Over 70% of MSMEs seek loans for short-term needs, less than 30% for growth: Paisabazaar – CNBC TV18

Over 70% of MSMEs (Micro, Small, and Medium Enterprises) are seeking loans to meet immediate financial needs, according to an analysis by Paisabazaar, a marketplace for consumer credit.

These needs include working capital expenses, purchasing raw materials, and consolidating debts.

“In contrast, fewer than 30% of businesses are seeking credit for growth initiatives such as marketing, upgrading machinery, or expanding office space,” the report said.

The analysis, which covers business loan applications made on Paisabazaar’s platform since January 2024, highlights the ongoing liquidity crunch faced by small businesses.

Nearly 45% of applications were driven by the need for working capital, which is essential for managing day-to-day expenses like paying salaries, rent, utility bills, and suppliers.

A further 24% of MSMEs needed loans to purchase raw materials and maintain inventory levels, especially in manufacturing, retail, and seasonal industries.

“Managing cash flow can be a challenge at times for small businesses. Payments get delayed, or unexpected expenses arise. As I have a good credit history, I am comfortable taking business loans to bridge these short-term gaps,” a Mumbai-based self-employed consumer was quoted as saying in the reoort.

Additionally, 15% of MSMEs sought loans for marketing and customer acquisition, while 9% focused on upgrading machinery to improve productivity and reduce costs.

A small fraction, about 3%, applied for loans to expand their office spaces or purchase new facilities.

Paisabazaar’s Chief Business Officer, Gaurav Aggarwal, emphasised the importance of timely and affordable credit for MSMEs’ growth.

The demand for business loans is primarily concentrated in top metro cities, with Delhi NCR and Mumbai leading the way. However, non-metro cities, including Jaipur and Surat, have also contributed significantly to the growing demand.