The digitalization has brought up many startup but making it to the zenith is not an easy task. One of the main drawbacks is getting finance to run the startup. The banks need collaterals and other documents and requirements to grant loans which is sometimes very hard to get. The banks are very stringent in giving especially to asset light and fast growing internet business but these days peer to peer lending sites have come up to cater to this problem. One such startup is LoanZen which is based in Bangalore. This startup has seeded funds to Tracxn Labs and Tracxn Syndicate. LoanZen funds startups that are just three months old. These loans come from financial institutions that are non-banking and private companies. Both the lender and the borrower enter into tripartite agreement with LoanZen. Madhu Sudhan who is the CEO and Co-Founder of LoanZen is MBA from IIM Bangalore and worked as financial professional at KPMG, Capital 18 and Lizard before starting LoanZen said that small startups are rejected by banks and desperately need credit to grow and their mission is to enable these small businesses to succeed. LoanZen uses technological aid to quickly access the credibility based on credit history, cash flows, accounts and assign credit scores and this enables the lenders to get suitable borrowers in no time. While LoanZen takes listing fee of one percent, the lenders get point eight to ten percent per month depending on eligibility and credit score of borrowers.
The World Bank study tells that the size of unsecured short term loans amounts to 120 billion US dollars which is spread over twenty six million small businesses in India. For banks, processing large loans is more economical that processing short loans. This has become the successful idea for LoanZen.