SMEs & The complexity of financing model
Many entrepreneurs accept a complex financing model without dwelling deep into it and ended up in a messy situation to deal with if slips to distress.
A few years back I witnessed one distressed SME in my known circle. He had been a very successful entrepreneur having a record of 20 years of successfully running his business. He was into manufacturing of packaging materials and major FMCGs were his clients. As the existing unit peaked its performance and, he started contemplating setting up the second unit with most modern technology sourced from abroad. It was necessitated because the industry was becoming very competitive due to clients demand for better quality and superior visual presentation of packaging materials.Read more
Universalising Credit Guarantee- A need of the hour for MSMEs
Universal access to Credit guarantee schemes for MSMEs can be an effective instrument for human capital development in India
Recently Karnataka State Finance Corporation(KSFC) came out with a scheme to extend loans at 4% interest rate up to 5 cores for the manufacturing sector and up to Rs 2 crores for the services sector.Read more
psbloansin59minutes.com: A new paradigm in the delivery of credit to MSMEs in India
Recently Govt announced setting up a digital platform to bring lenders closer to SMEs in India. It is a welcome initiative to improve the access to credit and make it timely.
The Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley recently launched the web portal www.psbloansin59minutes.com This will enable in principle approval for MSME loans up to Rs. 1 crore within 59 minutes from SIDBI and 5 Public Sector Banks (PSBs).Read more
Turning around a failing business- A pragmatic approach
Many SMEs believe in an infusion of more funds to revive the failing business. The fact is the solution lies beyond money.
In the previous blog, we analysed a business in cotton ginning business, which went into distress in just two years of its inception. We identified the reasons for failure are poor thought process and absence of detailed planning at the beginning, lack of internal control, poor quality control at the procurement stage which is the key success factor in the cotton ginning business, lack of oversight by the family elders over scion of the family who leads the business, etc.Read more
“I want to shut down by two-year-old venture because it is a failure”
Many entrepreneurs who diversify are finding difficult to sustain the new venture. The source of pain lies in the poor planning at the beginning.
Recently I met an entrepreneur from Maharashtra who has been very successful in his business of textile fabric manufacturing. The present turnover exceeds Rs 200 crores. The journey started with a small capital about 40 years back and it reached the significant level today due to perseverance and extremely sensitive to the quality of products. He is highly respected for delivery of his products on time and rigorous approach to quality control.Read more
A realistic DPR- Tool to win the confidence of potential stakeholders.
If DPR is prepared for the project with realistic assumptions and with the active involvement of promoters, it can help the promoters to strengthen their case to convince the potential stakeholders.
Recently I met a friend who has been very successful in an agro-based venture. He has been planning to expand the horizon his business into multiple links in the value chain to provide an integrated platform to farmers and consumers to experience superior value proposition in the transactions.Read more
Risk Management as a part of start-up planning- A process to ensure the sustainability.
Making risk assessment as a part of new business planning will lead business on the road to success for SMEs in India
Recently I had a new client seeking to set up a food processing unit in his hometown. He wanted a full pledged DPR (Detailed Project Report) analysing the issues, challenges and the opportunities. After all, he is not new to this business. He has been running the same business in a rented facility for 15 years which the owners wanted him to vacate.Read more
Is working capital denied?: Explore options
Many a time when there is no or less working capital financed, the SMEs tend to curse the at the fate than looking around for possibilities thus aggravating the distress.
In the previous fortnight, we had discussed the evils of starting a new project without proper arrangement for sufficient working capital under the blog titled: Starting a new project without tying up working capital – A suicidal act for SMEs.Read more
Starting a new project without tying up working capital – A suicidal act for SMEs
Many SMEs start a new project by taking a term loan and for working capital, they count on the assurance of banker to sanction at later date which is suicidal if not materialised.
Recently, I met an entrepreneur from Gulbarga who had set up a dal processing unit and which remained in the standstill for four years. He has been running a small business which was taking care of all his needs and also over the period of years, he has accumulated savings to fund his dream project of setting up a dal processing unit in Gulbarga. The region is very much known for producing a huge quantity of pulses, mainly Toor Dal.Read more
Enduring distress is rewarding in the long run for SMEs
Many SMEs cave in before the pressure of financial distress. However remain focused on the business will help overcome the distress.
I have two contrasting cases of SMEs who took exactly opposite direction while dealing with financial distress. Incidentally, the trigger for distress is same that the sudden pronouncement of demonetisation.Read more