the Problem
“India has 30 million
enterprises – only
7% have access to
financing – 93% are
either self financed
or not financed”
Formed committee on
Comprehensive
Financial Services for
small businesses and
low income
households in 2011
“90% of businesses have no
links with formal financial
institutions. Exists robust
demand for financial services
this demand currently being
served by informal sources.”
3. What
SoftBanQ
Does
Fast, flexible & transparent
credit products to SMEs in India
Initial focus on working
capital loans
Lends to the missing middle
Charges 16-18% interest +
0.5% closing fees
Receivables backed loans only to those enterprises
with $40,000/year minimum turnover & at least 1
MNC or listed client
Focus
Rural Urban/Semi-Urban
Estimatedhouseholdannual
income(INR’000’s)
0
100
200
300
400
500
600
700
800
BANKS
NON BANKING FINANCIAL COMPANIES
THE MIDDLE MISSING
MICRO FINANCE INSTITUTIONS – MFI’s
120
SUPPLY OF FUNDS : THE MISSING MIDDLE WITH
PERIPHERAL PLAYERS
600
What is SoftBanQ
4. How it Works
CUSTOMER
1. Purchase Order
2. Delivery + Invoice
3. Payment only after 30-180 days
SME SoftBanQ
SoftBanQ Advance up to
80% of invoice value
Repayment after customer pays
SME PROFILE TERMS FOR SOFTBANQ CREDIT PRODUCTS
• Established corporate customers (MNC’s, E-commerce
sites, listed companies)
• Long payment terms with above customers (30 days or
more)
• Manufacturing, B2B, E-commerce, Distribution businesses
• $5,000 – $50,000 in loan amount (never exceeding 80% of
invoice value)
• One time bullet repayment + EMIs
• 1-12 months loan term
5. Borrower Profiles / Diligence Criteria / Loan Sizes
Borrower Profile
• Fast growing India based SMEs
with at least one reputed client
(MNCs, large E-commerce players
or publicly listed Indian corporates)
• 1+ year in business
• More than INR 25 lacs ($40,000) in
annual turnover
• Initially, businesses based in Delhi,
Bangalore, Mumbai, Chennai and
Pune only
• Company & promoter profile
• Company Financials via Tally
• Bank statements & Income Tax
Returns
• Invoice/purchase order information
• $5,000 – 50,000
Diligence
Documents
Loan Sizes
Disbursement cycle of 7 days/1-12 month loan term/flexible repayment schedules
6. SoftBanQ vs Alternate Financing
Benefit to SMEs
SB vs Banks/NBFC’s SB vs Factoring SB vs Money
Lenders
SB vs Credit Cards
• No property/machinery
required as collateral
• Will lend to businesses under
3-5 years old
• Quick, paperless online
application process
• Funds transfer within 7 days
• No pre closure penalties
• Flexible repayment options
• Interest rates at par with
effective rates charged
• Available to all business
sizes, not just large
suppliers
• Ability to selectively finance
invoices only as and when
funds are required
• Quick empanelment
• 4 weeks typically taken by
factoring companies
• No hard collateral
requirement
• Significantly lower interest
rates (16% vs 40-60%)
• Get funds equally fast
• Free of risks typically
associated with informal sector
finance
• Less burdensome repayment
schedules
• Significantly lower interest
rates (credit cards ~40%)
• Dependable source of credit
for regular business needs
• Loan sizes set according to
business needs, not card
limits
Lower interest. Flexible repayment terms. No hard collateral.
