LoanTap, a digital lending platform, has raised 74 crore rupee (US$8.6 million) in a pre-series C round to expand its supply chain financing services for small retailers.

The funding includes 54 crore rupee (US$6.3 million) in equity led by July Ventures and 20 crore rupee (US$2.3 million) in venture debt.

Existing investors like 3one4 Capital, Avaana Capital, Kae Capital, and the Swapurna Family Office also participated.

The company focuses on India’s distributor-led small retailer ecosystem, especially in the grocery and pharmacy sectors.

Through LT Credit, it has financed over 4.5 lakh invoices worth more than 1,000 crore rupee (US$116.5 million) for 50,000+ retailers in the last two years.

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🔗 Source: YourStory

🧠 Food for thought

1️⃣ India’s MSME financing represents a massive untapped opportunity

Despite contributing significantly to India’s economy, accounting for 8% of GDP, 45% of manufacturing output, and 40% of exports, MSMEs continue to face a severe financing gap 1.

This gap exists even though MSMEs represent over 90% of all firms globally and contribute approximately 70% of total employment and 50% of GDP 2.

The global MSME financing market was valued at $4.0 trillion in 2024 and is projected to reach $5.8 trillion by 2030, growing at a CAGR of 6.4%, highlighting substantial growth potential 3.

LoanTap’s focus on small retailers with average ticket sizes of Rs 8,000-15,000 directly addresses this underserved segment, positioning the company to capture a meaningful share of India’s digital lending market, which is projected to exceed INR 47.4 lakh crore by 2026 4.

This investment comes at a strategic time, as many traditional lenders have pulled back from MSME financing during the recent industry slowdown, creating an opportunity for specialized fintech players to gain market share.

2️⃣ Alternative data-driven credit assessment is transforming MSME lending

LoanTap’s proprietary BICRI credit assessment tool represents a broader industry shift toward using non-traditional data to evaluate previously “unbankable” small businesses 5.

The traditional lending model has struggled with MSMEs due to fragmented information and opaque credit assessment processes, forcing many small businesses to resort to self-financing 1.

From 2016 to 2018, formal sector credit issuances to MSMEs increased from approximately $224 billion to $346 billion, showing growing appetite for better assessment methods 5.

Alternative data sources, including e-commerce activity, psychometric information, and mobile usage, are increasingly being used to assess creditworthiness where traditional credit histories don’t exist 5.

This data-driven approach not only expands the addressable market for lenders but also potentially reduces default risks through more accurate assessments, addressing a key challenge that has historically kept traditional banks from serving this segment effectively.

3️⃣ Supply chain financing represents a strategic entry point into the broader MSME credit ecosystem

LoanTap’s focus on invoice financing for small retailers in essential verticals like grocery and pharmacy addresses a specific pain point within the MSME financing landscape.

By financing over 4.5 lakh invoices worth more than Rs 1,000 crore to more than 50,000 retailers, LoanTap has demonstrated significant scale in a focused niche within just 24 months.

The market share for MSME lending is shifting from public sector banks to private banks and non-banking financial companies, with a growing reliance on digital technologies 5.

Supply chain finance provides a lower-risk entry point for lenders as these loans are typically tied to specific invoices and transactions rather than general business loans, allowing for better risk management.

This approach aligns with global trends where digital banking and fintech platforms are facilitating easier access to loans, particularly in regions with limited traditional banking infrastructure 3.

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