Stellaris, Omidyar Network, others back SME cashflow management startup Credflow

The digital lending market is expected to grow from $110 billion in 2019 to $350 billion in 2023

Credit and Finance for MSMEs: Cashflow management solution provider to business-to-business small and medium enterprises (SMEs) Credflow has secured seed capital of Rs 15.2 crore. The investment was led by Stellaris Venture Partners, Omidyar Network India, and Flourish Ventures. Angel investor and former CEO of Ola Financial Services Nitin Gupta also participated in the round. The company will deploy capital towards the development of its platform, technology, and new products as it looks to enhance its user base and expand its team across technology, product, and marketing verticals. Stellaris had earlier backed startups including Vogo, Mamaearth, and Signzy while Omidyar had invested in enterprises such as Quikr, Dailyhunt, 1mg, Vedantu, Railyatri, Indifi, etc.

Launched in May 2020, Credflow focuses on helping SMEs manage their finances by providing a dashboard of pending amounts by customers, sending timely payment reminders, validating invoices, and negotiating discounts for early payment. The company claims of reducing the working capital cycles of SMEs by 25-30 per cent while over 5,000 businesses have used Credflow. “Indian SMEs, particularly traditional manufacturing and distribution businesses in the B2B supply chain are still using archaic, offline processes to manage their receivables and payables. Much of fintech innovation in the past decade has been focused either on large enterprises or retailers and micro-enterprises, while the mid-market B2B segment remains largely unaddressed,” said Kunal Aggarwal, Founder, Credflow.

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“For the past two decades, average debtor days for Indian SMEs have consistently exceeded 90 days. While the sector has begun digitising and formalising rapidly, cashflow management remains a chronic pain point,” said Treasa Mathew, Director, Omidyar Network India. According to the World Bank estimates, the MSME credit gap is at $380 billion (around Rs 28.34 lakh crore). The digital lending market is expected to grow from $110 billion in 2019 to $350 billion in 2023 with a share of 48 per cent in 2023 in overall lending, according to ResearchAndMarkets.

Meanwhile, year-on-year growth in bank credit to micro and small enterprises in January 2021 stood at 6.4 per cent to Rs 11.48 lakh crore from Rs 10.79 lakh crore in January 2020, according to the March 2021 bulletin of the Reserve Bank of India. However, the January YoY growth contracted marginally by 0.2 per cent from 6.6 per cent December YoY growth. MSEs had a 12.09 per cent share in the overall Rs 94.97 lakh crore gross bank credit deployed in January 2021, down from 12.11 per cent in December 2020.