Helping Indian SMEs with Debt Financing and Loan Consolidation by FinanSMEThe 2016 Annual Report by the Ministry of Micro, Small and Medium Enterprises states that SMEs are responsible for 8 per cent of the country’s GDP, 40 per cent of the country’s total exports and about 45 per cent of India’s total manufacturing output. The SME sector is also a major employer in the country, employing more than 100 million individuals. Hence, it is impossible to ignore SMEs, which are vital to the Indian economy and growth. However, many traditional lenders are wary of lending to SMEs, and find them too risky. Due to high interest rates and limited credit options, SMEs are finding it difficult to break their shackles and experience growth and sustainability. The SME Financing PuzzleMany traditional lenders in India state that SMEs are too dependent on cash transactions and have a history of poor record keeping. While this is true to a certain extent, after the demonetisation in November 2016, many SMEs have transitioned to digital payments, including UPI payments, net banking and e-wallets. However, this has not helped this sector shed its image and get access to favourable credit facilities. MFIs and NBFC do offer small and medium enterprises credit facilities that are catered to the needs of this sector, but the scale and volume are insufficient to meet the regular credit needs of SMEs. This is the reason SMEs should look more closely at debt refinancing & consolidation loans. These loans can not only offer customised credit solutions, but also help SMEs improve their cash flow. Benefits of Debt Refinancing and Consolidation LoansThere is a tendency among small and medium enterprises to take loans from different avenues. This can often cause a problem as these loans are provided at high interest rates. On the other hand, debt refinancing & consolidation loans can make life easier for SMEs. Here are some ways that this could be the right path of SMEs that are burdened by debt and multiple loans. One Debt with One Payment: Multiple loans can take a toll on the finances of SMEs, and this can make it difficult for them to prioritise their budget and spending. However, when they opt for consolidation loans, all existing loans are bundled into one single loan. This does away the hassle of keeping note of multiple loans and their repayment dates. Lower Interest Rate: One of the main reasons for debt financing & consolidation loans is lower interest rates. As stated earlier, banks find SMEs too risky, and if and when they offer loans to them, they charge high interest. Rather than repaying multiple loans with varied interest rates, refinancing and consolidation allows SMEs to roll their liabilities into one loan with more attractive interest rates. This helps to make the repayments more manageable. Improved Cash Flow: When it comes to multiple loans and differing repayment dates, SME face serious cash flow issues. SMEs are constantly plagued by repayments which has an adverse effect on their cash flow. This, in turn, affects their sustainability. However, with a single loan to repay, the cash flow situation improves, allowing SMEs to plan their monthly production and procurement with ease. As you can see debt refinancing & consolidation loans for SMEs can prove to be a lifesaver. Hence, if you are operating a small or medium enterprise, you should seriously consider debt refinancing or loan consolidation to ease your financial woes. FinanSME is the financial arm of PowerSME. As an online financial platform, FinanSME helps SMEs in India get access to affordable and timely finance to meet their business needs. To get more details about debt financing & consolidation loans for SMEs, get in touch with FinanSME.Article Source: eArticlesOnline.com