NeoGrowth focuses on micro, small, and medium business loans. NeoGrowth has raised ₹85 crore through a combination of equity and debt. The investment was from LeapFrog Investments and FMO. This capital round follows the company’s previous financial success, including a leading role in a capital raise in December 2022, where the company raised a substantial equity round of ₹300 crore (approximately $36 million) led by FMO in addition to the existing pool of backers.

Capital deployment and business model

The company intends to use the fund to substantially expand its operational lending operations. The funds generated from this round will be used to expand the overall loan book of the organization to nearly ₹3,000 crore before the next round of equity raising is needed, NeoGrowth said in an official statement. The strategy is designed to broaden the lender’s footprint in the market and address the increasing need for flexible commercial credit among small business enterprises in India.

NeoGrowth was founded in 2011 by co-founders Dhruv Khaitan and Piyush Khaitan. NeoGrowth focuses on providing loans for small businesses to meet the operational and financial needs of local businesses. The financial tech company offers a wide range of product offerings for credit, including both collateral-free and collateral credit offerings directly targeting micro, small, and medium business entities.

The company helps small business operations by offering repayment facilities to be flexible with the merchants; merchants are given the option to collect money daily, weekly, fortnightly, or monthly. According to the company’s accountancy, NeoGrowth works in over 25 cities of India and provides services to more than 80 businesses and over 1 lakh different commercial enterprises.

Mission and growth of NeoGrowth

NeoGrowth has pioneered a paradigm shift within MSME lending through the adoption of a technology-led approach to evaluating creditworthiness within India. The company also dispenses with the traditional reliance on collateral through the utilization of digital payment trails, transactional point-of-sale data, GST records, cash flow information, and other tools to evaluate creditworthiness in real time. 

NeoGrowth intends to make credit lending data-driven, flexible, and inclusive for the MSMEs in India that have not been reached by the traditional credit lending process. This involves a digital payments infrastructure and POS data and cash-flow analysis that eliminate the use of collateral as a prerequisite for first-time borrowers and small retailers and neighborhood merchants. NeoGrowth is striving to simplify the lending process for quick onboarding and flexible repayments, including daily and weekly repayments based on merchant cash flows.

Conclusion

The fundraising for ₹85 crore by NeoGrowth from FMO and LeapFrog Investments demonstrates the continuous support of investors towards data-based solutions for MSME lending. Through the use of point-of-sale information, digital transaction histories, and adaptable repayment models, NeoGrowth is continuing to solve some of the basic credit availability problems experienced by small businesses. In light of the increasing amount of funds flowing into the overall digital lending ecosystem, platforms that leverage the power of analytics and specialized credit offerings will be better placed to grow their portfolios.