A well-oiled supply chain would require payments to be made on time, a rare occurrence in the Indian ecosystem. As it usually takes 60 to 90 days for a bill to be released, there rose the need for working capital. But, for a long time, banks have been unable to help the more-than-51 million SMEs in time. This is why fintech startup CredAble came to be.
Founded by Nirav Choksi and Ram Kewalramani in 2016, the Mumbai-based startup provides post-and pre-invoice financing, through its partnership with capital providers to companies that are in need of working capital.
CredAble was founded with a vision to triple the working capital available in India. With over $4 trillion of working capital assets outstanding globally and less than 20 percent financed through working capital solutions, Nirav says the startup is aiming to partner with corporates to unlock the valuable operating cash flow and bridge the working capital gap for suppliers and distributors.
"A lot of these entities are left out of the fold because they are deemed ‘unbankable’ by traditional working capital providers like banks due to their outdated evaluation processes. CredAble provides a solution to this problem, as all suppliers and distributors, whether they are corporations, partnerships, or even sole proprietors, can be onboarded onto CredAble’s platform, irrespective of size or scale," says Nirav.
In the beginning
Being brothers-in-law is not the only thing that ties Nirav and Ram together. Nirav has over 20 years of entrepreneurial experience and has founded, scaled, and managed companies across domains of technology, structured trade finance, commodity trading, and mining.
Ram, on the other hand, brings over 16 years’ experience across investment banking and logistics. During his logistic stint, where he was the CEO of a leading people logistics company, he encountered a large working capital gap, as the company’s average receivables were in excess of 90 days, whereas the company had to pay its vendors on a weekly basis. This, he observed, was the case not only across the logistics industry but also for a large number of services-driven businesses.
Besides speaking with traditional financiers such as banks and NBFCs to raise working capital, he approached his clients to enable early payment for the approved invoices against a cash discount. There he encountered a stumbling block as they had a mandate to push payments as far as possible.
This did not make sense as these clients (who were sitting on excess cash) were investing in short-term liquid papers while the cash discounts offered were much greater. This was an opportunity loss. So, with CredAble, Ram and Nirav aimed to address a gap like this for other companies by leveraging technology.
How CredAble helps
CredAble now delivers large scale supply chain funding programmes to enterprises. Nirav explains that all technology is developed and managed by an in-house team of computer engineers and product managers. By keeping technology at the crux of its solutions, he adds, the startup ensures that transactions take place within three or four clicks for any of its stakeholders. CredAble has a team size of 70, including relationship managers who provide customer support to corporate clients and their suppliers and distributors.
Nirav explains that CredAble also developed a proprietary Credit Assessment Model that harnesses the power of big data to equip relationship managers with the knowledge of a company’s cost of capital, making negotiations fair and transparent. "We believe that no two clients are the same, and shun cookie-cutter solutions for customised, built-to-suit structures that exactly meet the requirements of our clients," he adds.
CredAble offers three programmes:
(i) Early Payment Programme for Suppliers (DDRX), which enables vendors/suppliers to get early payment against their invoices in exchange for a discount. The payment for it can be done either on their own or through CredAble’s banking partners. Alternatively, they can also opt for an extension to the days payable while suppliers are paid early
(ii)Distributor Receivables Funding Programme, which is a built-to-suit solution that offers an off-balance sheet, scalable, and flexible model to monetise distributor receivables, while dealers and distributors may opt to extend credit periods
(iii) Just in Time Financing, which enables the supplier to access capital prior to their invoice being raised based on certain ‘billable’ events being completed.
"Up to the point the invoice is raised, these suppliers are financed through our NBFC. Post the invoice being raised, these invoices are automatically discounted on the Early Payment Programme for Suppliers' platform with guaranteed return for our enterprise client thus creating a win-win situation for all parties," says Nirav.
CredAble charges no fixed fees, but takes a commission on the savings that it generates for the client. The startup’s first sign-up was a leading food manufacturer with a dominant share of the biscuit market. Before CredAble,its vendor credit cycle was 70 days. CredAble’s solution resulted in the vendor credit cycle reducing from 70 days to 15 days.
The startup now has close to more than 30 clients.
The founders invested Rs 10 crore to set up CredAble. The startup has raised Rs 100 crore in Series A from Alpha Capital. Its annualised revenue for is Rs 65 crore. As far as future plans are concerned, the startup wants to reimage supply chain finance in India by adding multiple financing programmes.
“This would include going down the value chain to include not only direct vendors and distributors but also dealers, retailers, and sub-vendors directly, resulting in reduced C2C cycles by an average of 30-45 days, thereby unlocking capital that is currently locked in balance sheets of large corporates,” Nirav explains.
He adds that CredAble will look to increase the number of transactions executed on its platform by 10X in the next 18 months.
The founder says there is no competition in this segment and that CredAblecompetes with only banks offering traditional working capital products.
(Edited by Evelyn Ratnakumar)