Client Overview

When we partnered with this rapidly growing FinTech and digital lending platform, the company was experiencing substantial demand for its lending products, but its financial systems were struggling to scale with its growth:

  • Annual revenue of ₹35 Crores
  • Offering personal loans, microloans, and payday loans through a digital platform
  • Team of 120+ employees across tech, risk management, collections, and customer service
  • Strong customer base, with a growing focus on credit scoring algorithms and automated loan disbursements

When we partnered with this rapidly growing FinTech and digital lending platform, the company was experiencing substantial demand for its lending products, but its financial systems were struggling to scale with its growth:

  • Annual revenue of ₹35 Crores
  • Using a digital platform to provide payday loans, microloans, and personal loans
  • Team of more than 120 workers in customer service, technology, risk management, and collections
  • Robust clientele, with an increasing emphasis on automated loan disbursements and credit score algorithms

Despite impressive customer acquisition and loan origination, financial control and risk management processes were underdeveloped, making it difficult to sustain profitable growth.

The Challenge

Risk management and cash flow predictability became major issues as the platform grew. Loan disbursements were increasing, but ineffective follow-up procedures caused collections to lag, which raised the amount of non-performing assets (NPAs). A liquidity bottleneck resulted from the company’s heavy reliance on short-term borrowings to finance loans due to mismatched cash flow cycles.

It was unclear whether client acquisition techniques were genuinely long-term sustainable because there was no methodical way to monitor the cost of acquisition (CAC) versus loan payback patterns. Because credit scoring algorithms were not properly optimized for the increasing diversity of client profiles, the company also had trouble assessing credit risk, which resulted in a rise in defaults.

GST reconciliation problems, particularly with cross-border transactions and intricate fee structures for borrowers, further complicated the situation. The business also had trouble streamlining its loan-book management, and regulatory compliance—particularly with regard to lending rates and fee disclosures—was an issue.

The Solution

At Sharda Associates, we introduced a series of financial and operational improvements:

  • Real-time cash flow forecasting was used to lessen reliance on short-term borrowing and better match loan disbursements with collections.
  • To boost receivables and lower NPAs, automated collections and payment reminders were implemented.
  • Created dashboards that compare loan repayment trends with customer acquisition costs (CAC), enabling management to assess sustainability and profitability across client categories.
  • Enhanced credit risk models, increasing loan approvals and credit scoring systems’ accuracy
  • Improved regulatory compliance monitoring and GST reconciliation technologies to expedite tax filings, lending rates, and fee disclosures

In order to help the management team obtain money through loan instruments and equity financing while preserving sound margins and liquidity, we also worked closely with them on their funding plan.

The Impact

  • NPAs reduced by 18% through improved collections and payment tracking
  • Cash flow improved by 30% with better loan-book management and real-time forecasting
  • Credit risk assessment accuracy increased by 25% with enhanced algorithms
  • Compliance costs reduced by 20% with streamlined GST reconciliation and regulatory adherence
  • Customer acquisition costs (CAC) became more efficient, improving LTV/CAC ratio by 15%

Conclusion

We assisted the digital lending platform in increasing profitability and scaling sustainably by putting in place more robust financial controls, efficient collections, and improved risk management. The business was able to lower risk and boldly explore expansion prospects with more transparent financial processes in place.

Sharda Associates’ virtual CFO services can help you increase profitability and optimize operations if your FinTech or digital lending platform is having problems with cash flow, credit risk, or compliance.