Small businesses struggle with late payments. This startup shows a way out

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Most small and medium businesses in India face late payment of invoices, which often leads to working capital hassles. Now a startup has come to their rescue with invoice discounting.

KredX helps businesses get short-term working capital by discounting their unpaid invoices. Financiers make a certain percentage of the invoice value available as a working capital advance, for a service fee. This works out better for businesses than loans requiring collateral and long-term commitments. For financiers, it offers risk-mitigated short-term investment opportunities.

KredX, which operates as a marketplace connecting businesses and financiers, was founded last year by IIT & Stanford alumni Manish Kumar, Anurag Jain, and Puneet Agarwal. Today, the Bangalore-based company announced a US$6.25 million series A funding round led by Sequoia India. Existing investor Prime Venture Partners also participated in this round.

“Access to working capital for sustained growth and production is critical to businesses and late payments are often a huge bottleneck. Last year, almost 97 percent of the Indian SMEs reported having experienced late payment of their invoices, while 56 percent dealt with working capital issues due to late payment or unavailability of credit,” says Manish Kumar, CEO and co-founder of KredX.

The company neither assumes credit risk, nor has a balance sheet and that makes it akin to a pure marketplace.

This is where KredX comes in. KredX helps micro, small, and medium enterprises (MSMEs) maintain their cash flow by unlocking the cash tied up in invoices that otherwise takes an average of 30 to 90 days to be cleared. On the other hand, it offers financiers access to risk mitigated, high yield, and short-term investment opportunities that are not tied to the uncertainties of the stock market.

The team has developed a proprietary credit risk assessment model for its borrowers along with back-end technology that ensures secure, hassle-free and fast platform for transactions. For financiers, KredX provides complete trade services starting from sourcing curated invoices to conducting due diligence using its proprietary credit underwriting algorithms.

KredX allows “under-served SMEs access to credit from private and institutional lenders, typically 60-90 days in duration. The company neither assumes credit risk, nor has a balance sheet and that makes it akin to a pure marketplace,” explains Shailendra Singh, managing director of Sequoia Capital India Advisors.