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Credit availability for SMEs still a far cry
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Bikky Khosla | 11 May, 2010
Nothing seems to have changed and once again it's the same old story. Business confidence of the country's industry though has improved further compared to the past six months, credit availability still remains a major concern.
However, there are indications that the sectors which would contribute significantly to the growth are automotive, FMCG, electronics & consumer durables, metal & metal products, forging, textiles, machinery, tyre and ship building.
While there is a positive indication that order books for a majority of companies are likely to increase in the coming days owing to rising domestic and export demand, the hardening of raw material prices in sectors like cement, textiles, leather, metal and tyre, unavailability of sufficient power, current labour laws, uncertainty in economic environment and inadequate export demand have cropped up as major constraints in the growth path.
I think the survey Confederation of Indian Industries (CII) came up with startling facts wherein it observed that there was no improvement in credit availability in last six months. The way things are going I will not be surprised if there is no change in the credit availability in next six months.
Add to it infrastructure and institutional shortages and cost and availability of labour; SMEs are perhaps hard hit once again as 46 percent of the respondents of the survey who were from small organizations will agree with me.
Meanwhile, the woes of SMEs do not end here. Private Equity investment in SMEs too dipped considerably thus making it difficult for small firms to seek safe financial support for executing their growth plans.
Going by calender 2009 figures, the total number of PE deals signed by SMEs in 2009 stood at 81, while in 2008, it was 187, highlighting a sharp decline of almost 68 percent.
While the meltdown made PE investors wary of investing in small businesses as there is a great deal of risk involved when it comes to funding cash-strapped companies, and with no credit availability, SMEs find themselves in a tight spot.
With very less options left with SMEs, the best way would be to use the existing resources intelligently, tweaking areas in the operations to get maximum benefits.
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Risk Capital
Srikanth | Sun Jun 13 17:13:54 2010
Whatever happended to Risk Capital Fund for SME by SIDBI?
Credit availability
S Raghavan | Fri May 14 03:48:12 2010
With credit availability to SMEs not having shown signs of improvement, it is high time, government comes out with measures wherein contracts with government will result in positive cash flow for the agencies. Adherance to same payment terms even in hard times as these is a shortcoming in ameliorative measure. Dy. chairman of Planning commission did hint on such proposals some time back but nothing significant has happened since then.
CREDIT AVAILIBILITY
Niranjan Gajendragadkar | Thu May 13 08:03:55 2010
Dear Sir,
Some time back there was a article regarding the captioned subjecet.Today for small exporters it has become difficult to get preshipment finance from the banks as they insist on collateral.If I am not mistaken the banks have to give the preshipment credit after the exporter receives the LC without a collateral..Pl. enlighten on this subject.
Niranjan Gajendragadkar
Sme Credit
Preetham Reddy | Wed May 12 11:24:14 2010
Very true , while there is hue and cry about international firms on the back burner, there are many home grown SME which have a good order book position / have a good track , but funds just aint available for further growth
Quite a dismal state of affairs , wherin companies and individuals who can grow are not given incentive and the govt provided relief measures just do not reach them .
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Re: Sme Credit
Kajal Anand | Wed May 19 15:26:18 2010
Well said.
Money is only for the big, bigger and biggest.
Govt provided relief measures as mentioned by Mr. Reddy, donot percolate down the line as the they themselves are not aware about the reliefs. How can it reach the actual beneficiaries. And if they are aware, beneficiaries need to give a heavy purchase price. Very sad state of affairs.
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