The Medium, Small, and Micro Enterprise (MSME) sector is a primary engine of economic growth in India. These enterprises form the backbone of the Indian economy and drive growth in consumption.
Currently, MSME’s contribution to the country’s GDP from the manufacturing sector stands at 6.11% and 24.63% from the service sector.
The MSME sector has also demonstrated a consistent growth rate of approximately 10%, which buoys it to the government’s notice for economic revival and growth.
Resultantly, in recent years, the Government of India has undertaken multiple initiatives to achieve a 50% GDP contribution from the sector.
A crucial component noticed in all the initiatives is convenient availability of credit facilities to MSMEs such as capital finance loans.
With the increasing ease of doing business, the MSME sector has witnessed an upsurge in the number of units operating within India. And with growing numbers, competition has also increased.
This situation puts the onus on entrepreneurs to ascertain the precise time to avail sufficient business finance from sources such as financial institutions.
Which is the right time to avail capital finance loan?
In a business’s lifespan, multiple opportunities present themselves without prior notice. A business’s responsibility is to tap into these opportunities as and when available optimally.
Most of these opportunities involve substantial investments which can be availed in the form of capital finance loan.
This especially applies to MSMEs who rarely work with substantial financial capital. Also, there are several tips to ensure that a business loan does not further pinch the company budget.
However, the task which befalls companies is to determine the opportunity, either influential or internal, and use it to befit their objectives.
A few general instances when businesses should avail a loan to utilise it optimally are discussed below –
- Setting up a new business
A loan at the onset of a business relieves the respective entrepreneur of the responsibility to seek investment from different investors. Furthermore, a business loan liberalises an individual to set up his/her business as per their convenience.
There are multiple expenses in the initial stages of a business such as the acquisition of proper equipment, installation of necessary software systems, staff-hiring, purchasing or leasing of office space, etc.
Businesspersons might consider a loan for business finance to reduce the burden on self and other related individuals.
- Expansion and diversification of business
During a business’s growth phase, expansion is imminent. Without an expansion of operations or diversification of product lines, growth would stagnate. The circumstance prompting expansion can be either external or internal.
For instance, if an organisation is reaping substantial revenues, it must look towards expansion or diversify its goods or services provided.
On the other hand, external influence could include a change in socio-political circumstances, a shift in consumer tendencies, or a recent development in its respective industry.
When confronted with such opportunities, enterprises might consider a business loan to affect its expansion or diversification or any other form of progression to meet the ulterior motive of better revenue generation.
Reputed NBFCs such as Bajaj Finserv provide pre-approved offers on loans to make the process of loaning time-effective and simple. These offers apply to a wide assortment of credit facilities such as business loans, personal loans, loans against property, etc.
- Efficient management of inventory
In an increasingly competitive market, businesses must function at optimum levels at all times to survive and thrive. A crucial factor to look out for then is inventory, especially when market demand is surging. Hence, businesses should consider holding sufficient funds at their disposal to promptly and adequately meet an increase in demand.
- Equipment upgrade
Upgradation of existing equipment such as state-of-the-art plant and machinery, hardware systems, latest software systems alongside purchasing new and more efficient equipment is quintessential to a business’s growth, vital to stay in the competition.
It is particularly crucial to make use of the latest technology to further business operations as it is the face of growth in current times. For instance, utilising systems such as Big Data analytics provides businesses with a competitive edge.
- Hiring skilled staff or workforce
Businesses function on its workforce, and consistent and incessant infusion of new employees or staff is imperative for the success of any business. At the same time, it is crucial to train the existing workforce with modern and updated. Training employees is one of the ways to use working capital to strengthen a business.
Enterprises should always seek for opportunities that meet and further their business objectives and capitalise on it promptly. Any fall-out on the timing to acquire a loan for business finance, therefore, can negatively impact an organisation.