The Untold Story of Cash Flow Management of SMEs


The process of measuring, monitoring, and optimizing the number of net cash receipts minus the costs incurred by your firm is known as cash flow management. An important factor that establishes a company’s financial health is its cash flow.

It is quite crucial for a small company. This is because the company will quickly experience cash flow issues if it spends more than it makes. The most important cash flow component for small firms is to prevent any substantial cash flow constraints brought on by excessive expenditure.


Credit Guarantee Fund Trust for Micro and Small Enterprises is the full name of the organization. Financial institutions offer this fund to ensure credit to MSEs and SMEs.

This program helps aspiring entrepreneurs to start an SME or MSME. These companies are regarded as the Indian economy’s bulwark. The advance is paid back thanks to the guarantee, which takes care of the borrower’s default. Thus, Niyogin helps with credit aggregation as part of their Urban Tech Portfolio.

Eligibility Criteria:

The credit guarantee is considered to back the borrower with collateral and a third-party guarantee by the CGTMSE rules. A financial institution, which may be an NBFC, loans money to the MSME and SME sectors under this program and these companies are qualified for a fund with a maximum credit cap of Rs. 2 crores.

Problems of cash flow management in the Indian scenario:

Unfortunately, India’s habitual late payment cycles make it difficult for SMEs to manage their cash flow. According to a recent IFC survey, 35% of Indian SMEs don’t get paid till 90 days after the products or services are provided. This implies that a significant portion of the SME’s revenue, which should ideally be accessible, is locked up as receivables at any given time. When the SME’s cash flow is out of whack, it must either delay making crucial business decisions or risk defaulting on its obligations.

Having said that, India’s micro, small, and medium companies (MSMEs) are undeniably a force to be reckoned with. They are hailed as the economic growth engine. Right now, 111 Million jobs in the nation are solely attributable to this 63-million-unit sector. Also, in 2020–21, MSMEs contributed close to 29 percent of India’s GDP.

The way forward and role of Niyogin in such effective management:

Businesses requesting loans must list their assets and produce a cash-flow statement. Even without any assets to back them up, cash-flow-based money lending enables businesses to borrow money based on the projected cash flow of the money.

For firms, such as SMEs, that cannot use tangible assets as security, cash-flow lending (CFL) is the ideal option (small and medium-sized enterprises). SMEs typically keep their assets and sales below a specific level; therefore, cash-flow loans benefit these businesses. Thus, Niyogin plays an anchoring role in providing an umbrella solution to such micro cash management problems. Therefore, a timely infusion of funds can help SMEs manage their cash flow and overcome problems caused by late payments, unplanned expenses or costs associated with expansion plans. SMEs can effectively simplify their finances and foster growth even during periods when they may not have as much cash inflow as anticipated by utilizing cost-effective working capital.

Leave a comment

Your email address will not be published. Required fields are marked *