Every Entrepreneur should create a contingency plan to ensure sustainability of his venture beyond himself. Otherwise, it will lead to unbearable misery to his family if untimely death or disability strikes him.

Recently I met one entrepreneur who is having a turnover of less than  Rs. 10 crores. Having established himself and now he is looking to raise the turnover to Rs. 100 crores. The only hitch is financing the growth planned and thus Fundraising strategy was the focus of discussion.   He has been in this business for last 15 years, building the business brick by brick. There is pride, josh, vibration and plan to scale up and of course restless-attributes commonly seen in all successful entrepreneurs.  He is around fifty and his wife is a homemaker, and sons are studying.

When going gets tough, many entrepreneurs look to salvage their entrepreneurial journey and diversify to other areas. However, those in distress avoid or make such move cautiously and after meticulous planning. Otherwise, it may lead to further worsening of the situation.

A few months back, I had an opportunity to interact with an entrepreneur who has established series of educational institutions in his hometown.

 A good Financial Advisor can create a financial strategy to an SME such that risk is mitigated, profit is maximised and experience greater harmony between personal finance and business.

One successful businessman decided to start a resort near Bangalore in the year 2000 for which he decided to use his own property spread over 15 acres. The place is surrounded by rich greenery and located on a prominent highway. He started working on building the projecting brick by brick from his savings from other business. As the time passes, the liquidity started drying up whereas project remains incomplete. Having no other option he approached the bank and bank agreed to extend a loan of Rs 10 crores. Upon submission of application and due to the urgency of the project’s need, he was advised to take a loan Rs 5 crores. He was orally assured to sanction additional Rs 5 crores later. For various reasons, Bank sanctioned additional limit of Rs 1.50 crores that too with considerable delay instead of Rs 5 crores. The project could not reach the finality and remain incomplete. The confrontation began between them. Bank went on to auction the project. It became the matter of litigation and still, the case is going on in the court.

SMEs are the backbone of Indian economy. Industrial ecosystem reorienting to increase the share of outsourcing to SMEs. Going forward, focus on core competency and internet have driven evolving manufacturing ecosystem will expand the opportunity for outsourcing, so is the proliferation of SMEs.
However, the business climate is filled with uncertainties and intense competition. To remain relevant amid a tough economic environment, risk management in businesses is more important now than ever. Various tips and strategies are listed under RISK TOOL KIT FOR SMEs.

Insolvency code will boost confidence among entrepreneurs by taking away the fear of failure by offering support for turnaround or liquidation in a non-threatening way. It will enlarge the lending basket for SMEs.

INTRODUCTION:

Parliament recently passed Insolvency and Bankruptcy Code Bill that seeks to update and consolidate existing laws in this regard. The bankruptcy law is widely hailed as a landmark by the industry as it will improve ease of doing business in India by expediting resolution of stressed assets and streamlining the process of liquidating a business. Distress situation appears in any individuals’ life. Equally, it can appear in any business. Compared to large companies,  SMEs are very vulnerable to distress as the capacity to endure the distress is not there or very scarce.  Secondly, distress need not be self-inflicted; it can be due to changes economic scenario, distress in key buyers’ business, a shift in customer preference etc. Distress Management is an important exercise to nurse back the enterprise to a productive state. Legal cover in the form of Insolvency and Bankruptcy code is a great support to manage the distress. (What is distress Management?)

Does our company have a business strategy that makes sense within the context of changing general industry characteristics and economic environment?”

Introduction:

Industry within which a company operates is important to analyse the total risks the company exposed to. The studying industry provides insights to help you answer the above question.

ecently Deccan Herald has reported a serious fraud happened in a Bangalore-based private company which likely to push the company to the brink of collapse. (http://www.deccanherald.com/content/539095/cid-ordered-probe-multi-crore.html)

The brief of fraud:

It is reported that 11 officials of the company have misappropriation of funds of Rs 200 crores. Bank staff were also suspected. They used cheques and documents forging signatures of MD of the company.

Fund Raising is seen as a challenge by many SMEs. The methodical approach can assist to maximise the benefits.

Fundraising (loan or equity) has been a challenge for SMEs- be it at start up stage, growth, expansion or maturity. Fundraising is described as a painful exercise by many SMEs mainly due to their lack of awareness about the appropriate approach and hence vulnerable to exploitation by unscrupulous elements.