What & where to look for smart sources of capital
1. Your own network
It’s a no brainer that whenever we are running low on cash, friends & family are the first people we reach out to. Well, this isn’t any different – if you think they can back you up & get your business running then go ahead and reach out to them. That being said, you need to gauge their situations too in this plummeting market & be sure you don’t tarnish the relationship with your close-knit family & friends. Other entrepreneurs in your business circle, especially those who know the sector and your abilities well, are a strong probable source too.2. Government schemes & grants
The government of India has announced various modes of financial aids to uplift SMEs, MSMEs & startups to battle COVID-19. The top two initiatives you should definitely be up to speed are:(i) Collateral free automatic loan to MSMEs / Rs 3 lakh crore credit guarantee scheme for MSMEs:
Financial institutions like banks & NBFCs have been directed to give an emergency credit line up to 20% of the existing loan to borrowers with loans upto 25 crores and turnover upto 100 crores. The tenure is for four years with a moratorium of one year.(ii) Fund of funds for MSMEs:
This is an equity funding that’s announced by the government to help MSMEs with ‘growth potential and viability’, even as they are faced with severe shortage of equity. The fund of funds will infuse Rs 50,000 in equity, thus catering to over 25 lakh MSMEs. Not just these, there are other steps taken by the government to accelerate the growth of SMEs & MSMEs. These include:- The MSME receivables from Govt./CPSEs will be released in 45 days.
- The e-market linkage to MSMEs will be promoted in place of trade fairs/exhibitions. This data will then be used to enhance trade based lending.
- TDS rate has been reduced by 25% across the board, thus freeing up money that could have otherwise been blocked.