Higher fuel, LPG, freight, and raw material costs are aggravating working capital pressure on MSMEs, who are already grappling with delayed payments, tighter supplier credit, and rising input costs.
To address this, faster disbursements of business loans from RBI-regulated NBFCs such as Protium can help resolve these problems. Read the blog to know more
Global trade tensions and disruptions in the supply of commercial LPG cylinders continue to put pressure on MSME supply chains, raising the cost of fuel, gas, freight, and raw materials. The impact is already visible across key industrial clusters. Morbi, in Gujarat, one of India’s largest ceramic hubs, has reportedly seen 100 ceramic units close due to disruptions in propane supply. The impact of high costs is also being witnessed on India’s textile industry, which depends on petroleum byproducts, and has reported losses of around ₹100 crore per day. The plastics and polymers sector, where many units operate as MSMEs, is facing acute raw material shortages as well1. Related industries such as agricultural equipment, toys, and healthcare have also sought government support as manufacturing costs continue to rise.
These pressures have added to existing challenges such as delayed receivables, stretched payables, tighter supplier credit, and rising input costs. As a result, many MSMEs struggle to arrange the cash needed to keep operations running on time.
This results in several businesses having to delay purchases, postpone dispatch, reduce stock, or say no to a larger order. Over time, such decisions can affect customer trust and business stability.
One of the possible solutions would be to consider Protium’s business loan solutions that can help MSMEs manage such pressure through secured working capital loans such as Loan Against Property, machinery finance, or unsecured business loans..
Reasons for Rising Working Capital Stress for MSMEs
Working capital stress has increased because regular business expenses have become more difficult to control. Rising costs affect MSMEs differently, but the cash flow pressure is similar. Freight costs reduce margins, delayed payments slow down stock purchase, urgent repairs require immediate spending, and higher LPG or packaging costs affect production before businesses can revise prices.
Supplier credit may also become tighter in many sectors. When the overall market faces uncertainty, suppliers often reduce credit periods or ask for advance payment before dispatching material. This creates pressure for businesses that are already waiting for customer collections.
This is why liquidity planning has become important for MSMEs. It helps businesses continue production, maintain supply, and avoid delays even when the payment cycle becomes stretched.
Solution Beyond TReDS
When receivables are delayed, MSMEs often look for ways to convert invoices into faster cash. TReDS, or Trade Receivables Discounting System, can help eligible MSMEs discount trade receivables from approved buyers.
However, it may not work for every MSME or every situation. Many small businesses deal with local buyers, small retailers, contractors, dealers, distributors, or informal credit networks. Their invoices may not always be eligible for discounting. In some cases, the business may need money even before an invoice is raised.
For example, an MSME may need funds to purchase materials, pay workers, arrange transport, repair machinery, or maintain inventory before billing the customer. These expenses happen before receivables are created. TReDS may not solve this type of cash gap.
This is where business loans can work alongside TReDS. While TReDS can support invoice-based liquidity where eligible, business loans can support wider working capital needs.
How Business Loans Can Help
Business loans can be useful when expenses continue but customer payments are delayed. They can also help when an MSME receives a new order but does not have enough cash to execute it without affecting regular operations.
A loan at the right time can help the business avoid stopping production, delaying dispatch, or losing customers due to temporary cash pressure. It gives the business breathing room during a difficult payment cycle by supporting raw material purchases, supplier payments, fuel and freight costs, salaries and wages, rent and utilities, inventory stocking, and order execution.
These loans can support manufacturers, traders, distributors, workshops, retailers, food units, and service businesses. The main purpose is to keep operations active when cash inflows and outflows do not match.
Loan Against Property to Support Larger Funding Needs
Some MSME funding needs may be larger than routine working capital gaps, especially during periods of supply disruption and cost volatility. A business may need to buy bulk raw material before prices rise further, clear supplier dues to protect credit terms, consolidate high-cost debt, repair or upgrade a production unit to avoid downtime, or purchase critical machinery to meet pending orders.
These requirements usually need higher-value funding and a more structured repayment plan. Loan Against Property, or LAP, can help eligible MSMEs raise funds against residential, commercial, or industrial property. The property remains with the owner, while the loan can be used for business purposes.
For MSMEs that own eligible property, LAP can provide liquidity without disturbing business assets or daily operations. It can be useful when funding needs are greater and the business requires a planned source of finance.
Why Manufacturing and Machinery Finance Matters
For many MSMEs, machines are not only production assets. They decide whether an order can be completed on time, whether quality can be maintained, and whether higher input costs can be managed through better efficiency. If an old machine consumes more power, breaks down often, or slows production, it adds to the cost pressure that the business is already facing.
Machine downtime can create losses beyond repair costs. It can stop production, delay dispatch, keep workers idle, and prompt customers to look for another supplier. In sectors such as fabrication, packaging, textiles, food processing, engineering, and small-scale manufacturing, even a few days of disruption can affect the entire cash cycle.
This is why machinery finance becomes relevant during such periods. It can help MSMEs repair critical equipment, replace inefficient machines, upgrade production capacity, or invest in machinery that reduces wastage and improves output.
When Unsecured Business Loans Can Be Useful
Not every MSME wants to pledge property or fixed assets for a loan. Some businesses need quicker access to funds for short-term needs, especially during a volatile period like the current one. In such cases, unsecured business loans can be useful.
Protium’s unsecured business loan of up to ₹50 lakh can support eligible businesses without collateral. This can help MSMEs respond to urgent business requirements more quickly.
Unsecured business loans can support short-term gaps, emergency expenses, seasonal stock purchases, order execution, and pressure caused by delayed receivables. They can be especially useful when the business need is urgent and the repayment plan is clear.
While business loans can help MSMEs respond to immediate requirements, timely access to the right lender is equally important.
Why MSMEs Can Consider NBFCs for Faster Credit Access
When working capital pressure rises, timing becomes important. A delayed loan may not help an MSME that needs funds quickly to manage a payment cycle, execute an order, or handle an urgent business requirement. Thus, NBFCs can be useful in the following ways:
- Quick Assessment and Faster Approval
NBFCs can be useful when MSMEs need faster credit decisions. During periods of cost pressure or supply disruption, quick access to funds can help businesses avoid delays in production, dispatch, or vendor payments. - Flexible Loan Options
NBFCs may offer loan options based on business cash flow, banking records, repayment behavior, and operating needs. This can help smaller businesses access finance based on how they actually operate, not only on traditional documentation strength. - Simpler Documentation for Smaller Businesses
Many MSMEs, especially in Tier-2 and Tier-3 cities, may not have complex financial records. NBFCs may support such businesses with simpler documentation, depending on the loan type, eligibility, and assessment process. - Loan Options for Different Business Needs
MSMEs can approach NBFCs for different funding requirements, depending on the size, urgency, and purpose of the loan.
- Quick Access to Funds
Faster access to credit can help MSMEs respond to urgent payment requirements without waiting too long for approvals. - Working Capital Support
NBFC loans can help businesses manage short-term cash-flow gaps when regular expenses continue but customer collections are delayed. - Collateral-Free Finance, Where Eligible
Some MSMEs may be eligible for unsecured loans that do not require property or fixed assets to be pledged. - Machinery and Business Expansion Finance
NBFCs can support funding for machinery purchase, repair, production improvement, or business growth requirements. - Structured Repayment Options
Repayment plans can help MSMEs manage EMIs in a way that is better aligned with their cash flow and business cycle. - Useful for Tier-2 and Tier-3 MSMEs
This can be especially useful for businesses that need timely credit but may not have the same documentation strength as larger enterprises. For such MSMEs, NBFCs can provide a more practical route to finance during periods of uneven cash flow.
Documents MSMEs Should Keep Ready for Quick Loan Disbursal
Access to credit becomes easier when business records are organised. MSMEs do not need to wait until a cash gap appears to prepare documents. Keeping basic papers ready can help speed up the loan process and reduce last-minute stress.
Important documents may include the Udyam Registration Certificate, business and owner PAN, Aadhaar and KYC documents, GST registration where applicable, bank statements, income tax returns or financial statements where available, and such basic records.
Besides these, the business owner must also have:
- Business Ownership Proof
This helps establish who owns and operates the business. It may include registration documents, partnership deeds, proprietorship proof, or other valid records. - Shop Act, Trade License, or Factory License
Where applicable, these documents help confirm that the business is operating through the required local or sector-specific permissions. - Invoices and Purchase Orders
Invoices and purchase orders help show business activity, customer demand, and order flow. - Existing Loan Repayment Details
If the MSME already has loans, repayment details help the lender assess current obligations and repayment behavior. - Property Documents for LAP
For Loan Against Property, property ownership records, title documents, and related papers may be required. - Machinery Quotation or Invoice for Machinery Finance
For machinery finance, a quotation or invoice helps establish the cost and purpose of the loan.
Organized documents can reduce delays and help lenders understand the business requirement more clearly. However, paperwork readiness is only one part of responsible borrowing. MSMEs must also check whether the lender, payment process, and loan communication are genuine before moving ahead.
Safety Checks Before Applying for a Business Loan
Access to credit is important, but loan safety is equally important. MSMEs should be careful before sharing documents, paying fees, or accepting loan offers. A genuine loan process should always be clear, traceable, and handled through official channels.
Here are the steps MSMEs must take to ensure financial safety:
- Check the Lender’s RBI Registration
MSMEs should verify whether the NBFC is registered with the Reserve Bank of India. This helps confirm that the lender is legitimate and protects business owners from fake loan providers, fraud agents, and unauthorized loan apps. - Use Only Official Company Channels
Loan applications should be made through the lender’s official website, branch, or verified support channel. MSMEs should avoid suspicious links, unknown WhatsApp numbers, and unofficial agents. - Pay Fees Digitally, Not in Cash
Application or processing fees should be paid only through official digital payment channels. If payment is made by cheque, it should be drawn directly in favor of the company. Payments should never be made to an individual, personal account, agent, or third-party wallet. Cash payments for “file approval,” “fast sanction,” or “guaranteed loan” should be treated as warning signs. - Keep Proof of Every Payment
MSMEs should save receipts, transaction IDs, email confirmations, and acknowledgment messages. These records can help if there is a dispute or service issue. - Read All Charges Before Signing
Before accepting a loan, MSMEs should review the processing fee, interest rate, EMI amount, repayment date, penal charges, foreclosure terms, prepayment terms, late payment charges, and insurance or bundled charges, if any.
A loan should support the business, not create confusion later. Clear understanding at the beginning can prevent disputes and repayment stress.
Where Protium Fits In
Working capital stress can affect even a running business. MSMEs need timely finance that supports real business requirements, not only long-term expansion plans. Protium can support them with business finance designed around practical operating needs, as seen in the case of PSR Enterprises.
The COVID-19 lockdown showed how quickly an external crisis can disrupt operations. PSR Enterprises, a Bengaluru-based business operating PG accommodation, catering, and wholesale hardware, faced a near-total shutdown during the pandemic as its PG business reduced from 11 operational properties to only one.
At that stage, the business needed funds to recover and restart. Protium supported PSR Enterprises with a Loan Against Property. The loan was sanctioned and disbursed within a couple of days, with most documents collected or verified digitally. The funds helped PSR Enterprises reinvest in the business and revive its remaining 10 PG properties.
The case is relevant to today’s geoeconomic pressures because the crisis may be different, but the cash-flow challenge is similar. Whether disruption comes from lockdowns, higher operating costs, supply shortages, or delayed payments, timely access to structured finance can help MSMEs protect operations and recover faster.
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1 Observer Research Foundation, Strengthening MSME Resilience in an Era of Geoeconomic Turbulence, April 2026