5 Smart Ways for MSMEs to access Business Credit: Finova Capital

Indian MSMEs are a resilient lot, existing amidst funding crunches, inaccessibility to financial services and yet being one of the most significant contributors to the country’s manufacturing output and GDP. However, here’s listing 5 smart ways for MSMEs to upgrade their profile and easily access the financial services made available at their disposal.

1. Ensure a good CIBIL Score

MSME with the required wherewithal, must always ascertain a good CIBIL score. As safe practice, they must always payback instead of having the loan waived off, otherwise, the same will reflect badly on the CIBIL score. Regardless of the difficulties, small and medium sized enterprises must definitely try to maintain a healthy credit history.

2. Keep proper records of bills

Whether it is a formal invoice or a KACCHA bill, MSMEs should maintain records of all the transactions. Furthermore, they must endeavour to route all transactions through formal banking channels. Although in the short term, this may appear costly, but the same will pay off in the due course of time.

3. Contact the Right NBFC

There are various types of NBFCs existing in the market today. While all of these NBFCs are working with the intention of making credit accessible to small and mid-level enterprises, however,contacting the right NBFC focused at your segment will help in optimizing efforts and saving time. Furthermore, MSMEs would benefit more, given the expertise of the NBFCs in their niche.

4. Carefully evaluate the loan terms

NBFCs should try and keep the tenure of their first loan flexible, since that is going to be the costliest. Getting started with a small loan term would help MSMEs mitigate the challenges and be prompt with the paybacks. Utilizing smaller loan terms in the beginning to build the right track would then enable MSMEs successfully receive subsequent loans at cheaper rates and perhaps with larger tenors.

5. Take loans suitable for your needs

When it comes to small business financing, MSMEs have a host of credit solutions to their disposal. Being aware of all their options and making the right decision for the line of credit will help in ensuring the longevity of these enterprises. For instance, if the requirement for business credit is only during a particular season of influx, MSMEs may opt for seasonal loans. These ultra-short-term loans are easier for businesses of varying sizes and helps in meeting the requirements at present.