As an e-commerce seller, competing with big brands in a marketplace can often become difficult. While the big brands can afford all the risks, cashbacks, and deep-discounts the small brands are strapped for cash. They need the cash to deal with large volumes during festive season, to launch new products, build brand value and goodwill, pay off short term debt and bills, buy inventory when needed, and run day-to-day operations smoothly. In short they need Working Capital loan.
To procure a loan for meeting such working capital needs they have the option to approach a traditional lender aka banks. But the procedure is lengthy and approval rate is not so great. In words of Flipkart’s former CFO, Ankit Nagory, “Most of the lending organizations consider them (online sellers) as ‘un-bankable’ which results in a lot of SMEs/units closing down or borrowing from other sources at higher rates.”
So, to fix this problem many e-commerce marketplaces have tied up with banks and lending institutions to provide online sellers with financial aid.
Under its ‘Growth Capital Initiative’ that was launched in July 2015, the marketplace has tied up with leading banks and financial institutions to provide –
Initially set up by Snapdeal, but now managed by Freecharge Capital Assist is a merchant lending platform. It has tied up with 25 financial institutions to provide working capital to sellers on Snapdeals marketplace based on their performance and track record
Amazon Lending was launched in 2012 and gave out loans to sellers based in the United States and Japan. In June this year, the American marketplace announced their plans to launch its business loan program for small sellers in India. As of now they’ve tied up with six lenders in India.
Shopclue’s Capital Wings was launched in 2015 after Flipkart and Snapdeals initiatives to offer financial assistance to sellers. They’ve tied up with various NBFCs and Nationalised banks to offer working capital to sellers.
Similarly many organizations such as Paytm, Uber, eBay etc. have tied up with banks, lending institutions and NBFCs to provide financial aid to e-commerce and online sellers.
Flexiloans too have tied up with other e-commerce platforms besides Flipkart and Shopclues to disburse working capital loans to small and medium businesses. These include Grofers, Wydr, The Secret Label, and Uber.
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Other than marketplaces who tie up with banks and lenders, financial aid is also offered by several venture capitalists who invest in e-commerce companies that are growing, and help them increase the depth of their operations.