Lendingkart is a leading digital lending platform in India that provides quick and easy loans to small and medium-sized enterprises (SMEs). Founded in 2014 by Harshvardhan Lunia and Mukul Sachan, Lendingkart aims to solve one of the biggest challenges faced by SMEs—access to credit. Traditional banks often require lengthy paperwork and collateral for loans, making it difficult for small businesses to secure funding. Lendingkart has addressed this gap by offering collateral-free loans through an entirely digital process, making finance more accessible to entrepreneurs.
With the growth of the Indian SME sector and increasing demand for digital lending, Lendingkart has become a vital player in India’s fintech ecosystem. But how does Lendingkart earn profit, and what makes its business model successful in the competitive Indian market? Let’s explore Lendingkart’s business model and understand how the company generates revenue.
Lendingkart Business Model
Lendingkart operates on a digital lending model where it provides short-term loans to small businesses and entrepreneurs. The platform leverages technology, data analytics, and machine learning to assess the creditworthiness of borrowers and disburse loans quickly, without the need for physical documentation or collateral. This tech-driven approach has made Lendingkart a popular choice for businesses seeking hassle-free financing.
Here are the key components of Lendingkart’s business model:
1. Target Audience: Small and Medium Enterprises (SMEs): Lendingkart primarily serves the SME sector, offering loans to businesses that need working capital to fund day-to-day operations or expand their activities. These SMEs often find it challenging to access credit from traditional banks due to stringent requirements such as collateral, credit history, and long processing times.
Lendingkart fills this gap by providing unsecured loans (loans without collateral) to SMEs, making it easier for small businesses to get the funds they need to grow.
2. Completely Digital Loan Application Process: One of the core strengths of Lendingkart’s business model is its digital application process. Borrowers can apply for loans online via the Lendingkart website or mobile app. The process is fast, easy, and requires minimal documentation, making it convenient for entrepreneurs who may not have the time or resources to go through traditional bank procedures.
Using advanced algorithms and data analytics, Lendingkart assesses the creditworthiness of borrowers based on non-traditional data sources, such as bank statements, GST filings, and social media activity. This allows Lendingkart to make loan decisions quickly, often within 24 to 72 hours.
3. Unsecured, Short-Term Loans: Lendingkart offers short-term business loans ranging from ₹50,000 to ₹2 crore, with tenures typically between 6 and 36 months. Since these loans are unsecured, borrowers are not required to pledge any assets as collateral. The interest rates are competitive, but slightly higher than traditional bank loans due to the higher risk involved in unsecured lending.
The company focuses on providing working capital loans, which help businesses manage cash flow, pay suppliers, and meet other operational expenses. This makes Lendingkart an attractive option for SMEs that need quick funding without the complexities of traditional banking.
4. Data-Driven Credit Evaluation: Unlike traditional banks that rely heavily on credit scores and financial statements, Lendingkart uses a data-driven approach to evaluate the creditworthiness of borrowers. The platform analyzes multiple data points, such as business performance, transaction history, customer reviews, and digital footprint, to assess the risk profile of each applicant.
By utilizing machine learning and AI-powered algorithms, Lendingkart can process vast amounts of data and make real-time credit decisions, allowing the company to serve a wide range of businesses, including those that may not have a long credit history.
5. Technology and Automation: Lendingkart’s lending process is highly automated, from application to loan disbursement. The platform uses cloud-based technology and automated workflows to streamline the loan application, approval, and disbursal process. This reduces human intervention, speeds up loan processing, and minimizes the risk of errors or delays.
The company’s use of technology also allows it to scale quickly, enabling Lendingkart to serve thousands of SMEs across India, even in Tier 2 and Tier 3 cities.
6. Focus on Financial Inclusion: Lendingkart’s mission is to promote financial inclusion by providing access to credit for SMEs in both urban and rural areas. The company focuses on serving businesses that are underserved by traditional banks, particularly in smaller towns and cities where banking infrastructure may be limited.
By offering loans through a digital platform, Lendingkart is able to reach a wider audience, including businesses that may not have access to formal financial services.
How Does Lendingkart Earn Profit?
Lendingkart generates revenue through several channels, primarily focused on interest income, processing fees, and value-added services. Let’s take a closer look at how Lendingkart earns profit:
1. Interest on Loans: The primary source of revenue for Lendingkart comes from the interest charged on loans. The company offers loans at interest rates ranging from 1.5% to 2.5% per month, depending on the borrower’s credit profile and loan tenure. Since Lendingkart provides unsecured loans, the interest rates are higher compared to secured loans offered by traditional banks.
The interest income is the largest revenue stream for Lendingkart, as the company earns a significant margin on the loans it disburses. As the number of loans increases, so does the interest income, making this a scalable revenue model.
2. Processing Fees: In addition to interest, Lendingkart charges a processing fee for each loan disbursed. This fee typically ranges from 2% to 3% of the loan amount and is charged upfront. The processing fee covers administrative costs, credit evaluation, and other operational expenses associated with loan disbursement.
The processing fee adds to Lendingkart’s revenue while helping cover the costs of maintaining its digital lending platform and technology infrastructure.
3. Partnerships with Banks and NBFCs: Lendingkart partners with banks and non-banking financial companies (NBFCs) to fund its loans. The company raises capital from these financial institutions and lends it to SMEs at a higher interest rate, earning a profit on the interest rate spread. By partnering with multiple financial institutions, Lendingkart can access a large pool of capital, allowing it to disburse loans to a wider range of businesses.
The interest rate spread between the funds Lendingkart borrows and the interest it charges borrowers is a key driver of profitability for the company.
4. Securitization of Loan Portfolio: Another revenue stream for Lendingkart is the securitization of its loan portfolio. Securitization allows Lendingkart to package its loans into financial products and sell them to institutional investors, such as banks, mutual funds, or insurance companies. By doing this, Lendingkart frees up capital to lend to more businesses while earning a fee or profit from the sale of the loan portfolio.
Securitization helps Lendingkart manage its liquidity and expand its lending capacity without needing to rely solely on its balance sheet for funding.
5. Value-Added Services: Lendingkart also offers value-added services to its borrowers, such as financial advisory, credit score tracking, and business analytics tools. These services help SMEs better manage their finances and improve their credit profiles, making them more eligible for future loans. Lendingkart charges fees for these services, adding another revenue stream to its business model.
By offering these additional services, Lendingkart not only generates more revenue but also builds long-term relationships with its customers.
Challenges and Opportunities for Lendingkart
While Lendingkart has achieved significant success in the digital lending space, it faces several challenges and opportunities:
1. Rising Competition in the Digital Lending Space: The Indian fintech sector is highly competitive, with several digital lending platforms such as Capital Float, NeoGrowth, and Indifi also targeting the SME market. To maintain its competitive edge, Lendingkart needs to continuously innovate, enhance its credit assessment tools, and offer better terms to borrowers.
2. Growing Demand for SME Credit: India’s SME sector is growing rapidly, and there is a rising demand for quick and flexible financing options. As traditional banks struggle to meet the needs of SMEs, Lendingkart has the opportunity to expand its reach and capture a larger share of the market. The company can also explore new product offerings, such as invoice financing and supply chain financing, to diversify its portfolio.
3. Risk Management and Loan Defaults: Since Lendingkart provides unsecured loans, it faces a higher risk of defaults compared to traditional lenders. To mitigate this risk, the company must continuously improve its risk management practices and credit evaluation algorithms to ensure that loans are disbursed to creditworthy borrowers.
Conclusion
Lendingkart’s business model revolves around providing digital, unsecured loans to SMEs through an entirely online process. The company earns profit primarily from interest income, processing fees, and value-added services. By leveraging technology and data analytics, Lendingkart has created a scalable and efficient lending platform that addresses the funding needs of small businesses across India. As the demand for digital lending continues to grow, Lendingkart is well-positioned to expand its market presence and profitability in the Indian fintech landscape