Covid-19: How MSMEs Can Manage Their Cashflow Challenge

In a recent study, it was found out that there are more than 63.3 million MSMEs. These are engaged in the non-agricultural sector of our country. They are giving employment to more than 110 million people. They single-handedly contribute 30% of the GDP and about 49% of the total exports of our country. The pandemic period jas seriously affected this sector, so the government has come up with many relief measures, such as MSME loans.The full form of MSME is Micro, Small, and Medium Enterprises. These types of industries are generally regarded as the backbone of the economy of a country. The country’s economy grows as a whole and flourishes when these industries grow on a large scale and make a good amount of profits. To support the MSME during this difficult time, the government has introduced a new scheme known as the CTGMSE scheme. To start the scheme, India and the SIDBI have created a Credit Guarantee Fund Trust. This fund has been created for Micro and Small Enterprises (CGTMSE). Under this CGTMSE scheme, both new and existing micro and small enterprises can get a collateral-free loan from the government. The loan amount can be two crore rupees maximum. This will be very helpful for any type of business and an entrepreneur. This loan generally has a very low interest rate, i.e., 1%. The interest rate can also be as low as 0.75% when the loan amount is more than five lakhs. When a company is registered as an MSME under the PM svanidhi act, it can easily acquire government works and tenders as the Udyam registration portal is often linked with the government marketplace. A large number of state government sites also give asses to particulate in the tenders easily.

Steps to overcome the cash flow challenges of MSME

  • A company should be proactive rather than reactive
An MSME should always conserve cash and reduce the leverage on the company wherever it is possible.
  • The company should negotiate fixed expenses with all the vendors as well as the distribution to cut costs. A company should rethink every type of expense they do and do savings on things in any possible way. A person can also move to a smaller place rather than take a large office to increase savings.
  • An MSME should always keep its stakeholders in their sight and should always support them by all means.
  • An MSME should always think of new ways to re-invent themselves and try something new. The current lockdown scenario is an ideal time to think and carry out experiments in many ways that can be used to carry out the business strategy.
  • A company should also build a good team of workers for them. It is the first and foremost requirement. They should always be motivated to work for the company. To gain their trust and to gain maximum work from them, a company should always pay them on time and support them financially and emotionally, as corona has destroyed many happy families.
  • A company should never go for a moratorium if they can arrange an EMI loan for themselves.
  • If a company has many loans on them, it should always think of new ways to lower the interest rates. They should always look at the ways such as part payment or foreclosure of the loans because of the more the loan period, the more interest money. But they should never go for a moratorium when loans with EMI are plentily available for them.

Conclusion

We all know that after sunset, there will be a sunrise. These difficult times will also pass by in a few years. Many economists have also forecasted that there would be a quick V-shaped recovery once the pandemic is controlled and the lockdown is lifted. So in this situation, all an MSME can do is have patience and work hard to manage their cash in these hard times.