Flipkart collaborates with lenders to enable quicker loans to merchants

Flipkart is working on issuing loans to its online sellers. The leading ecommerce company is exploring options of providing its merchants with working capital loans. The company has issued a sum of Rs. 50 crores to nearly 250 sellers in a pilot run five months back. Flipkart is collaborating with leading banks and financial institutions to work on this scheme.

The online marketplace has devised a credit rating system that will gauge the seller’s credibility, and approve the loan in a couple of days.

Merchant retaining the key task

In a bid to earn the trust and loyalty of their merchants, leading marketplaces are extending support facilities such as aiding them in getting loans. Acquiring capital through loans appears to be a herculean task.

Manish Maheshwari, who heads Flipkart’s seller community opines, “One of the biggest problems that our sellers face is that most traditional banks do not understand the nature of ecommerce business and so they refuse to give out loans without collaterals and high interest rates.”

The company has worked out an understanding with leading banks like State Bank, Axis Bank, Capital First, Bajaj Finserv among others for this.

Maheshwari rightly points out the obvious matter of trust, “We add a layer of authenticity and trust on both sides, hence enabling our merchants to get as much as Rs 3 crore of working capital loans to scale up their business.”

Repayments also have a fool-proof plan, “Whatever revenue these sellers get, a part of that directly goes to the bank, so the lender has a comfort that the seller will not default.”

Others follow suit

Other leading ecommerce marketplaces like Amazon, Snapdeal, and Paytm have also announced associations with banks, to aid their merchants in getting loans.

Flipkart has interestingly raised capital by pledging its assets. The company is said to have pledged assets worth nearly Rs. 1,400 crores with Deutsche Bank and Kotak Mahindra. The company spokesperson justified the move with, “Our business is growing at a rapid pace and we have sufficient capital to scale. The usage of any small banking loan is towards expenditure for supporting day-to-day cash operations to enable smooth functioning of the business.”

With the ecommerce industry on a meteoric growth path, capital requirements are going up at an equal pace. When companies assist their sellers with nudges in the right direction, it will surely translate to happier sellers and certain growth.