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Credibility is key for SMEs to access funding

Thursday, 20 February 2014 - 6:00am IST | Place: Mumbai | Agency: DNA

Small and medium enterprises should present their credibly to access funding from banks and financial institutions, according to lenders.

K V Srinivasan, chief executive officer, Reliance Commercial Finance, said the attitude and approach to business is the key reason why SMEs find it difficult to access funds through banks and other financial institutions.

"It all depends how you present your case to a bank as credibility plays a very important role," said Srinivasan at the recently concluded India SME Forum (ISF) in Mumbai.

Companies like Reliance Commercial Finance have been working on various initiatives, funding schemes and easy lending initiatives thus providing businesses the much required support and expertise to SMEs.
"SMEs need to initiate or enhance their business capacities but it has been observed that most SMEs in India misutilise funds borrowed from the banking institutions," said Srinivasan, adding that any business funding (loans) should be used for the purpose it is taken and not for any other investment.

Expressing similar concerns as far as offering insurance to SMEs, A R Sekar, director, general manager and financial advisor, The New India Assurance Co Ltd said there have been instances wherein SMEs been seen adopting different business reporting methodology to serve different purposes.

"Typically SMEs maintain books differently, one for the income tax department, one for the excise department, one for some other regulatory authorities and one for the promoters of the business. In such a scenario it becomes very difficult for us to ascertain where the business actually stands. Maintaining transparency in operations is key for availing support from funding and insurance companies," said Sekar.

The day-long ISF event witnessed participation from 165 SMEs which gathered to discuss key challenges, share knowledge, identify crucial skills needed to excel in the challenging business environment among other things.

Commenting on the 23 city tour initiated by the ISF, Sushma Morthania, director general, ISF said, there are also plans to organise special trade facilitation exhibitions to showcase products and services by SMEs.

"These will feature business-to-business (B2B) meetings, mentoring programmes and networking sessions. ISF will also conduct a guided tour to select and identify 180 cluster development markets across the country," she said.

While economic environment continues to remain challenging for all sectors, ISF office bearers said the coming years will bring promising opportunities.

"India has one of the largest population of small and medium businesses. This cluster of business contributes more than 60% to the Indian GDP, are large employers and their contribution towards the GDP is only expected to keep growing," said Vinod Kumar, country head - SDRC and honorary vice-president, ISF.

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