Giving Small A Big Boost For small merchants, who sell online, Indian e-commerce players are providing them with a platform to access capital.

It's a tough world for small businesses out there when they have to achieve their big goals. They can push themselves beyond their limits while trying to achieve their targets but what about managing cash flows? For small merchants, who sell online, Indian e-commerce players are providing them with a platform to access capital.

India's growing Internet economy presents immense opportunities for the growth of small and medium businesses; however, they face many challenges including limited access to credit in their entrepreneurial journey. Lack of funding has often emerged as one of the key hurdles for small businesses. In fact, most of the lending organizations consider them "un-bankable," which makes SMEs to close down or borrow from other sources at high rates.

To make financing accessible and efficient, e-commerce players are building financing solutions for the small businesses operating through their platforms.

Whether it is Snapdeal, Flipkart, Shopclues or Jabong-- all are geared up to build their businesses via helping small merchants. Snapdeal identified this challenge early on as one of the impediments to their growth and decided to address this through the Capital Assist platform, which leverages technology and a sound ecosystem of banking partners and Nonbanking Financial Companies (NBFCs).

The Capital Assist platform was launched in 2014 and has been working on creating an enabling ecosystem for small businesses. Capital Assist was the first online platform in India to enable SMEs to get instant loan approval from financers.

Sharing the number of SMEs benefitting through this programme, Vijay Ajmera, Senior Vice President, Snapdeal, says, "Under the programme, over 300 SMEs have availed loans amounting to more than Rs 100 crore. This programme has particularly benefited first generation entrepreneurs. The programme was launched in August last year and has been running successfully for a year now."

Currently, Snapdeal works with a network of 2,00,000 sellers from across India and plans to grow this base to 250,000 within this year. Capital Assist facility is available to all Snapdeal sellers. It works with each banking partner to develop criteria through which qualified SMEs are identified. The criteria include seller's sales history, vintage and ratings on Snapdeal.

"On an average, sellers who have availed financial assistance through Capital Assist platform have observed 100 per cent growth within a quarter.

More sellers are willing to leverage through Capital Assist to grow their businesses," says Ajmera. Similarly, the Growth Capital initiative from Flipkart offers financial assistance to sellers across the country.

In the words of Ankit Nagori, Chief Business Officer, Flipkart, "So far, around 100 sellers have availed services through Growth Capital, and loans worth Rs 4 crore have been disbursed till date. Although sellers across categories can avail the facility, a clean history and good customer ratings are always a bonus."

The interest rates start at as low as 12 per cent per annum with a fast processing of loans within two-five days. In June this year, Shopclues also entered the domain of vendor financing with its Capital Wings programme.

According to Vishal Sharma, VPOperations, Shopclues, "We now have more than 2,20,000 sellers. These sellers or merchants invariably want to increase their businesses. So they keep coming back to us on how we can support them in terms of meeting their cash flow needs. That's where we felt we should align ourselves with various NBFCs/banks and financial institutions, which can help these sellers or merchants to raise money."

These loans come with flexible repayment terms not a curated monthly installment time. So the repayment period ranges from a month to three months to six months. Shopclues makes tailor-made programmes with the help of financial institutions meeting the requirement of SMEs based on the businesses they are doing.

Besides tying up with FinCap and Capital Float, Shopclues is tying up with some banks for large requirements. On short listing vendors on the amount and their eligibility, Sharma says, "We have worked out a criteria based on the past trends of a merchant's sale and vintage. So this acts as a calculator that shows the amount for which a merchant is eligible for." As per Sharma, sellers in home and furnishings, mobile accessories, mobile and tablets have come up in large numbers to take these loans.

"The initial response was from metro but small Tier 2 and 3 merchants were involved in the last 200 loans," says Sharma. Shopclues processes merchants' payments faster, helping them again on the cash flow side. The easing out of payments is based on merchants' customer feedback and ratings.

(This article first appeared in the Indian edition of Entrepreneur magazine (October, 2015 Issue).