The government has recently announced a special package for small businesses impacted by the covid-19 outbreak. After the good news came, many start-ups are working overtime to get MSME registration for their business. One out of it is ‘The Renal Project’, its Chief Executive Shashank Moddhia, said “We need to ensure that we have access to funds. We have applied for the MSME registration so that we can avail collateral-free loans at a time when it is even more critical for us to obtain expensive medical equipment to keep the centres running."
The Renal Project is a startup that runs a chain of dialysis centres in the suburbs of Mumbai and Pune. It is working overtime to get a micro, small and medium enterprise (MSME) registration for his business.
Government Schemes for MSMEs
The government has announced various schemes to address the financial crisis faced by MSMEs, by giving them access to credit during a squeeze on liquidity. Sanjay Mehta, founder & partner 100X.VC, said “With the Atmanirbhar package, MSME registration for many startups has almost become a necessity which besides to provide easier access to liquidity also allows benefits from measures like MSME incubators." Sanjay Mehta is an early stage VC and board member, TiE Mumbai, which has started programmes to guide startups for registering as MSMEs.
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How Businesses can qualify as MSME?
There are stringent rules for businesses to qualify as MSMEs. It includes revenue & investment parameters. As per industry experts, while registering as MSMEs may not be a lasting solution for most startups, it will nonetheless help them tide over the current crisis of coronavirus. Anil Joshi, managing partner, Unicorn India Ventures, another early-stage tech-focused VC said, “Startups cannot be classified as MSMEs for lifelong, but it would be in the interest of companies to register, keeping in mind the status can change over time."
Emergency Loans
The government has also approved to create Rs 50,000-crore fund of funds to help select high-growth MSMEs with a good track record, & help them list on the exchanges. Piyush Goyal, Commerce Minister recently said that most startups will be eligible to additional liquidity and funding under the credit support schemes for MSMEs in the Aatmanirbhar Bharat Abhiyan package.
But, not all venture capital firms are finding it important for their investee companies to register themselves as MSMEs. Mohit Gulati, managing general partner, ITI Growth Opportunities Venture Fund, believes startups that are institutionally funded were told in advance to conserve capital & were also helped with reserves to last up to a year. It is the non-funded companies that are more expected to register at present for the lack of backing.
He added, “Registering startups as MSMEs can really hurt small-micro entrepreneurs as they compete with much larger businesses for the same bank loans. We don’t encourage our startups for MSME registrations even if they are in a position to do so, including those in manufacturing space."
Source: Livemint
