SMEs Financing: Access to diversified financial instruments

28 Apr 2022

India has 42.50 million Small Medium Enterprises (SMEs) that employ almost 106 million people. Even with such a mammoth scale, SME financing is a major hurdle to the growth process. 

According to a survey by the International Finance Corporation (IFC), approximately 40% of formal and most informal SME enterprises have significant unmet financing needs.

The Indian SME sector now has a credit shortage of over 16 lakh crores. With a CAGR of 10% YoY, the industry has showcased a robust potential. With smart financing products like business loans, the financing vows have decreased at a substantial rate.

Banking market views the SME segment to be profitable, according to a recent survey of 91 banks in 45 economies. However, macroeconomic instability in developing economies and competitiveness in developed economies were the key barriers to them providing finance to SMEs

Banks are less exposed to SMEs than large corporations, lend a smaller share of investment loans to SMEs, and charge them higher fees and interest rates, particularly in developing nations like India.

Working capital finance is a way for SMEs to keep projects moving smoothly, but it’s also a way to make sure that day-to-day operations don’t impede the company’s efficiency. Diversification in the realms of SME finance generation can be of prime importance.

Applying for working capital loans at Oxyzo is a popular way for small businesses to get funding. A customized solution with the best interest rates and terms is prepared based on customer eligibility, preferred tenure, and a loan amount with the paperwork. The best thing is that the funds are disbursed in as little as three days. Working capital loans can be collateralized, unsecured, or partially collateralized.

The MSME business loan scheme was created by the Indian government as a working capital loan. Small and Medium Enterprises can gain a loan sanction of up to Rs. 1 crore as an MSME in as little as 59 minutes. The best part is that you may receive this loan for an interest rate of 8%, making the repayment process simple.

The SME financing also makes use of Work Order Financing. It is a type of short-term commercial financing that allows companies to pay suppliers in advance for confirmed work orders or tenders issued by authorities or reputed organizations.

When a company doesn’t have enough operating capital or doesn’t want to exhaust its cash reserves, products like Work Order Financing allow them to accept unusually big orders while promptly adjusting the loan basis to match their needs.

Purchase finance is another renowned financing method that helps firms make an upfront payment to their suppliers on raw material purchases and manage their cash flow. Purchase  financing is thus a viable and popular choice for companies 

 SME financing is also done through Sales Bill Discounting. It is a type of short-term financing that allows suppliers to sell unpaid bills that are due at a later date to financial institutions 

A Dropline Overdraft is a financial instrument that allows a borrower to overdraw money up to a predetermined limit, with the withdrawal limit decreasing each month from the sanctioned level. 

Therefore, for SMEs in India, with companies like Oxyzo, SME financing is drastically shifting to ease raising capital. The diversified financial instruments have further allowed the enterprises to make the financing woes go away to a great extent.

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