Sundaram Home Finance, which recently forayed into small business loans against residential properties, said the segment has the potential to grow well in the coming years. Based on the experience over the next six months in Tamil Nadu, the company will assess and work out plans for further expansion within the state and outside, Lakshminarayanan Duraiswamy, MD, Sundaram Home Finance, told FE in an exclusive interaction.
The company’s immediate plan is to open eight more exclusive small business loan offices in tier 3 and 4 towns in Tamil Nadu by March 2023, taking the total number of offices to ten.
Sundaram Home Finance, the housing finance arm of Chennai-based NBFC Sundaram Finance, expects to achieve disbursements of Rs 10-15 crore from this segment by the end of financial year. It is dedicating an exclusive team to run and tap into this opportunity and will be hiring 50 people specifically for this segment over the next six months.
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Duraiswamy said while there continues to be an opportunity to finance homes, the company found that there was a need for organised financing to the small business segment in the rural market. In light of the revival in businesses after the pandemic, the self-employed business men, traders, grocery shop owners, pharmacists, hardware shops, tea shops and the like in smaller towns are looking for working capital loans to expand their business.
“This has been in the works for the last one year. We did test marketing in Madurai, Tirunelveli and Salem and received positive feedback from this segment. That led us to this strategic diversification from home and loan against property (LAP) loans to small business loans and is a new segment we have entered into. We have just launched an exclusive loan product for this segment whereby we will lend up to Rs 20 lakh to small business owners and traders against residential property,” he said. The interest rates will be upwards of 15% per annum. The tenure of these loans is likely to be 5-7 years. The EMI will be on conventional fixed monthly model.
The company’s majority of 100 plus branches are in tier 2 and 3 towns where it has been been providing home and non-home loans (LAP).
On the challenges, he said the customers in this segment may not have the typical documentation that those in the home loan segment would have and hence this calls for an in-depth understanding of the customers and their businesses. “We believe that the Sundaram experience will come in handy here as our focus has always been on understanding the customer needs and providing the best customer service,” he said.