Source: Banking Frontiers
Vayana Network enables smallest of firms to have access to trade finance:
Pune-headquartered Vayana Network aims to democratize the access to trade finance so that the smallest of enterprises can have access to it. The company offers tailor-made, affordable, closed loop programs to meet the financing demands of businesses and their supply chain partners. With its operating units in the US and Singapore and in Mumbai, Gurugram and Bengaluru in India, it offers access to low cost financing with nil or minimal collateral.
“We help increase the working capital available to the entire supply chain ecosystem to grow business leading to a positive impact on the country’s GDP,” claims Vinod Parmar, global head – Sales and Marketing at Vayana Network. He explains that the company in fact enables financing to support both the sell as well as the buy side of the supply chain, ie on the dealer / customer as well as the supplier / vendor side.
“This is through various types of short-term trade financing via factoring, buyer financing, payable financing or reverse factoring with or without commercial cards. We enable both balance sheet or off-balance sheet financing; as well as pre-shipment or post shipment financing, etc on our network,” says Parmar.
He elaborates that Vayana Network operates pre-approved, closed-loop programs on which it enables automated financing through partner banks and financial institutions. “SMEs and corporates like the predictable, implicit financing through us where they are not required to take any additional steps for accessing finance. Also, given our partnership with some ofthe leading banks and NBFCs, the SMEs get financed at substantially lower interest rates.”
The average ticket size of loans on Vayana Network is upwards of $2500. The company works with the SME and the bank to structure the financing program. It also works with the SME to identify and market the program to the counterparties, map approved invoice formats and onboard them. The entire transaction from invoice acceptance and approval by the buyer, and financing of approved invoices by the financial institution, is seamless and completely digital.
What is unique, says Parmar, is the fact that the transaction workflows are fully automated and straight through. “None of the counterparties see any changes to their documents or processes and there is no need for investment in new technology. The SME simply needs to allocate sub-limits with the financial institution and introduce the counterparties who enter into a discount agreement to get onto the program. The sellers create electronic invoices through their own accounting systems and present them through our cloud-based network. The buyer provides acceptance that is non-repudiable. The seller gets a direct credit to his bank account and the buyer repays the financial institution on due date. Our proprietary parsing technology and workflow engine validate, route and reconcile trade documents and provide reports with invoice-level reconciliation. The entire trade transaction is captured digitally enabling electronic financial audit,” he explains.
RISKS TAKEN CARE OF
Since lending to the segments that Vayana Network covers involves certain degree of risk, how are mitigation measures evolved and implemented?
Parmar maintains that the financing programs are based on existing trade flows between the counterparties. As such, limits are pre-approved and used only to fund valid transactions in a particular program. “All invoices are approved by the buyer and are non-repudiable. There have been no instances of non-payment, default or delinquency on any of our financing programs till date,” says he.
Vayana Network covers some 15-16 different sectors from manufacturing, automotive, steel and textiles to FMCG, electricals, electronics, pharma, energy to eCommerce. It has sourced finance for the SMEs from PSU, private and foreign banks as well as leading NBFCs. IDG Ventures and Jungle Ventures offered Series A funding of $4 million to the company in 2017.
SIGHT ON 50+ COUNTRIES
Parmar says as the business gets maturity, the company would, with its strong experience in supply chain financing, converge the 2 capabilities and further enhance its offerings to all the stakeholders. “We intend to take the convenience and access to low-cost finance all the way down to the last tiers of suppliers and retailers in a supply chain. We anticipate tens of thousands of enterprises coming onboard to do away with their working capital worries. Over the next 3-5 years, we will clearly emerge as a truly global player in the B2B short-term trade financing space. We are already live in the US and will soon launch our services in South East Asia. Ultimately, we expect to have our customers from 50+ countries soon,” says he.