India is home to some 30 million micro, small and medium businesses, which face major challenges in raising loans from banks for working capital requirements.

Restrictive lending policies, inflexible collateral requirements and slow disbursement times by formal financial institutions often put these MSMEs at the mercy of informal financiers or money lenders.

While these lenders are quick to offer funds, crippling interest rates tie down the borrower to a chronic cycle of debt.

Quick loans

Coming to the rescue of these MSMEs are a clutch of online loan disbursement companies that offer quick loans ranging from ₹50,000 up to ₹50 crore at interest rates ranging from 15 per cent to 24 per cent over loan tenures varying from 60 days to 5 years.

Digital lending platform Lendingkart, founded in 2014 has disbursed loans totalling ₹225 crore through Aadri Infin Ltd, an NBFC company it acquired two years ago; to over 3,000 MSMEs in 186 cities across 23 States with an average loan size of ₹6-7 lakh.

“The loan application process is 100 per cent online and takes 15 minutes to complete, where our borrowers upload personal details and documents such as bank statements and VAT returns. We have reduced decision making time to sanction loans from 48 hours to sub-4 hours and it takes 72 hours for the borrower to receive the loan,” Lendingkart Co-founder and CEO Harshvardhan Lunia told BusinessLine .

Last month, the company raised $32 million in Series B funding, which will be used to strengthen its data science capabilities, enhancing its technology platform and expand its footprint to huge underserved lending markets across India.

With 20,000 MSMEs reaching out to the company every month, Lendingkart is witnessing a 20 per cent month-over-month growth in loan origination.

Capital Float, founded three years ago, has disbursed ₹600 crore in loans to over 4,000 MSMEs in 50 cities, from small kirana stores to manufacturing enterprises. “We receive a loan application every 5 minutes and while many of these borrowers come to us through word of mouth and referrals, we have reached out to many more by forging partnerships with Snapdeal, Paytm, Uber, Mswipe,, where we offer financing solutions to their merchant sellers,” said Sashank Rishyasringa, Co-founder and Managing Director, Capital Float.

Focus on Tier-3 cities

“We are getting a lot of traction in Tier-3 cities such as Bhilwara, Bhatinda, Tirupur and Dibrugarh,” he said.

The company raised $25 million recently, which will be used to expand its reach to over 100 cities, adding 20,000 new customers, investing in the technology platform and innovating to create new products that solve specific pain points for MSMEs.

With the venture capital funding environment drying up over the last 12 months, many early-stage start-ups are looking to raise debt from venture debt firms such as IntelleGrow and InnoVen Capital.

This quarter, InnoVen hit the milestone of crossing over ₹100 crore of cumulative venture debt disbursements in India, across more than 75 companies and over 110 deals. Among the new customers onboarded are early stage companies – Housejoy, Xpressbees, Chillr, Simplilearn, Ridlr and Stayzilla.

Venture debt financing

Ajay Hattangdi, Group COO and CEO of InnoVen Capital, said: “We have give loans to 80 technology-enabled start-ups across sectors since we started in 2008 and typically give out half a million to $5 million loans for a small equity component of 0.5 to 1 per cent stake in the start-up, at interest rates in the mid-teens. Our right offs are much lower than most banks would have.”

IntelleGrow, a venture debt financing arm of Aavishkaar – Intellecap Group, with over 100 companies in its portfolio across various sectors such as clean energy, financial services, infrastructure and waste management, has crossed ₹400 crore disbursement mark since it started lending to early stage enterprises.

The company’s average loan size is ₹2.5 crore and goes up to ₹10 crore.

Nitin Agrawal, Deputy CEO, IntelleGrow, said: “Our strength lies in customising and structuring debt solutions where traditional lenders focus on replication and scale. We are trying to get the best of both worlds.”