With the country in the midst of an economic slowdown, a term that often gets bandied about is liquidity and the constant refrain is “Where’s the money?” “Liquidity crisis in my view is a bit overhyped now. It’s a cycle, so there’s nothing new. Financial markets have always been jolted periodically but have been resilient enough to bounce back. Is liquidity that easily available? Can an NBFC go out and float a commercial paper? No. Can he go to banks and recycle the loans? Maybe not. But that doesn’t mean it’s a permanent issue. As far as we are concerned, with the kind of model we have, there is no dearth of liquidity. In facts, banks move away from traditional lending and like to move to structures like this because it’s relatively safer,” says Nirav Choksi, Co-founder and CEO of CredAble.
CredAble is a fintech company that aims to redefine supply chain finance and is exponentially increasing the capital available within the enterprise supply chain. The core idea of CredAble is to bridge the gap between the vendors and aid in improving the cash conversion cycle as due to the changing dynamics in the industry, one of the core issues faced by businesses is the untimely cash flow gaps.
Being functional in 6 cities and doing close to 20,000 transactions worth over Rs. 300 crore a month, CredAble is in the process of reaching $2 billion of deal flow across their platforms in the next 12 months.
The company was set up with the aim of solving twin issues that are at the heart of the supply chain industry.
“For a borrower to be creditworthy, if you can take that out of the equation, theoretically you can lend him any amount of money. So, we said let’s try and build a business around this. The idea was to transfer the risk to his anchor, to the large corporate who he is servicing. We partner with large corporates and we enable large-scale liquidity programs for their vendors, and for their dealers and distributors and do it in a way where the need for them to be creditworthy is taken out because now the risk sits on the large corporate. And we do this using a financial ecosystem of banks, capital markets, mutual funds, foreign investors,” says Nirav.
The second problem was that while vendors were happy getting access to some sort of working capital post-invoice, the real challenge was pre-invoice. “We identified what we called billable events. So, every time, a proof of delivery (PoD) gets generated for cargo that goes from point A to point B, basis the PoD, you know that he is definitely going to be paid for that trip. So why can’t we finance partially that trip in real time?” he says. The companies processes close to 20,000 such transactions on a weekly basis in real time in what is called just-in-time financing.
By combining pre- and post-invoice requirements, the company takes care of the entire working capital needs for vendors of large corporates. “We are able to offer a 360-degree working capital solution to any large corporate and we are able to do it at scale,” says Nirav.
CredAble works with close to a dozen corporates, all multinational AAA-rated corporates pan-India and with an entire vendor ecosystem.
The biggest challenge in plugging the cash flow gaps in the supply chain is the lengthy sales cycle. “To me, my customer is the large corporate. For a large corporate, to move, to take a decision, do the technology integration, get all the legal vetting done, all the accounting done, typically is a long sales cycle. So, the challenge is can we have enough of a funnel at any given point in time of conversations we are having with large corporates such that conversions happen continuously,” says Nirav.
And so far, Nirav claims there have been no defaults because the anchors the company works with are so large and it is working with banks on the other side. “The banks are taking the risk essentially. So, if you are working with a AAA-rated multinational company which is global in nature, chances of that Indian subsidiary defaulting is very low. So that’s the idea, how you can shift the creditworthiness from the borrower to the large corporate,” he concludes.