Drip Capital Raises $113M to Boost Working Capital for SMBs, Aiding Global Growth
Byline: [Your Name], Senior Journalist
In a significant boost to small and medium-sized businesses (SMBs) worldwide, Drip Capital, a fintech firm specializing in providing working capital, has successfully raised $113 million in a new round of funding. This substantial injection of capital is poised to revolutionize the financial landscape for SMBs, particularly in India, where traditional banking has often fallen short in meeting their needs.
A Shift from Traditional Banking
For over two decades, Dhaval Agri, a leading sesame seed exporter owned by Jay Chandarana, relied on commercial banks to manage its day-to-day operations. Despite achieving a remarkable 13% share of the country’s total exports, Chandarana found that traditional banking, which is heavily reliant on collateral, was a barrier to growth. Banking in India is collateral-based, Chandarana explained. Your volumes may grow according to the business you’re doing, but the bank payments will only increase according to the value of your collateral.
Drip Capital’s Solution
In 2019, Dhaval Agri turned to Drip Capital for an alternative solution. The decision paid off handsomely, with Chandarana noting a 50% increase in volume over the past five years. Drip Capital’s innovative approach to working capital has been a game-changer for businesses like Dhaval Agri, which often face cash flow challenges due to the time it takes to receive payments from customers.
Funding Details
The latest funding round includes $23 million in equity from Japanese institutional investors GMO Payment Gateway and Sumitomo Mitsui Banking Corporation. Additionally, $90 million in debt financing was led by the World Bank’s International Finance Corporation (IFC) and East West Bank. This brings Drip Capital’s total funding to approximately $640 million, with notable investors such as Accel, Peak XV Partners, and Y Combinator.
Expanding Services
Drip Capital plans to use the funds to expand its working-capital loan offerings to SMBs and to further develop its company and product. The firm leverages AI to automate and digitize processes, and it aims to use AI for risk analysis as well. Currently serving between 9,000 and 10,000 businesses, Drip Capital is already profitable and targets a 40% year-on-year growth in the next two years.
Addressing Global Challenges
The challenges faced by Dhaval Agri are not unique; SMBs worldwide often struggle with short capital turnarounds. Drip Capital’s services are particularly crucial in India, where despite the presence of nearly 100 million SMBs, traditional financial institutions have failed to provide adequate support for growth.
Conclusion
Drip Capital’s latest funding round is a testament to the growing recognition of the importance of innovative financial solutions for SMBs. By addressing the capital hurdles these businesses face, Drip Capital is not only enabling growth but also contributing to the broader economic development of regions like India. As the company continues to expand its reach, it is setting the stage for a more robust and inclusive global economy.
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