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How digital lending is driving growth and scale for India’s F&B sector

By Rana Vikram Anand , President, Indifi Technologies

Thursday, March 14, 2019, 17:34 Hrs  [IST]

To say that Indians are an entrepreneurial lot would be making an understatement. There is an underlying urge amongst the country’s citizens, even professionals with high-paying jobs at blue-chip companies, to launch their own enterprises. And amongst all the different businesses that they can opt for, there are few options more enticing to Indians than opening an F&B outlet.

A combination of a ‘gastronomic’ population and high gross margins makes this move an attractive proposition for many first-time entrepreneurs. The success stories and experiences of near and dear ones also inspire a lot of people into launching their own restaurants, as do excellent peer reviews of home-cooked food. And then there is the glamour quotient, the status of a food connoisseur that inevitably comes with being a foodpreneur!

The advent of food delivery platforms – and the near-ready demand that it brings – has also added significant impetus to the growth of entrepreneurship in the restaurant space. It is little wonder, then, that the National Restaurant Association of India (NRAI) estimates the annualised sales for the Indian restaurant industry to be around USD 783 billion.

Achieving growth and scale in an industry as hyper-competitive as F&B can be a challenging task – and one that needs capital.

Capital Woes: The challenges that small F&B businesses face

Like any business, running your own restaurant outlet has many short-term and long-term monetary needs to be met. These are usually drawn from the operational capital that businesses set aside. However, in the F&B industry, things aren’t quite as straightforward, particularly for the smaller businesses in the space. There are several factors which influence their operations, such as:

Marketing,Working capital, Refurbishment, Expansion

In the F&B sector, such a scenario more than just undesirable: it is practically untenable. The exponential growth in local competition also eats away at the profitability of individual businesses. Any loss of revenue can have a deep impact on the business of small restaurants and F&B outlets, and erode their overall competitiveness. Most restaurant owners end up having to dig even deeper into their growth capital, just to sustain the business.

Why SMBs are turning to digital lending platforms to meet their working capital requirements

As alarming as it might seem, the situation is not without a solution. Working capital loans can help you seamlessly manage your day-to-day expenses by providing access to some much-needed operational capital. However, opting for such loans from a traditional lending institution is hardly without its fair share of challenges.

The conventional loan application process is a time-consuming task which not only requires quite extensive documentation, but is also prone to delays. The underwriting methodologies usually adopted by traditional lenders are also not particularly well-suited for the needs of small F&B businesses. Additionally, any loan taken has to be backed either by a collateral or by demonstrating a record of profitability of at least three years, while the terms and conditions of repayment are also quite rigid and can impact the financial health of the business.

Digital lending platforms step into the picture to address these challenges through cutting-edge technology. Such lenders leverage proprietary algorithms to power their underwriting mechanisms and consider both traditional and non-traditional data points to assess the creditworthiness of the applicant. This not only enables them to create a more accurate borrower profile, but also allows them to tailor the loan offering to the specific needs of a business.

The usage of digital technology also allows for a significantly smoother loan application process. All it takes to apply is filling a simple application form; the eKYC is conducted with minimal documentation after the in-principle approval of the loan. Through automated workflows, such platforms also allow for speedier disbursement of the approved loan amount in as low as 24 hours. The digitisation of the lending process also solves for the challenge of geographic connectivity, allowing restaurateurs from anywhere in India to apply for and avail loans.

And that’s not all. Leading player in the digital lending space are leaving no stone unturned to ensure that your restaurant business has access to the capital it needs to grow and scale. Indifi, for instance, provides collateral-free loans between INR 50,000 and INR 50 lakh to MSMEs. It also offers loans of up to INR 50 lakh on outstanding invoices, which can be availed for an amount of up to 80% of the invoice value.

An important contributor to the national economy, the Indian foods & beverages segment, accounts for around 31% of the country’s overall consumption. Driving the growth of the segment is therefore critical to India’s ongoing resurgence as a global economic superpower. Innovative lending platforms such as Indifi are ensuring that players in the F&B space have seamless access to credit, giving them the fuel they need to achieve long-term growth and success.

The views expressed within this column are the opinion of the author, and may not necessarily be endorsed by the publication.

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