Chirag Shah talks to Business Leader about his FinTech company
For its latest online interview, Business Leader spoke to Chirag Shah Q&A, CEO and Founder at Nucleus Commercial Finance.
You were one of the early alternative lenders for SMEs. How has the market changed as more fintechs have come into play?
When we launched Nucleus Commercial Finance in 2011, fintech was barely even a word! SMEs’ only real option for financing was to go to a bank that often wouldn’t offer loans that fitted their needs or would reject applications from seemingly creditworthy businesses. Banks ruled, and businesses had to follow.
The main change since we launched is the sheer number of fintechs that have entered the market to provide financing to SMEs, which has brought a tidal wave of innovation and a healthy dose of competition. This not only means better lending terms for businesses, but it has forced fintechs to create new products for the ever-changing needs of SMEs.
A decade ago, getting a business loan used to be a slow process that often centred around going to a bank branch or speaking to a bank manager on the phone. Fintechs have transformed this process for the better.
Open Banking is disrupting the lending space. Can you talk about the technology you’ve embedded into your platform?
Often the biggest pain point for a business is not just being unable to access financing, but the sheer time it takes to get it. A large portion of business loan applications are never completed simply due to the hassle it takes for business leaders who are often already in stressed situations and have limited time on their hands.
Open Banking has real potential to cut the friction for getting a business loan. Rather than having to submit reams of bank statements, account details and verification documents, with our APIs SMEs can securely link their business bank account with our online platform so we can quickly and simply get an appraisal of their financials.
The pandemic saw lots of businesses struggle. How have you supported businesses through this time?
The pandemic has hit the SME community particularly hard. Not only did businesses have to contend with a virtually overnight drop in revenues, but some were already operating on thin margins. There was a desperate need to provide businesses with financing so they could stay afloat to try and ride out this period of immense uncertainty.
When the pandemic struck, we quickly processed an application to become an accredited Coronavirus Business Interruption Loan Scheme (CBILS) lender. Since being approved, we have processed over 12,000 applications to UK SMEs that needed vital funding and support.
When CBILS ended, we launched our very own Business Growth Loans (BGL) as we recognised there would be a funding gap in the market; we were determined not to leave businesses in the lurch.
In total, during 2020 we lent approximately £438m to UK businesses, which we are incredibly proud of as a business.
What challenges has your business faced during the pandemic? Have there been any opportunities from working remotely?
The main challenge was dealing with the drastic rise in demand for financing from SMEs. Enquiries from SMEs and brokers increased fifteen-fold when the pandemic hit which put immense pressure on our customer services team.
Despite usually splitting my time between India and the UK, I’ve been stuck in India since the world went into lockdown. However, the way we were set up meant I was able to continue running the businesses as if I were in the London office, even during this incredibly busy time for the company.
Looking ahead, how do you think SMEs will come out of the pandemic and is more change needed in the lending space to serve them?
SME business leaders are raring to fully open their doors and get back to business, after a year and a half of stop-start reopenings. The reality is that some businesses will come out of the pandemic more easily than others. Some sectors such as travel and retail, to name just a couple, have been acutely impacted while others are more adapted to the new ways of working that we’ve become accustomed to during the pandemic.
Some businesses were already set up to work remotely or had online offerings for customers, but many companies were still completely bricks and mortar businesses when the pandemic hit and may be struggling to adapt.