SME export can touch new heights but first these issues should be addressed
SME exports face serious challenges like lack of instant loan approval, collateral-free post-shipment finance, minimum documentation, invoice factoring, etc.
SME Export: SMEs or small and medium enterprises account for near 40 per cent of India’s total export volumes but are some of the most underserved when it comes to working capital provisions. Demands for collateral, long processing times, heavy paperwork burden, and other such factors contribute towards making working capital highly inaccessible for SMEs. Institutions like factoring firms and NBFCs offer alternative financing solutions; however, many SME exporters are unaware of these offerings. At a time when the Modi government is seriously thinking to enhance the export via SMEs these issues need an urgent address, say SME experts.
Pressing for awareness among the SMEs for finding alternatives to credit capital Rajeev Chawla, Chairman, IamSMEofIndia told Zee Business, "Invoice factoring is a process of procuring finance by selling the invoices of your transactions to a third party known as the factor. Based on your transaction history and other parameters, the factor gives the seller (the exporter) a credit line which they can then use to finance further transactions to other buyers (importers). In most cases, the seller gets 80 per cent of their invoice value upfront from the factor (often without the need for collateral), and the remaining 20 per cent — minus the factor’s fees and interest — after the buyer transfers the value of the invoice to the factor.
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Vikas Yadav, Senior Business Development Manager at Drip Capital — a US-based trade finance firm — said, “There are many small and medium industrial units in India and many of these SMEs face severe issues with managing their working capital because of a lack of adequate financing options. In order to solve this problem, we provide collateral-free post-shipment finance to Indian exporters with instant approvals and minimal documentation.” However, he said, many SME exporters are unaware of these offerings and need to be educated about the same.