Credit Counselling for Businesses: Managing Working Capital and Debt

Profitable businesses can still run out of cash. Delayed customer payments, stock build-up and borrowing that doesn't match the business cycle are common reasons. Business credit counselling looks at the whole picture before problems turn into defaults.

Early warning signs

Step 1: Diagnose the cash cycle

Work out how many days money is tied up in stock and in receivables, minus the credit you get from suppliers. A long or lengthening cycle usually explains the stress better than profit does.

Step 2: Match funding to purpose

For MSMEs selling to large buyers, the TReDS platforms let you discount approved invoices quickly. The CGTMSE scheme can support collateral-free credit through participating lenders.

Step 3: Clean up your credit profile

• Check the business's commercial credit report and the promoters' personal credit reports.
• Keep GST returns, bank statements and financial statements consistent. Lenders compare them.
• Register under Udyam to access MSME benefits, including the rules on delayed payments from buyers.

Step 4: Engage lenders early

If repayments look strained, approach your bank before an account becomes overdue. Lenders have more options for accounts that are still in good standing: revised limits, a different repayment schedule or, where RBI frameworks allow, restructuring. Once an account is classified as a non-performing asset (NPA), the choices narrow sharply.

Step 5: Keep business and personal finances apart

Mixing household and business money hides the true cash position and puts family assets at risk. Clear records also make future borrowing easier.

SERNET offers credit counselling to business owners to review borrowing and plan the next steps. Any financing is subject to the lender's assessment and approval.