New expansion of small business loans after six-month performance review: Sundaram Home Finance
Sundaram Home Finance, which recently made a foray into small business lending against residential properties, said the segment has the potential to grow well in the coming years. Based on the experience of the next six months in Tamil Nadu, the company will assess and develop plans for expansion in the state and out, Lakshminarayanan Duraiswamy, MD, Sundaram Home Finance, told FE in a exclusive interaction.
The company’s immediate plan is to open eight more exclusive small business lending offices in Tier 3 and 4 cities of Tamil Nadu by March 2023, bringing the total number of offices to ten.
Sundaram Home Finance, the housing finance arm of Chennai-based NBFC Sundaram Finance, expects to achieve disbursements of Rs 10-15 crore from this segment by the end of the financial year. It is dedicating an exclusive team to executing and exploiting this opportunity and will be hiring 50 people specifically for this segment over the next six months.
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Duraiswamy said that while there is still an opportunity to finance houses, the company has seen that there is a need for organized finance for the small business segment in the rural market. In light of business recovery from the pandemic, self-employed business people, shopkeepers, grocers, drugstores, hardware stores, tea shops and others in small towns are seeking working capital loans to expand. their business.
“It’s been in the works for a year. We conducted test marketing in Madurai, Tirunelveli and Salem and received positive feedback from this segment. That led us to this strategic diversification from home loans and real estate loans (LAP) to small business loans and this is a new segment that we have entered. We have just launched an exclusive loan product for this segment whereby we will lend up to Rs 20 lakh to small business owners and traders against residential property,” he said. Interest rates will be above 15% per annum. The duration of these loans is likely to be 5 to 7 years. The EMI will be on the conventional fixed monthly model.
The majority of the company’s more than 100 branches are in Tier 2 and Tier 3 cities where it has provided home and non-home loans (LAPs).
Regarding the challenges, he said that customers in this segment may not have the typical documentation that those in the mortgage segment would have and therefore requires a deep understanding of customers and their business. “We believe the Sundaram experience will come in handy here as our goal has always been to understand customer needs and provide the best customer service,” he said.