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In a major step toward scaling loan solutions for small businesses in India, Prayaan Capital has raised ₹110 crore in a Series A financing round led by Peak XV Partners. The company’s expansion goals are expected to be accelerated by the new capital infusion, which will also enhance its technological foundation and increase its presence in important MSME markets across the country.

The funding comes at a time when micro, small, and medium-sized businesses (MSMEs), which are generally recognized as the backbone of India’s economy, continue to face difficulties obtaining official credit.

Credits: Ascendants

Fueling Growth Through Technology and Talent

Prayaan Capital said the newly raised funds will be deployed to strengthen its lending platform, invest in advanced technology systems, and expand its workforce. The company aims to build a robust infrastructure that can support scalable and sustainable growth in the MSME financing sector.

Technology will be central to this expansion. By enhancing digital capabilities across underwriting, customer sourcing, and collections, the firm intends to streamline processes while maintaining strong credit discipline. Investments in data analytics and automated workflows are expected to improve operational efficiency and borrower experience alike.

Simultaneously, the company plans to hire talent across credit, operations, and technology functions, ensuring it has the right expertise to drive its ambitious roadmap.

Leadership Vision: Blending Experience With Innovation

Prayaan Capital is led by Rangarajan Krishnan, popularly known as Ranga, who previously served as Joint Managing Director and Chief Executive Officer of Five-Star Business Finance. Krishnan recently acquired a controlling stake in Prayaan Capital and is spearheading its transformation into a new-age MSME lender.

Under his leadership, the company is working to combine traditional lending expertise with modern digital tools. The approach is designed to preserve the strengths of relationship-based lending while leveraging technology to enhance speed, accuracy, and scale.

Krishnan’s experience in building and scaling financial institutions is expected to play a crucial role in shaping Prayaan Capital’s strategic direction as it seeks to expand responsibly in a competitive market.

Addressing India’s $300 Billion MSME Credit Gap

India’s MSME sector faces an estimated credit gap of nearly $300 billion, underscoring the immense unmet demand for formal financing. Many small entrepreneurs, particularly in semi-urban and rural markets, continue to rely on informal sources of funding due to limited access to institutional credit.

Prayaan Capital is positioning itself to address this gap by targeting underserved micro and small enterprises. By offering structured lending solutions tailored to the unique needs of small businesses, the company aims to help entrepreneurs access the capital required for working capital, expansion, and long-term growth.

Improving credit access is widely seen as critical to strengthening India’s entrepreneurial ecosystem and supporting employment generation across the country.

Hybrid Model: Branch Network Meets Digital Efficiency

One of the core pillars of Prayaan Capital’s strategy is its hybrid operating model. The company plans to blend branch-based distribution with a technology-enabled lending platform.

On-ground branch networks will enable direct engagement with borrowers, fostering trust and local market insights. At the same time, digital systems will support efficient underwriting, faster loan processing, and effective repayment management.

This dual approach is intended to strike a balance between personalized service and scalable operations. By integrating data-driven decision-making with experienced underwriting teams, the company aims to enhance credit assessment standards while improving turnaround times.

Peak XV Partners’ Strategic Backing

The transaction increases Peak XV Partners’ presence in the financial services sector in India. The venture capital business has invested in over 450 firms and managed over $10 billion over 16 funds over the last 20 years. In addition to a number of profitable mergers and acquisitions, its portfolio consists of over 35 initial public offerings.

With Peak XV’s support, Prayaan Capital receives strategic advice from an investor with extensive experience in growing technology-driven financial services platforms in addition to growth capital.

Credits: Justdial

Building the Next-Generation MSME Lender

Prayaan Capital is putting itself at the nexus of traditional finance and technology as the lending landscape in India moves more and more toward digital-first approaches. The organization wants to create a scalable and disciplined lending institution that targets underrepresented entrepreneurs by fusing technological investments, on-the-ground presence, and seasoned leadership.

An significant step in that direction is the ₹110 crore funding round, which has the potential to increase credit availability for thousands of small enterprises and support the overall expansion of India’s MSME sector.