A once-in-a-century pandemic called COVID-19 had a significant negative impact on nearly every area of the Indian economy. Nearly all firms have felt its effects, but small enterprises in India, which make up the majority of the country’s economy, have been particularly hard hit because they typically have low profit margins and little liquidity. Continue reading to find out how COVID-19 has affected India’s small companies.
Negative impact on the majority of small businesses in India
- According to a report, more than 82% of small businesses in India have been affected negatively due to COVID-19, with those in the manufacturing sector experiencing more troubles. The survey conducted among 250 companies also found that 70% of businesses feel that it will take them at least a year more to recover from the pandemic blues and go back to demand levels before the emergence of COVID-19.
- Note that globally, India has been one of the worst affected countries due to the pandemic. Just as things were slowly getting on track, the country was hit hard by the second wave that proved to be worse than the first. This forced state governments and local authorities to impose mini lockdowns, hampering production and operations.
Challenges for small businesses in India due to the pandemic
Shrinking revenues
Small businesses already operate on thin profit margins. The resultant lockdown due to COVID-19 took a toll on their revenues, throwing them in the face of an existential crisis. A prominent credit rating agency pointed out that the margin of small businesses would contract by 200-300 basis points, especially for the micro-segment.
Shrinking margins mean companies can face issues related to working capital, thus missing out on their commitments. However, a small business loan after COVID-19 can help them overcome this challenge to a great extent.
Low creditworthiness
Shrinking margins will also hinder the creditworthiness of small businesses, further enhancing their liquidity problem, something that they have been grappling with for a long time. With creditworthiness and liquidity under pressure, small businesses will find it challenging to meet day-to-day needs and complete existing and new orders coming their way.
The positives and the way forward
While the pandemic has affected small businesses negatively; on a positive note, it has bolstered the pace of digitisation. Nearly 82% of the surveyed businesses have digitised their daily operations, which has helped them reduce costs and boost competitiveness.
While the Government of India has come up with relief measures for Small and Medium Enterprises (SMEs) suffering the brunt of the pandemic, there’s still a long way to go, for things to normalise. To scale businesses, SMEs need better market access and finance at their disposal. This is where getting a customisable business loan after COVID-19 can be helpful in expanding operations.
How did Business Loans help After COVID-19?
As evident, businesses are already under tremendous pressure on the liquidity front due to the pandemic. A business loan gives them the much-needed funds to meet their working capital needs at a competitive interest rate and collateral-free.
Relaxed repayment tenure facilitates easy repayment, and in most cases, there are nil foreclosure charges. Perhaps, the biggest advantage is the quick disbursal of funds as the loan warrants minimal documentation. With money at their disposal, businesses can address a range of needs, including paying vendors, fulfilling new orders, undertaking digitalisation processes, etc.
At the same time, with adequate money, they can implement strict COVID-19 measures within premises, including regular sanitisation and tweaking infrastructure in a manner that ensures social distancing, among others.
If you are a small business entity looking for a cost-effective business loan scheme after COVID-19, creditsuccess offers unsecured business loans for SMEs and MSMEs on easy terms and conditions.
