Today, businesses of all types are navigating uncertainty and volatility on multiple fronts. The consistent occurrence of high inflation, supply chain disruption, geopolitical unrest, technological changes, worker shortages, and a prolonged pandemic erects a quagmire for medium- to small-size businesses. Ever since the pandemic hit the world, all types of economic warning signs have been flaring for business leaders, like the growing risk of recession and rising interest rates, to name a few. In such tribulations, cash is king. Acquiring capital or cash from banks in such uncertain times is a bit tricky, as banks, too, demand something to be kept as security. Since midsized companies are not renowned, they face challenges in accessing capital to survive the crisis.
In spite of the challenges faced in the past few years, India has come to light as the fastest-growing large economy in the world. With an estimated 7.8% rise in GDP, the country is at a critical stage of its development, as per The Economist, a global media and information services company. Since midsize companies directly or indirectly contribute in excess of 42% of India’s GDP and are major growth catalysts for the Indian economy, these companies can form the backbone of the entire economic ecosystem as they provide jobs across all sectors. Despite the mesmerising value addition of midsize companies in the country, the critical challenge they face is the lack of access to capital amidst tempestuous times to sustain their businesses.
The traditional capital providers of midsize companies perceive businesses through the lens of previously audited financials and the availability of collateral security. Although these providers are happy to lend funds to well-established brands and business leaders, they might pose restrictions for midsize companies. In uncertain times and the fast-growing nature of the economy, which is filled with startups, young entrepreneurs, and newer innovations, the entire equation of capital financing for midsize companies needs to be taken into consideration for their survival in tough times. In the modern scenario, these companies need an advanced approach to recognise the company’s growth potential, and cash flow availability must meet the allocation requirements to access capital.
As the wave of disruption confronts midsize companies, they need to go beyond traditional modes of operation. Companies are required to work closely with capital providers in niche industries so that they can easily understand the nuances of their financial needs and capital requirements. As per the report published by the India Briefing on Micro, Small, and Medium Enterprises in India, there are about 63.05 million micro industries, 0.33 million small enterprises and about 5,000 medium enterprises in the country. Albeit, when it comes to capital markets, these companies are mostly left wandering in the dark in upheaval times. Whether these companies require debt, an equity investment, or an acquisition, for the most part, they are neglected. The struggle to access capital from banks and other financial institutions creates a messy situation for midsize companies to survive in turbulent times.
In order to keep their businesses thriving in uncertain times, midsize companies need to navigate the future with full confidence by creating relevant sources of capital. As hundreds of thousands of midsize companies have pent-up demand for capital or loan requirements, not every bank or financial institution is certain about offering loans to companies, especially those not well-known in the industry. In order to secure intact funding in turbulent times, businesses can hunt for the best deal they can get within their circle. With persistent general economic turmoil, pandemic impact, and inflation on the loose, the old gang of capital supplies might have altered. The previous commercial banks, private equity firms, and numerous non-banking lenders might no longer be concerned about working with you.
The world is evolving with advanced technology; midsize companies shouldn’t stay behind in finding the best deal through a tech-enabled marketplace. Though all lenders include banks, some of them, too, offer online solutions to the financial needs of midsize companies. Using shopping tools like Axial and Opus Connect, the equity fundraising networks can help midsize companies access capital in uncertain times. If any company’s financing needs are more than $50 million, they can turn their eyes towards platforms like Alliance-Bernstein and MidCap Financial. To sail their boats through economic turmoil, midsize companies need to pay attention to their operational efficiencies by ensuring tight controls over their finances and maintaining confidentiality and process control to secure relevant deals.