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Working capital access for small and midsize companies in India

Insights from the C2FO Working Capital Outlook Survey 2017

Each year, C2FO interviews small and midsize companies globally to uncover current perceptions around working capital financing, funding growth, deploying capital, their preferences related to working with their buyers, and their economic concerns. This data reflects responses from over 700 companies in India ranging in size from one to 10 employees to 100-500 employees. 

Read the full C2FO Working Capital Outlook Survey Insights

India’s rapidly growing economy is reflected in the increasing need for liquidity by small and midsize companies. Thirty-two percent of the companies surveyed had an increase in need for liquidity greater than 20 percent over the previous year. At the same time, these companies are navigating a high cost of borrowing and limited access to working capital to fund growth.

Late payments and extended terms for SMEs in IndiaNearly a third of small and midsize businesses in India report receiving late payments from their customers. Nearly one-quarter have customers who extended payment terms in the past year. If suppliers are also managing an increased need for liquidity, pressure to grow, and limited access to funding, this increases financial risk in supply chains.

Learn how corporate can strengthen India-based supply chains

Primary barriers to growth for SMEs in IndiaThe World Bank projects 7.3 percent growth for India’s economy in 2018. Meeting that goal, however, requires addressing key barriers for small and midsize businesses which comprise 40 percent of production in India and produce 36 percent of total exports. SMEs identified high interest rates and payment terms as two key barriers. Unlike some of the complicated policy issues, these two barriers can be solved via an early payment solution.

Learn how trade finance innovation can remove barriers to economic growth

Challenges to secure financing for SMEs in India

Only 12 percent of over 700 small and midsize businesses indicated that they had no difficulty in securing financing. While alternative finance options hold promise for additional funding tools, many companies are not familiar with these options. Successful early payment platforms require significant supplier education and support, both offline and online to overcome these challenges. Most of all, Indian suppliers need access to affordable capital without fees or underwriting process.

Learn about what C2FO offers suppliers

Funding mix for SMEs in India

Private funding and cash flow are the primary funding sources for small and midsize businesses in India. Traditional banking use lags these funding sources.  Much of traditional financing is backed by the collateral securities provided by the company or promoter, limiting the amount a SME can borrow based on the ease and liquidation value of their collateral. Rapidly growing businesses often have funding needs that exceed the value of the underlying securities.

How SMEs in India would put more cash flow to work

According to the survey, if SMEs in India can access additional cash flow, they would put it to work in ways that directly and positively contribute to the economy: expanding operations and purchasing inventory and equipment. This data highlights the importance of empowering SMEs to help drive economic growth.

Interested in learning more?

Access the full C2FO Working Capital Outlook Survey 2017 report, including analysis and comparison of SME data across the globe. If you would like to access just the charts in this summary, you may find them on SlideShare.