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What MSMEs must not ignore in raising funds and managing finance

Credit and finance for MSMEs: Raising finance is often a goal for businesses instead of a means to get to that business goal.

Credit and finance for MSMEs: Managing finance could be as tough as raising it and small business owners often struggle in both. According to multiple market studies, the lack of access to affordable finance is among the key reasons small businesses fail to survive or grow. While every lender and business is distinct and hence there can’t be a perfect formula to ensure access to credit and manage it smartly, it generally comes down to the promoter’s ability to repay the amount and win the lender’s confidence. Nonetheless, there are steps a small business owner must take to raise capital efficiently and use it effectively to avoid situations of working capital under stress.

Bhairav Kothari, founder and CEO of SuperCFO Advisory Services, which provides CFO (chief financial officer) services around strategic planning, transaction support, audit preparation, and more, explained steps to small business fundraising and managing finance at the second edition of the ScaleUp Summit organised by Financial Express Digital last month. So, let’s dive into it.

The end goal — Fundraising to entrepreneurs is often a goal rather than a means to achieve a business goal. Hence, before looking at approaching the lenders, it is “important to decide whether you are raising funds just for the sake of it or is it a means to an end, for instance buying a company, setting up a manufacturing plant etc.,” said Kothari. In other words, introspection around whether one really needs money, why it is required, how much is the risk-taking appetite of the promoter and how the business environment is are important areas to consider.