MSMES

Nobody loves me

Independent businesses do not scale, as they do not get formal financing

Unprofitable Indian startups have no dearth of funding, as VCs keep pumping the money. MSMEs, India’s growth engine face a credit gap of INR 16 lakh crore.

Only 16% of MSMEs have access to formal finance. About 80% of the MSMES bootstrap by default. Key reasons for the gap are lack of financial literacy, non-availability of securities for the collateral and delayed payments. Larger companies do not pay MSMEs on time. About 80% of working capital gap will go away with the timely payments. 80% of the formal financing for MSMEs come from commercial banks.

Monish Anand is founder of Shubh Loans. It lends to people from the informal economy. He writes, “Fintech companies can reach out to MSMEs by assessing the extent of digitisation of the company and the type of debt required by the company. Close scrutiny of these two parameters will help fintech players in assessing risk and providing tailored solutions as per the MSMEs’ requirement.”

Indie businesses require alternative finance such as invoice financing, non banking finance companies and venture capital finance for MSMEs. Indie VC is one such alternative finance company for indie businesses. They fund real businesses, which value revenue and profits over funding.