A true story: Techfins (Amazin) beat Fintechs and Banks on SME lending

No – the title doesn’t have a typo. It actually started as a typo, but I chose to keep it that way. Google SEO will learn.

amazon-lending

They are really Amazing Amazon for the work they do in the SME lending space (not for just that). This is a real life story, where I was involved with an SME and witnessed first hand how hard they had to struggle before they got funded by Amazon.

The SME is Ausha foods, I know them personally as they are run by a friend. After a few months of ideation and planning in 2016, they launched in 2017. They sell organic food products in the UK, based out of London. Their supply comes from Kerala (mostly) in South India.

They made sure they went for all the top certifications and are very quality focused across their supply chain. Now, this is not to provide free marketing for them, but just to set the ground for the firm under discussion.

Ausha listed themselves on Amazon as seller, and for a year have seen some serious sales happen through the platform. They have sold 18 products on Amazon over the past 12 months. After hitting good revenues there, and with 4.8 stars on Amazon reviews, they decided to expand. They wanted to ship larger volumes of their products, and needed some financing options. And like any typical funding request, they wanted the monies in 2 weeks.

For an SME who haven’t done fund raising for expansion before, it can be quite daunting. They reached out to me, and I gave them a few tips, and suggested to go for debt rather than equity as their need was small, and my ecosystem of equity investors were largely tech focused.

I put them in touch with a Fintech I knew, who were good at connecting SMEs to lenders. They got two lenders who were interested in talking to them. But both lenders wanted them to fill in tonnes of paper work, and gave a minimum time line of 6 weeks to even get to the approval stage. The result could also be a reject.

The founding team didn’t give up, and reached out to Amazon for financing their expansion. Amazon already had all the details about their products (about 18 products listed on the platform), the sale they make and the reviews they have from customers. They knew that the business was scalable, and gave them the approval for the funding request on the same day of applying. Ausha got the money in their bank account in 2 working days.

I met the founding team at a party, and I was surprised when they told me what had happened, and felt compelled to write this story.

Its critical that SMEs felt well supported by the financial services ecosystem they operated in. The founders of Ausha were well educated engineers who knew the right doors to knock on – but most SMEs don’t.

Its critical that SMEs atleast have the information on who to reach out to when they need funding. Despite the efforts of the British Business Bank, I believe, there is still a lot of work to be done in the UK to bring awareness in this space. It is also critical for these lenders to tap into data available on social media and other platforms where a borrower trades.

In an open banking day and age, they can proactively reach out to these firms when they see anomalies in their transactions, and find out if they needed any funding help. How hard can that be?

Techfins like Amazon and Alibaba have an information advantage over the Banks, and even Fintechs. These giants have transaction level information on the SMEs trading on their platform and get to see demand for their products. And when an SME fully relies on, say Amazon, it is an Amazon family SME. By funding the SME, Amazon are really funding their own growth in the e-commerce space and in the Financial Services space.

Amazon rules. Go Ausha.


Arunkumar Krishnakumar is a VC investor focusing on Impact investments, a writer and a speaker.

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