The festive season is a time for MSMEs to benefit from the increased demand for products. As apparel, textiles, dairy products, food items, decor, etc are sought after, sectors like manufacturing, logistics, travel, dairy, and retail get busy to meet this demand. While this surge brings revenue and growth, operational costs also rise, requiring adequate working capital to cover additional expenses compared to regular days.  

Here’s how MSMEs can bridge this financial gap by opting for short-term loans that are flexible and convenient. 

Understanding Short-Term Loans  

Short-term loans or short-term financing offer MSMEs swift and hassle-free access to capital for periods ranging from a few months to a year. Unlike traditional solution providers, this option requires minimal documentation and features quick processing. If taken from select financial institutions such as non-banking financial companies (NBFCs), it provides MSMEs with a convenient and timely funding source. 

Here are some examples of short-term loan products designed to cater to the different needs of an MSME:   

• Working Capital Loan – Helps businesses manage their day-to-day operational expenses, such as purchasing raw materials, managing inventory, or paying salaries. They can be secured or unsecured, depending on the lender’s requirements. 

• Machinery & Equipment Loan — A machinery loan is more focused and targets specific, non-customized machinery that can be rapidly deployed and utilized in existing operations, thereby providing immediate value. 

• Business Loan — MSMEs can opt for a business loan for multiple reasons, including expansion, growth, scaling of production, procuring raw materials, etc. The amount of the loan is allocated depending on the MSME’s creditworthiness and growth plans.  

5 Key Benefits of Short-Term Finance 

MSMEs can generate up to 20-30% of annual revenue across all categories during peak festival season. Short-term finance can help them maximize their festive season sales potential with the following benefits: 

1. Swift Access to Capital 

Short-term credit offers MSMEs quick and convenient access to funds, bridging the gap left by traditional lenders’ lengthy and time-consuming procedures. With streamlined processes, MSMEs can secure the necessary funds promptly. 

2. Effective Working Capital Management Solution 

Short-term credit facilities inject liquidity into MSMEs, enabling them to manage working capital efficiently. This facilitates prompt payment to suppliers, purchase of raw materials, and addressing operational expenses. 

3. Bridging Funding Gaps During Peak Periods 

Short-term credit helps bridge funding gaps during peak periods, allowing them to capitalize on opportunities without straining finances during off-peak periods. 

4. Optimizing Inventory Levels 

Balancing inventory levels is crucial. While overstocking can strain finances, tying up capital in unsold stock can impact negatively if not handled efficiently. This is where last-minute Short-term financing helps MSMEs to manage their inventory in a way that minimizes their overall inventory stock while remaining competitive. 

5. Mitigating Supply Chain Disruptions 

Supply chain disruptions, including transportation delays and inventory shortages, can cost MSMEs 25-35% of their annual revenue during festive seasons. Short-term finance helps MSMEs address sudden supply chain gaps, ensure timely inventory replenishment, and maintain business continuity. 

Top 3 Essential Tips for MSMEs to Secure Short-Term Finance 

To secure short-term finance, MSMEs must consider the following: 

1. Build a Strong Credit Score 

Maintaining a good credit score is crucial for MSMEs seeking quick loans. Ensure timely payment of existing debts, keep a low credit utilization ratio, and regularly monitor your credit reports for errors. This demonstrates your ability to manage debt responsibly and increases the likelihood of loan approval. 

2. Accurate Financial Documentation 

Providing accurate financial documents such as balance sheets, profit and loss statements, cash flow statements, tax returns, business plans, etc. is vital for rapid loan processing. This transparency helps lenders assess your business’s financial health and make informed decisions. 

3. Solid Business and Clear Repayment Plans 

Demonstrating a solid business plan and a clear repayment plan avoids lender concerns about recovery. Develop a comprehensive business plan outlining realistic growth projections, cash flow management strategies, and contingency plans for potential setbacks.  

Following the above-outlined strategy, a well-thought-out plan, and funding for NBFCs such as Protium Finance Ltd, MSMEs can scale tremendously during the festive season.  

MSMEs can contact Protium using the contact details below to learn more about Protium’s business loans, which are available within 7-10 working days and have flexible repayment plans.  

– Visit: https://protium.co.in/ 

– Call: 8828820004 from 10 am to 7 pm, Monday to Saturday 

– Email: customerservice@protium.co.in