India’s SMEs contribute to nation building and
generate employment for lakhs of Indians. However, their optimal performance
may be hampered by lack of funding.
India’s Small and Medium Enterprise (SME) sector has been a
strong backbone of the country’s economic growth since its independence in
1947. The sector has largely contributed to job creation and industrialisation
in large swathes of India’s hinterland. This sector provides output at lower
operational and capital costs than large industrial enterprises, and it is the
most important secondary support to large businesses.
As per estimates from
the Small and Medium Business Development Chamber of India, the SME sector
employs about 80 million people, and contributes to roughly 8% of the country’s
GDP. It also accounts for 45% of the country’s manufacturing output and about
40% of its exports. The sector plays a crucial role in national development by
contributing to both domestic and international earnings, and by helping to raise
a new generation of Indian entrepreneurs.
But
something ails the SME sector…
The growing SME segment in India needs timely, consistent
funding to realise its business goals. For long, the SMEs have not been privy
to the kind of financial backing that large industrial houses in India have
received. The sector depends on a regular infusion of funds to keep itself
afloat – without adequate reserves, daily and long term operations cannot be
actualised. Finance must be available through quick channels to meet urgent
business requirements, especially in the early days of operation.
Several SME companies report a lack of timely credit with
flexible repayment options. In the past, SMEs have been unable to participate
in large infrastructure projects or develop innovative machinery and solutions
owing to a lack of capital. This can hamper their development and endanger
their very survival.
But
lending institutions show the way
However, banks and NBFCs in India are now focussing their
energies on bolstering the SME sector through periodic funding in the form of
SME loans. The scenario for SME loans
in India is a healthy one: lending institutions are ratifying loan
applications within mere days of receiving them, and accelerating the funds
disbursal process so that SME businesses may benefit from the quick infusion of
funds.
Considering the vital role SMEs play in the Indian growth
story, SME loans in India perform an immensely important function. Lenders in
India have been quick to understand the benefits of partnering with the SMEs’
growth, and are offering customised financial solutions for their many needs.
Hence, SME funding is being offered in the form of term loans, line of credit,
working capital loans, etc. The financial state of the company, its credit
score and requirement for funding are thoroughly scrutinised before the loan is
granted.
It must also be noted that NBFCs have been quicker in
responding to the needs of Indian SMEs by offering lower interest rates and
more flexible repayment options than banks.
