Capital has always been a constraint for small-and-medium enterprises (SMEs). India has more than 60 million SMEs, which contribute more than 40 percent to its GDP. But, less than 10 percent of them have access to formal credit.
Banks are reluctant to lend to small entrepreneurs because of their lack of credit history or even a steady income flow. Add to that, the lengthy and complex lending processes carried out by banks and NBFCs make it even more difficult for SMEs.
Even where credit is available to them, from informal sources, for instance, they have to pay exorbitant interest rates (which can go up to even 80 percent) that challenges their growth prospects further.
As a result, most remain perennially strapped for cash, and fizzle out soon, sometimes even before the completion of a loan repayment cycle. In the last three years, however, many alternate lenders focused on SMEs have mushroomed in India.
Loanzen is one such startup focused on the SME lending space.
Founded in late 2015 by IIM-B alumni Madhu Sudhan and Venkatesh Sankararaman, it began as a peer-to-peer lending marketplace before pivoting to its current form — a logistics financing startup for small and individual fleet owners — in 2017.
Both co-founders recently transitioned into a non-executive role, with Loanzen roping in Anil S as its new CEO.
The lending process and what it fixes
Loanzen caters to 90 lakh small fleet owners, who account for more than two-thirds of India’s inter-state and intra-state logistics industry.
Most of these own pre-used vehicles, and struggle to get finance to buy them. “The truck owners go from not owning any vehicle to paying huge interest rates on loans per annum. There is no in-between,” CEO Anil tells
“Because of the rapid growth in ecommerce, intra-state transportation is in focus now. But fleet owners need a constant stream of capital to grow,” he explains.
That is where Loanzen steps in.
Its proprietary credit underwriting process takes into account the value of a vehicle, which the startup claims is a key differentiator in the market. Other factors like demographic details, kilometres travelled, load transported, repayment history, etc. are also taken into account while building the credit score.
“These factors help project a potential customer’s creditworthiness,” says Anil. Besides vehicle financing, Loanzen intends to service all needs of fleet owners, including inter-state licences, tyres, repair, maintenance, petro cards, and more.
