SMEs in India are plagued with the difficulty of raising working capital but even before they reach that stage - their growth is being interrupted by inefficient cashflow management.
By Nitin Sharma, MD, SME Business & CPO
We live in extraordinary times. Not only this is true for the ongoing pandemic but also of the exponential nature of the fintech revolution we’re experiencing in our daily lives.
From standing in queues and signing countless documents for opening a savings account to downloading an app on our phones and opening an account in minutes -the banking & financial services as we know it – has changed, and for the better if I may add.
Yet, the one thing that hasn’t changed throughout all of this is the financial constraint faced by small and medium sized businesses in India.
Owing to poor cash flow management, these businesses struggle with a manual cumbersome process and end up missing out on the advantages of having a predictive cash flow system in place.
The other thing that also hasn’t changed is the borrowing relationship with the bank.
A borrowing relationship with a bank is built over time. Legacy banks have many customers and that makes it difficult for them to give customised attention to each customer.
The other side of the story is not great either! Even though there have been improvements when it comes to credit score validation and guarantor requirements, banks still find it hard to get loan repayments.
The end result? Banks cannot cater to the unique working capital needs of small and medium sized businesses whose daily operations depend on receiving the capital on-time, in a seamless manner.
When it all began
Four years ago, CredAble came into the picture to bridge the working capital financing gap for SMEs. Since then, we’ve provided financing to more than 100,000 suppliers and dealers or retailers of some of the largest corporations in India.
Working with hundreds and thousands of businesses, most of which fall into the SME category, helped us uncover a unique insight into how businesses in India function on a daily basis.
SMEs in India are plagued with the difficulty of raising working capital but even before they reach that stage – their growth is being interrupted by inefficient cashflow management.
Let’s take a pause here.
Cash is the pivotal notch around which every single transaction revolves. Cashflow in its essence means the cash coming in and out of a business.
For a business, the power of cashflow describes what they do, how they do it and what needs to be done for it to turn positive. It is, quite simply put, the lifeline of the business which keeps it flowing AND growing.
But here’s the irony.
The 70+ million MSMEs who contributed towards 29% of the GDP of India in 2020-21, suffer from broken cashflow management.
– Lack of unified view of financial information across the business results in poor monitoring of cashflow & cost-benefit analysis
– Manual, cumbersome & time consuming process to reconcile across multiple systems causes lost efficiencies
– Lack of cashflow awareness results in poor working capital management
– Non-availability of structured information which is required for credit appraisal by legacy banks & other financial institutions creates difficulty in raising credit
As a result of which only 16% of SMEs in India have access to formal credit, resulting in a credit gap of USD 16 billion.
While the fintech space has seen tremendous progress in the last 5 years, there is still not a singular solution which caters to this unique problem faced by over 6.3 crore businesses in India.
That’s why we built UpScale
In the last four years, while building and scaling CredAble, we’ve interacted with hundreds and thousands of small and medium-sized enterprises – who have made us realize the need for an all-inclusive solution which looks after the financial health of a business.
We’ve also learnt how to navigate the complex world of supply-chain financing, compliance, regulations and technology. With 25+ leading banking & financial institutional partnerships we had already extended our services towards building India’s largest platform for enabling working capital.
We wanted to offer our learnings, experience and finance expertise in the form of a formidable technology platform which helps businesses tackle their cashflow challenges, without any hassle.
For us, building an all-in-one solution was an inevitable eventuality that has finally taken its true form.
As I’ve said in the beginning, we live in extraordinary times. Today, I am elated to share our newest achievement – UpScale with all of you. And I truly cannot wait to see the incredible impact it brings to the MSME ecosystem in India.
How did we do it?
UpScale has been designed ground up, keeping in mind only the SMEs. In other words, SMEs (irrespective of their constitution type) with their annual turnover over a crore in INR can get the maximum benefit out of our platform.
In the last four years, we’ve worked closely with financial institutions and businesses to understand where exactly the pain points lie. Especially when it comes to simplifying banking, payments, accounting, reporting AND lending – the current technology offerings are complicated.
This is exactly where UpScale brings its true value to the table. It uses state-of-the-art technology which makes each of the modules mentioned above more efficient and makes them work seamlessly with each other.
In short, we’ve dealt with ground reality closely enough and were able to design a plug-and-play platform for not-so tech savvy SMEs which addresses their specific pain points.
Built to Scale; Designed for Growth
UpScale simplifies and structures the 4 main pillars of a business to manage their cashflow efficiently –
1. Banking & payments
2. Accounting & reporting
3. Working capital
4. Growth Tools for compliance
From the beginning of UpScale’s inception, we’ve believed that for a business in India, credit & cashflow challenges need to be solved simultaneously.
While many fintech solutions have come forward in the last few years to solve banking & other financial services for businesses, they’ve left credit entirely out of the picture.
This is where UpScale offers a truly unique solution.
Firstly, it takes into account end-to-end cashflow management covering an array of daily functions a business needs to complete from morning till evening. This allows businesses to develop actionable insights from their daily financial transactions.
UpScale then takes this structured (and again, actionable) information to bring forward instant access to business credit or broadly speaking, working capital.
UpScale is then the only one platform a business needs to get better visibility of their finances, better control of their operations and access to credit to achieve better growth.
We’ve seen this happening in real-time, during our Beta programme. The platform has already processed and assessed transactions worth INR 400 crores. This has given us the confidence in the value that UpScale will bring to the MSME sector in India.
Made in India; with love and care from CredAble
If the last four years have taught us anything, it is that a business truly values seamlessness. Keeping this in mind, we’ve also integrated UpScale with the existing solutions from CredAble.
As of today, CredAble funds INR 2000 crores in monthly transactions through its Receivables Exchange platform. Now any supplier on the Receivables Exchange platform can access additional credit & cashflow management via UpScale.
However, this also implies any business that UpScale serves can access the vast range of services that CredAble provides as of today.
The road ahead
We’ve released our platform for public access today after completing a very successful Beta programme. In the next one year, we hope to become the sole enabler of credit & cashflow management for 500,000+ MSMEs in India.
However, for us, the journey has only begun. We’re looking at integrating with other fintech products to offer a more holistic solution for our end customers. The next 6 months are critical to establish a solid product-market fit.
At CredAble, we believe in the ethos of delivering the maximum value to our customers. With UpScale, we’ve left no stone unturned to make it happen. At the end of the day, the ones who will get the maximum benefit will be our customers -the MSMEs in India.
I’m sure you’ll have many questions about the platform, how it works and how we can deliver the maximum value. Fortunately, we’ve a team of seasoned experts who are around the corner to help and guide you through.
Watch this space, as we will keep on sharing more information about UpScale, our learnings, the great time we had while building the platform and most importantly, the impact it has had on our users.
Till then, onwards and upwards!