Sellers on e-commerce platforms – many new and a few current ones – are more likely to face a funds crunch in stocking up for the upcoming festive season because of a squeeze in working capital loans to small companies.
These small and medium-sized retailers are discovering it powerful to interrupt out of the vicious cycle of sputtering offline gross sales – which has locked up working capital – and lending faucets going dry from e-commerce platforms as a result of they lack historic efficiency information to facilitate loans.
Moreover, banks and non-banks have tightened eligibility norms for loans to third-party e-commerce sellers, inducing a demand-supply constraint in working capital loans to online sellers, in accordance with a number of sellers, executives and trade watchers.
“I’ve a mortgage of about Rs 50 lakh, and banks (and NBFCs) are unwilling to lend more cash to me,” a vendor of trend equipment on ecommerce platforms advised ET.
“I’m attempting to renegotiate the phrases of my current mortgage with them, and my working capital is caught at many various locations,” the vendor added.
ET spoke to 4 different sellers — two of whom are within the enterprise of promoting attire and trend equipment and had been in no place to pile on extra debt.
The opposite two — one sells laptop peripherals whereas the opposite sells cellphones — mentioned they had been planning to take loans to acquire stock for the subsequent two months.
Vogue class beneath strain
A big proportion of sellers on e-commerce platforms are within the trend and attire house, in accordance with Satish Meena, an analyst with Forrester Analysis.
This section has not recovered in addition to different classes, which may very well be one motive why fewer sellers are taking over debt forward of the festive season.
“Even when we inform lenders that a few of these guys are doing properly on our platform, they could not get loans from banks as they could already be harassed or lagging in funds on one other mortgage,” a high e-commerce government mentioned, including that sellers had been being cautious about making commitments this time round.
Lenders, which embrace conventional banks and non-banking finance corporations in addition to new-age fintech companies, normally work with marketplaces to supply info — together with how lengthy a vendor has been on the platform, the gross sales it has clocked, degree of buyer returns, progress within the enterprise and buyer scores.
Curiosity on working capital loans within the sector vary between 16% and 18% per yr and are typically greater in the course of the festive interval because of elevated demand for capital.
“It’s not simply the lack of lenders to offer loans, however new sellers are not sure how a lot of their working capital to lock up in stock for gross sales. Some new sellers on this house have already got a little bit of working capital crunch, but when they wish to tackle extra loans, there’s inadequate information on them for lenders,” one other e-commerce government mentioned.
Homegrown e-tailer Flipkart mentioned that whereas lenders had taken a cautious method to approving loans within the preliminary days of the Covid-19 pandemic, it has seen a gentle progress in mortgage approvals to sellers on its platform over the previous few months.
“We’re additional innovating with our lending companions to supply aggressive rates of interest, secured lending choices in opposition to collateral or gold that would present MSMEs the much-needed capital,” mentioned Ranjith Boyanapalli, Head – Fintech and Funds Group at Flipkart.
Snapdeal, too, mentioned that it had seen no massive variance within the variety of sellers making use of for working capital loans from lenders this yr.
Amazon didn’t reply to ET’s queries until press time Wednesday.
Anurag Jain, founder and government director of fintech participant KredX, mentioned that there’s normally an uptick of 20-50% in annualised limits for sellers in the course of the festive season.
“We’re anticipating good gross sales on e-commerce this festive season, be it electronics, white items, or every other necessities, and we’re hoping that these sellers can profit from that,” he added.