Paytm initiates collateral free lending for small scale businesses in need of capital!

Sellers can now avail of collateral free funding from Paytm! The ecommerce and payment service platform announced this week it will provide working capital loans to its sellers without requesting for collateral.

Who’s funding these loans and how will they work?

Capital Float has partnered with One97 Communications Ltd. and other lending institutions like Capital First and Aditya Birla Finance want to join too as partners, revealed the etailer. Parent company One97 Communications’ partnership with financial institutions has allowed Paytm to provide collateral free working capital loans to small scale merchants and service providers like kirana stores, taxi and auto drivers and milk cooperatives, all based on payment history.

Paytm mentioned, small loans of Rs. 10,000 to 1,00,000 will be available without the need for collateral. The loan amount can be increased based on the borrower’s working capital requirements and eligibility criteria.

The online retailer maintains merchants credit profiles based on transaction history on its platform. Various factors like volume and value of transactions are considered when putting together profiles. These profiles will then be passed on to the third party financial institutions for eligibility screening.

Paytm looking out for everyone’s financial well-being or is there more to it?

Paytm is accepted by four lakh merchants and it wants to push this number to 1 million by the end of the year.

Paytm Senior Vice-President, Kiran Vasireddy said, “Financial inclusion is our main agenda. Availability of unsecured loans at low interest rates has been a challenge for small merchants till now, forcing them to borrow through high-cost methods like chit funds. By accepting payments through Paytm consistently, merchants can now get a digital footprint at zero cost, courtesy which they will get access to low-interest loans.”

Kiran also said, Chances of getting a loan increases as the merchants’ usage of Paytm increases since there is more data available for underwriting.” Paytm will not underwrite the loans however.

The ecommerce company will now be able to achieve its objective of getting into the unbanked and under-banked segments. It will also be able to include small retailers in organized credit.

Where else can you find ecommerce funding?

Other online marketplaces also assist sellers with working capital for their ecommerce businesses. Flipkart tries to help merchants obtain loans quickly and Snapdeal tries to provide financial assistance through introduced Capital Assist. Shopclues offers working capital loans and Amazon lends to Indian online sellers in addition to sellers in other countries. Craftsvilla started lending collateral free loans to sellers after partnering with Lendingkart. This way online sellers always have the funds they need to run their online retail smoothly!

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