In his opening remarks on finance made easy as one of the panelists, Hoshie Ghaswalla of BW Businessworld said that finance continues to pose a challenge for SMEs. They are working on tight cash flows and funding all the time.
Giving the lender perspective, Sudip Bandyopadhyay, group chairman of Inditrade said that from his 30 years of experience funding only happens when credentials of a company are proven, there is proof of concept. Till then, people are not willing to bet on you.
The group chairman of Inditrade said that once companies start then they have to run the organisation for some time after which they would approach private lenders and other newer classes of lenders prevalent in the ecosystem for funding at that point of time. Banks come in stage three or stage four, said Bandyopadhyay.
In terms of new class of lenders, Bandyopadhyay said venture debt was a new source of funding. Three such funds exist in India. Once the business is up and stabilized and has done its angel and first round, such start-ups can look at venture debt funding. He added that NBFCs— non-banking finance companies were more flexible than banks apart from family and friends when it comes to early-stage funding.
Bandyopadhyay also dwelt on the history of the Indian SME sector and drew global parallels. India had a wonderful SME ecosystem at the time of independence. And if you look at Germany today, 99% of German industries are SME, it’s the industry backbone and they are multi-generational.
The group chairman of Inditrade also said that venture capital funding has evolved globally and in India and today lot of money also goes into non-tech companies. In the initial years, the VC industry in the USA focused on tech companies. But that has opened up now. Venture funds are now funding non-tech companies, a lot of funds are looking at traditional businesses as well, he said. He concluded by saying that if a company has good cash flows, there are enough and more private lenders in the market who are looking to fund such businesses.