Quick Trade loans for MSMEs through ProFinTech’s Live trade model

Live Trade based Financing is a low-risk loan decision for Banks and NBFCs, and a stress-free loan process for MSMEs

Quick trade loans for MSMEs is possible! This may sound unbelievable to you, but we want you to read this conversation between Shri G Vijay Pratap Reddy, MD Prime Textiles and the founding team of ProFinTech. During this conversation, they also discussed how the ‘Live trade based financing model’ from ProFinTech can be a low-risk loan decision for Banks and Financiers, and a stress-free process for Micro and Small enterprises – who struggle with complex processes, heavy documentation and lower chance of getting a loan within 2-3 days.

(Pic : Shri Vijay Pratap Reddy, Prime Textiles MD, with ProFinTech Founding team, Ravi Tanniru, Sandeep Kunkunuru, Suryanarayana)

Shri G Vijay Pratap Reddy : Why would not the bank be at risk when I am NOT PROVIDING collateral?

Ravi : Good question, Vijay.  On our platform, we associate you with your business partners – for example, every hospital who you are supplying to, would be added as the business partner in this financing. Because of this, banks will get 360 degree view of your business. Usually what happens is – the bank either evaluates your business or the business of your business partners. But, on ProFinTech platform,  the bank can see the complete flow of the business. Due to the visibility of overall business flow, the bank can easily and accurately estimate the revenue status & well-being of your enterprise. Say, Prime Textiles manufactured and supplied to the specific customer, what is the customer’s strength? For example, you are supplying to Apollo Hospitals, a well-known large entity that has a negligible chance of defaulting on payments. But if you are supplying to a small hospital, its chance of defaulting on payments would be high. Therefore, instead of looking at a stand-alone business transaction, the bank could see the complete flow of your business transactions on our platform and can arrive at a far more informed loan decision, quickly. Due to this, the bank can have a good clarity on pricing the risk and can price the risk precisely. Usually, in banks, the pricing of risk is done  on the basis of your collateral security. Banks will feel comfortable and safe after seeing the security of collaterals. We, instead of collateral security, are creating full visibility for your business. Therefore, Banks need not demand for collateral security.

Ravi continues…Before launching our platform, we did a good level of market research. We met many banks and asked all of them one question– we will bring MSME customers to you and we will give you a choice – do you need collateral security or cash flows (cash flows visibility and control)? We asked banks as to which one they would prefer –

All banks prefer to see Cash-flows over Collateral security. Low-risk loan decisions by Banks = Quick trade loans for MSMEs

Then we asked all banks as to why they are not practicing it. Banks told us  ‘we were not able to  see cash flows due to traditional systems. That’s why, we are keeping all our comfort on collateral security. Though we have collateral security, we can never liquidate it. Because this requires a heavy level of legal processes in India as well as in other countries’. Since banks have been relying on security for years, they don’t want to break the traditional process of taking collateral security.  That’s why, we at ProFinTech are offering this process of seeing cash-flows and business before releasing the loan. Most banks have responded to our proposition, positively. Because of the newer processes like GST etc, we can create visibility across for banks.

You can watch this conversation on our YouTube channel

Business is the only trustworthy document for Banks  

Sandeep : We are creating a platform that does not need collateral, as banks will have only one trustworthy document – TRADE. How much trade happened in recent times, how much can happen in the future…earlier, all banks used the past data to give loan to you, while we use future possibilities, we depend on the future more.

Shri G Vijay Pratap Reddy : What kind of procedure do you prefer? Should my customer issue a purchase order or you consider my sale bill only? What kind of information do you need to track my trade?

Ravi :…we noticed that every industry has a specific pattern, you may or may not have a purchase order in your industry, some industries have invoice in different formats, E-invoice could be there, …so what we are doing is – traditionally banks have standardized these documents, say invoice should be like this; we, instead, focus on business, who are your customers, which products you supply, within what period you are supplying products to them, how long you have been dealing with them, when will they be able to pay for your products, etc, all business related aspects. These business aspects can SIGNAL the business health to finance…as I explained to you earlier, if your customer is a strong one, he is releasing pay on delivery, it is an important signal as per finance; if your customer is a weak one, and delays his payments to you or defaulting, then banks may not be keen to release loan…so we focus on the CONTEXT of every transaction, and for each context, there may or may not be some documents…if you don’t have a purchase order document, its ok as long as you received the order in some other format; how did you receive the signal for the order!

Purchase order document is not that important but the signal is. You would have received the order by an Email or some other way.

Shri G Vijay Pratap Reddy : …so you just need a proof for the order.

—The transcription of this conversation ends here—

If you want to know more about ProFinTech marketplace and how you could access timely and quick trade loans via our platform, do connect with us. One of our team members will talk to you or write back to you, immediately.