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5 Factors that are Affecting SMEs’ Access to Finance

If you own a SME and you have been worried about how your business experienced a financial jolt due to this pandemic, you are not alone. Read this blog to know the common factors usually affecting the access to finance for SMEs and how can they overcome such a situation.

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5 Factors that are Affecting SMEs’ Access to Finance

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  1. 5 Factors that are Affecting SMEs’ Access to Finance

  2. Introduction • SMEs Are The Lifeline Of The Indian Economy. However, They Need Sufficient Funding Regularly To Stay Operational. • But SMEs Are Not Always Getting Easy Access To Finance. • Why? • Here Are Some Of The Biggest Roadblocks That These SMEs Face.

  3. Lack Of Credit Information • The Government Has Rolled Out Different Schemes For SMEs But Only A Few Reach The Intended Recipients. • There’s A Huge Vacuum In The Process Of Information Transfer. • Also, The Details Of The Schemes Aren’t Understood Well By Many, Hence, These Are Not Availed Of.

  4. Inadequate Investment In Research And Development • SMEs Often Overestimate Their Budget To Realise The Growth Trajectory. • SMEs Procure Huge Gap In The Credit Application Estimate & The Lender’s Assessment, And This Is Due To Inadequate R&D. • SMEs Need To Invest In R&D In This Data-driven Economy To Thrive. • A Clear Business Plan And A Proper Estimation Should Be There For Requesting Credit.

  5. Credit Scores • 40% Of SMEs Rely On Informal Credit Scores And Don’t Possess A Strong Credit History. • Business Cannot Avail Credits Due To Limited Or Non-existent Credit History. • SMEs Usually Belong To Unorganised Sector & Don’t Possess Any Transaction Data. • They Lack A Concrete Road Map For Financial Institutions In Order To Secure A SME Business Loan & They Become The Risky Borrowers.

  6. Location • The SMEs Which Are Located In Economically & Financially Better Places Get Easy Access To Finance. • In 2019, Andhra Pradesh Grabbed The No.1 Spot In Implementing The BRAP Among The 36 Other Union Territories And States. • AP Became The State Where Doing A Business Is The Easiest. • For The Rest Of The States And Union Territories, Acquiring A Land For Doing Business Can Get Challenging.

  7. Not Leveraging Technology • Small Businesses Have To Leverage Technology And Use The Latest Software To Keep Track Of Their Daily Work. • Business Operations Become Smoother And More Efficient By Using Cloud-based Accounting Tools. • SMEs Need To Go Online To Research About Various Lenders, Compare Them And Their Offerings, And Even Apply For Credit Online.

  8. Conclusion The Challenges Discussed Above Have Been Persistent For Years. They Have To Be Addressed In A Time-bound Manner To Alleviate Any Further Distress To The SMEs In India.

  9. Thank You !Would Love to Hear From You Hero FinCorp Limited 09, BasantLok, Vasant Vihar, New Delhi - 110057 Tel. 18001024145 Email Id: Corporate.Care@HeroFinCorp.com Website: https://www.herofincorp.com/ Know more- 5 Factors that are Affecting SMEs’ Access to Finance

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