Another posting from India’s The Economic Times, with this subject around the growing use of supply chain finance (SCF), which is being spearheaded by what are referred to as non-banking financial companies (NBFCs). Apparently the RBI is following suit with other central banks and increasing rates to fend off inflation. As such, this is seen as an opportune time to offer up some liquidity choices for startups from some other place than traditional banks. Many readers here will be familiar with the various forms of SCF that we have described over the years.
‘“We are building a solution that will address the supply chain finance issues for startups,” said Ishpreet Singh Gandhi, founder and managing partner of venture debt firm Stride Ventures. “We are setting up a separate business which is not part of Stride Ventures.”…
Supply chain finance is a lending solution provided to suppliers and other channel partners of a startup to optimize cashflows…
On Tuesday, Gandhi announced the starting of a new NBFC – StrideOne – which offers customised credit to startups and their suppliers. The NBFC has raised Rs 250 crore to develop the product…
StrideOne, which was launched six months ago, has assets under management (AUM) of Rs 200 crore across more than 20 anchor companies…
“The demand for supply chain finance is growing, we have already onboarded 1,000 borrowers on the platform, and it will easily go up 5-10 times in the next three-four quarters,” Gandhi said.’
The piece does not clarify the types of SCF being offered, but we interpret it as some form of reverse factoring. That would make the loans a bit more risky amongst the startup community, since repayment is less likely at some percentage versus established companies, but we expect that would be priced into the service charge. There is also some mention of invoice discounting, which is a supplier choice in most cases. The piece has a couple of charts to review as well, so those interested in local India financial solutions may wish to read the full article.
“We focus mostly on seed-stage startups and due diligence on that itself is difficult. So, it is very hard for us to lend for their suppliers,” said a venture debt firm that was considering a supply chain finance business…
StrideOne’s Gandhi said that providing the right technology solutions and offering a high degree of customisation were big challenges…
“Every business is different and understanding their needs is important… next is nimbleness, we have borrowers from across the city, we need to find the right solutions – digital or offline – for them,” Gandhi added.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
