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Look beyond bank; seek finance from private equity & venture capitals: Gujarat Chamber of Commerce & Industries

AHMEDABAD: Look beyond banks; this was the message given out to the Small & Medium Enterprise (SMEs) at a one day SMEs Finance conference held in Ahmedabad by Gujarat Chamber of Commerce & Industries (GCCI) and Federation of India Chambers of Commerce and Industry ( FICCI). 

Apart from talking upon the traditional route to raise finance via bank and debt, the speakers in the conference also explained the need to seek new avenues of finance like venture capitals (VCs)and private equity (PE) apart from bank finance. 

Gujarat-based venture fund, GVFL's chief executive officer, 
Mihir Joshi, advised SMEs to focus on their strength to raise fund from VCs and PE, instead of just waiting for get a loan from banks. According to him, most of the SMEs do not maintain proper finance books, thus they are not preferred by the banks. However, if they are able to project their strength like technology knowhow, their product uniqueness and its USP (unique selling proposition), then SMEs can easily raise fund from VCs and PE. 

"All venture capital firms like those businesses which are unique" said Mr Joshi, adding that having proper financial documents comes later. 

Similar view was echoed by Ashwani Khare, partner, corporate Finance, 
KPMG. According to Mr Khare, "Alternative finance is not the mainly based on balance sheet, but on the strengthen of the business". He further said that if a SME firm has USP and scalability then it can run fund from alternative finance route instead of depending on traditional source of finance (banks). 

However, GITCO's managing director, Padmin Buch that unlike large companies, SMEs are haplessly depended upon banks, SFC ( 
State Finance Corporation) and such sources. "There is a perception of SMEs as unreliability", says Mr Buch. According to him, there are credit worthness difficulties amongst SMEs. "This can be overcome by proper planning and having project feasibility" he says adding that in this way SMEs can not only identify their way to future growth, but can also project their growth trajectory to potential leader whether its banks or VC /PE. 

The one day SME conference was also addressed by the minister 
Saurabh Patel, who brought to the noticed to the bankers that SMEs and small entrepreneurs should be preferred for loans instead of big companies. 

However, the minister also suggested to the association - GCCI that there is need to create a institutional system jointly by industry association and state government where in case of wrongly rejection of loan by the banks, a strong lobby could be carried out with the bankers on behalf of the members. Pointing towards GCCI's president Shanker R Patel, the minister further said "It's an important issue and we shall meet on it".