Debt platforms boost lending to consumer and e-commerce businesses as holiday sales expected to surge

Alternative debt platforms like Velocity, GetVantage, and Klub are all expecting to significantly increase their lending pool to e-commerce businesses this year, allowing them to expand their seller base and deliver faster.

Velocity, a cash flow finance firm backed by Peter Thiel’s Valar Ventures, has launched ₹The Rs 400 crore fund is to support direct-to-consumer brands, which is an increase of over 60% compared to the levels of the previous festive season, the company said. Mint.

Mumbai-based financial platform GetVantage expects to pay out up to ₹E-commerce companies have earned Rs 250 crore this year, nearly 30% more than last year, founder Bhavik Vasa said.

“While e-commerce and fast-paced marketplaces offer significant support to consumer brands, many are focused on increasing direct sales through websites, making working capital management crucial,” Vasa said. Mint. GetVantage has partnerships with a range of companies, from Flipkart and Myntra to modern food brands like Open Secret and Snackible.

E-commerce companies are expecting a 35 percent increase in sales this holiday season, according to a report from recruitment services platform TeamLease. The growth is being helped by the growth of express commerce and an increase in consumer spending.

The holiday season usually begins on August 15, Independence Day, and lasts until the New Year.

There is no time to waste

According to Shankar Prasad, founder of Unilever Ventures-backed cosmetics company Plum, on a typical peak sales day at a consumer products company, there are many rapidly changing factors — from order capture to packaging and shipping — and time is of the essence.

“We have to put in place a number of things – from making sure the website doesn’t have any issues, to getting supplies to meet demand, to planning the sales funnel. Working capital is essential to keep the engines running,” Prasad said. Mint.

Seasonal peaks during festive periods like Diwali and Navratri typically require e-commerce businesses to increase their marketing budgets, stock up on inventory and make quick deliveries, which can be difficult without sufficient working capital.

Moreover, according to Prasad, the working capital requirement of retail companies is increasing to 1.5 times of peak day revenue, making maintaining liquidity imperative.

Alternative debt capital has emerged as a quick way to obtain financing without diluting equity, making it a desirable financing instrument for many consumer businesses.

Access to credit

According to Plum’s Prasad, small businesses, especially start-ups, often find it difficult to get loans from traditional banks due to the conservative approach of lenders.

“It takes a long time for a small brand to build a relationship with a bank because they are very focused on the balance sheet and profit and loss statement,” Prasad noted.

Revenue-based financing platforms, which provide loans against a portion of the borrower’s income, offer an easier way to obtain credit.

While most consumer businesses work with debt finance institutions throughout the year for medium- to long-term working capital loans, the holiday season calls for additional short-term financing, typically for a period of four to six months.

Eklavya Gupta, founder of the insurance platform Recur Club, which allocated the amount to ₹150 crore for e-commerce firms this year, said debt products were increasingly popular among digital-first companies, with inventory invoicing and bill discounting seeing the highest demand.

Offline reinforcement

The increase in working capital will also benefit companies looking to expand their offline presence, according to Anurakt Jain, founder of Klub, a revenue-based financing firm that has doubled its funding allocation for e-commerce. ₹200 crore this year.

While online-focused brands are allocating capital to increase marketing budgets and improve distribution channels, offline brands are using working capital to expand stores and manage inventory.

“This year has been a watershed realization that omnichannel is the way to go,” Jain added.