GetVantage, a fintech lending platform based in Mumbai, operates a platform to connect institutional lenders to small business borrowers, using APIs to carve out a portion of a user’s online revenues to ensure loans are paid back.
It has recently raised $36 million for its own business, with proceeds going to four things. First, the platform wants to build its capital base to attract wholesale lenders. Second, it will set up its own licensed lending balance sheet. Third it will add additional services to borrowers beyond just providing capital. Fourth, it plans to expand into Southeast Asia.
“Our raw material is access to dry powder,” said Bhavik Vasa, co-founder and CEO (pictured, right).
Small business lending
Vasa established the company in early 2020 with co-founder and CTO Amit Srivastava (pictured, left). GetVantage has since disbursed about $16 million to 350 small businesses in India across 18 sectors.
The platform can lend to small businesses that receive at least part of their revenues digitally, so it caters to companies in areas such as e-commerce, enterprise software-as-a-service, fintech, media, and healthtech.
Many Indian small businesses have digitalized at least part of their business – particularly in the wake of COVID-19. Ten years ago Vasa was running another startup, ItzCash, an early payments fintech with ambitions to be the Indian PayPal. It was too early: digital payments were rare and banks and other institutions would not provide working capital to ItzCash.
Since 2016, Indian commerce has gone digital, driven by success stories like ecommerce platform Flipkart and the government’s demonetization campaigns.
“If the previous decade was about consumers going online, the next decade is about small businesses and emerging going digital,” Vasa said. “This will drive the consumption story of India for the next ten years.”
But these small businesses still lack access to capital, because traditional banks and non-bank wholesale lenders can’t assess their credit, or make it economical to lend in small sums.
GetVantage is designed to provide wholesale lenders with both traditional and alternative data on small companies, plus the technology to streamline the process, both for borrowers and for lenders. The platform can support loans for different needs, from $500,000 tickets in working capital to seasonal loans and short-term bridge finance.
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Borrowers agree to integrate their systems via GetVantage’s APIs so the platform has a real-time view of payables and recievables. Such data is meant to enhance traditional data such as tax filings and the accounts.
But the platform also digitizes collections. GetVantage’s APIs connect to the payment gateways that a small business uses for its own revenues. Legally, borrowers give the platform a lien on their revenues or accounts receivables. A portion of revenues, up to 10 percent over a given period, gets sent to GetVantage automatically.
Payments are therefore paid based on the business’s performance. If revenues are up, GetVantage gets paid back sooner. It does not charge interest: instead, it charges borrowers a one-time fee.
Of course, some borrowers may not perform well, so it could take GetVantage longer to be paid back. But the relationships between borrower and lender are not direct; GetVantage manages exposures so lenders have exposure to certain parameters but not to a specific borrower.
It’s up to GetVantage to risk-manage the pace of repayment. Slower repayments hurt its internal rate of return. Vasa says investors can expect IRRs of 16 percent to 20 percent.
Data as collateral
However, in the 18 months since the platform has been live, only 0.8 percent of loans have defaulted, due to the borrower going under, Vasa says. So long as there is some revenue coming in via online payment gateways, GetVantage continues to be repaid.
Moreover its APIs provide it with good intelligence on how a business is faring, so it is able to manage its own balance sheet risks. “This is ‘new collateral’,” Vasa said. “It’s better than physical collateral.”
In extreme cases the fintech can arrange for a company to pay via a bank wire transfer – particularly when a business is still getting paid offline.
Businesses that pay back on time or early will enjoy better terms in the next round. And with the APIs already set up, second rounds can be disbursed in two or three days. For businesses, this represents fast cash that is cheaper than venture debt, and does not involve dilutive structures such as convertible bonds.
With the business building a track record, the founders have raised money to expand in multiple directions.
First it needs to grow its capital base to provide comfort to wholesale lending partners, be they banks or non-bank institutions. GetVantage hopes this will encourage these capital suppliers to open bigger credit lines to borrowers. Some of its funding may also be used as collateral to support expanded credit lines.
Second, Vasa says the company is looking to get a license to operate its own lending portfolio. Right now GetVantage is a pure platform. But it would like to be able to participate in some deals. Co-investing is another way to attract bigger capital suppliers – with GetVantage proving it has “skin in the game” – and to test out new lending segments or products.
“We are now building a regulated division of the business that would compete for deals,” Vasa said. “It would serve as a nursery for us to test new products, increase leverage, and reduce the cost of our borrowing.”
This would also lead to GetVantage providing small businesses with additional services. Many use short-term money to finance digital marketing pushes. GetVantage wants to bundle marketing tools, access to new payment gateways, and logistics tools along with its capital.
“This is like what a venture capital firm would do manually,” Vasa said.
Not only do new services generate revenues for GetVantage, but by helping borrowers make the most of their proceeds, the platform increases the chances that it gets repaid quickly – thus improving its IRR.
Finally, Vasa says the fintech is keen to expand into Southeast Asia. It is looking to set up in Singapore and other markets, although it needs to establish relationships with banks or other capital suppliers. “India is to prove the model, but the pipes were built for Asia,” he said.
The latest fund raising was led by Varanium Nexgen Fintech Fund, DMI Sparkle Fund, and returning investors Chiratae Ventures and Dream Incubator Japan. Other new investors include Sony Innovation Fund, InCred Capital, and Haldiram’s Family Office. This is the second capital raise by GetVantage, which has now amassed a total of $40 million.