As a Micro,Small & Medium Enterprise (MSME) head you would be worried for options every time you plan for expanding the business or conducting new processes in the organization. These MSMEs are one of the most important contributors in employment generation, promotion of entrepreneurship, wealth distribution and backward area development in India. However, they face a lot of hurdles due to their limited resources in manpower, finance, infrastructure and reach in the market. So where can the MSMEs generate or borrow funds from?
A Mix of Challenges and Opportunities
MSMEs face competition both from internal as well global competitors in times of globalization. Investments in technology & innovation often vie for an extra investment which needs to be provided from time-to-time. Having an extra amount for expansion and development could be a vital difference in the company’s future. There are a number of capital lending agencies working in India which could include banks, financial institutions, private investors, money lenders, etc.
How to approach these Agencies
Traditional finance agencies such as banks rely on documented sources of information, interviews, visits along with the knowledge and expertise of the individual managers in assessing and monitoring a certain business.
While approaching a lending agency, a good credit rating, secure financial statements and stable collateral could work towards your advantage. Many small business lenders often rely on personal credit history of the proprietor while giving the loan. So, the conditions can vary amongst various lending agencies. Risk assessment in a MSME varies greatly from a bigger company as the owner’s assets can also be listed as part of the SME. They often operate in the informal manner and thus listing their financial history can prove to be quite difficult. Keeping a strong financial process within the enterprise could benefit you in getting easy finances. Some lending companies may also demand for shares in your enterprise or prefer an internal agreement for a percentage of the company profits which can be negotiated at your end depending upon your need for the money.
With the advent of credit rating, getting your enterprise rated would also prove to be a good move. The credit rating agencies often have a list of banks and financial institutions on their panels. Getting a good rating would automatically make you eligible for a loan and that too at a reduced interest.
All’s Going Well
Today, as a MSME you have a better chance to avail finances with the launch of the new SME Exchange. You can enlist the organization on the Exchange and avail equity from the market. The latest budget has also provisions for an exemption on capital gains tax for property sales which are focused towards investments in MSMEs. The government has also set aside 5000 crore rupees to establish an India Opportunities Venture Fund along with SIDBI to offer easy equity to MSMEs.
One has to understand that companies such as Microsoft also started as a typical MSME and have reached an important milestone of being the richest enterprise presently. MSMEs can easily collaborate, merge and develop into larger organisations without much complications regarding documentation and thus prove to be perfect vehicles for instant growth. Thus, a gap in financing should be the last problem on your list with a variety of options for you.
A Mix of Challenges and Opportunities
MSMEs face competition both from internal as well global competitors in times of globalization. Investments in technology & innovation often vie for an extra investment which needs to be provided from time-to-time. Having an extra amount for expansion and development could be a vital difference in the company’s future. There are a number of capital lending agencies working in India which could include banks, financial institutions, private investors, money lenders, etc.
How to approach these Agencies
Traditional finance agencies such as banks rely on documented sources of information, interviews, visits along with the knowledge and expertise of the individual managers in assessing and monitoring a certain business.
While approaching a lending agency, a good credit rating, secure financial statements and stable collateral could work towards your advantage. Many small business lenders often rely on personal credit history of the proprietor while giving the loan. So, the conditions can vary amongst various lending agencies. Risk assessment in a MSME varies greatly from a bigger company as the owner’s assets can also be listed as part of the SME. They often operate in the informal manner and thus listing their financial history can prove to be quite difficult. Keeping a strong financial process within the enterprise could benefit you in getting easy finances. Some lending companies may also demand for shares in your enterprise or prefer an internal agreement for a percentage of the company profits which can be negotiated at your end depending upon your need for the money.
With the advent of credit rating, getting your enterprise rated would also prove to be a good move. The credit rating agencies often have a list of banks and financial institutions on their panels. Getting a good rating would automatically make you eligible for a loan and that too at a reduced interest.
All’s Going Well
Today, as a MSME you have a better chance to avail finances with the launch of the new SME Exchange. You can enlist the organization on the Exchange and avail equity from the market. The latest budget has also provisions for an exemption on capital gains tax for property sales which are focused towards investments in MSMEs. The government has also set aside 5000 crore rupees to establish an India Opportunities Venture Fund along with SIDBI to offer easy equity to MSMEs.
One has to understand that companies such as Microsoft also started as a typical MSME and have reached an important milestone of being the richest enterprise presently. MSMEs can easily collaborate, merge and develop into larger organisations without much complications regarding documentation and thus prove to be perfect vehicles for instant growth. Thus, a gap in financing should be the last problem on your list with a variety of options for you.
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