Challenges of Lending and Credit Assessment for SMEs in India

Abstract

Small and Medium-sized enterprises are the most varied business groups that deal with manufacturing, services, trade and agri-business. These entities face numerous challenges in financing their projects and for working capital needs. This paper is an attempt to understand the growth and the prospects for growth of the SMEs in India. The study is also to understand the difficulties faced by lending agencies in appraising SMEs in the wake of accounting and financing practices of SMEs. Further the paper also makes an attempt to understand the process and importance of the credit scoring model in relationship to theoretical understanding of what a bank or financial institution as a lender would see (as the process of a bank in appraising the loan application as confidential and tailored as bank specific). The paper would enable an SME entrepreneur learn about the importance and methodology of the processes and the way in which he/she should behave in terms of maintenance of accounts, auditing of accounts and financing. Keywords : Small and medium enterprise, lending, credit asessment

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