How companies can prepare for an audit

introduction

The small and medium-sized enterprises (SMEs) are the backbone to transform India into a developed nation. They are the defibrillators for talent, innovation. Creativity and entrepreneurship which are essential for the economic development of a nation like India. Statistics show that the contribution of SMEs to industrial production is about 45%, the contribution to the country’s total exports is 40% and, very importantly, it employs over 60 million people creating 1.3 million jobs every year. In addition, the SMEs produce over 8000 high-quality and valuable products for domestic and overseas markets. With an annual growth rate of 8%, 12 million people are expected to join the more than 30 million SMEs in India to push development into another dimension.

Potential for the development of SME capital markets:

SME financing has a traditional policy of increasing profitability or we can say bankability, Asian policy makers had not considered the development of SME capital markets as meaningful for a long time for the following reasons:-

1. Bank-centric financial system established,

2. still underdeveloped capital markets,

3. fragile internal control systems of SMEs,

4. no claims on SMEs and investors for capital market financing,

5. Cost and size considerations for setting up and running SME capital markets.

However, this is the previously formed opinion and is not backed by clear evidence, advanced technology can enable the creation of SME capital markets at a reasonable cost. This may have hampered the policy formulation of capital market financing for SMEs due to less coordination between the numerous policy makers responsible for the development and financing of the SME sector. This section assesses the real intention of the supply side (regulators, policy makers, market organisations, investment firms and investors) and the demand side (SMEs) for the development of an SME market, based on the results of intensive surveys, and explores possible directions to improve long-term financing opportunities for SMEs.

ANALYSIS OF SUPPLY PAGE:-

• Policy stance on SME capital markets

After examining the supply side of SMEs in different countries, more than 80% of the respondents found that the development of an SME capital market is a national policy priority. Behind their responses were three dimensions of perception: (ii) awareness of the underserved segment, i.e. SMEs, in the capital markets space, (ii) increasing role of capital markets as part of national growth strategies, and (iii) limitations of traditional bank-centric financial systems, according to a survey of the country’s growth capital More than 80% of respondents have found that long-term financing SMEs are driving Asia’s growth, which continuously drives the global economy, and this is accelerating SME growth by providing growth capital for SMEs, contributing to a resilient national economy that the restrictions bank financing for SMEs require different financing modalities for them what is an SME capital market Your answers for the developers t the SME markets are likely to be built from a long-term strategic point of view.

1. POLICY MEASURES TO BE TAKEN:

To stimulate the SME policy market, there are several options and approaches at national level. From country to country, these approaches are prioritized by policy makers. Overall, however, all study countries considered a comprehensive policy framework for SME access to capital markets to be necessary; In particular, policies to develop an investor base for an SME market and to promote market knowledge among SMEs and investors are the most important measures to be taken by the government in order to realize a functioning market. According to the study in the PRC, the establishment of a financial and non-financial database of SMEs, including white paper SMEs, is ranked as the top guideline that supports the field of SME markets with transparency. In India, policies to build a base of professionals to support SMEs in capital markets ranked e.g. B. Disclosure support by consultants and Certified Public Accountants (CPAs), primarily as required measures for active SME markets.

2. Critical Factors To Creating A SME Market:-

In India, the top three supply-side priorities were (i) raising funds quickly for SMEs, (ii) simplified listing procedures and (iii) disseminating information on SME capital markets, while these ranked fourth, third and tenth respectively demand side. The top three on the demand side were (i) simplified disclosure requirements, (ii) low cost of listing and maintenance, and (iii) simplified listing procedures, while these ranked tenth, fifth, and second on the supply side. The item simplified listing procedures was shared between both sides under the top 3 topics. The critical factors for creating an SME market vary from country to country due to different circumstances of SME financing and capital markets. However, these results point to a common problem in priority policies on both the supply and demand side: ie policies to reduce the cost burden on SMEs in accessing capital markets. When setting up an SME market, the question of cost is often addressed, since the market size is expected to be small in general.

DEMAND SIDE ANALYSIS

1. Funding Instruments:-

• Term Financing

• Online Seller Financing

• Pay later

• Merchant cash advance

• Supply Chain Finance

• Taxi financing

These are some of the instruments made available for SME financing. While these are unique, they underscore the need for tailored financial products for unique business lending needs.

2. Willingness to access an SME capital market:-

The discussion centers on whether there should be a dedicated venue for equity financing and debt issuance for SMEs, regardless of the stock market, in order to create a base for high-quality SMEs driving sustainable economic growth and pro-poor growth nationally. The demand-side survey assessed their willingness to access an SME capital market. Overall, the surveyed SMEs in the study countries are likely to use such a specialized marketplace for their future financing if it is established, with positive answers (combined yes and more likely yes) of 77%, 83%, 82% and 54% in the PRC, India (for shares), the Republic of Korea (for shares) and Malaysia (for shares). In the last three countries, they relatively preferred access to a stock market rather than a bond market. The main reasons for their preference for accessing an SME market are generally explained in four countries (i) overall easier financing, (ii) financing alternatives besides banks and (iii) expected increased social credibility of the company. Meanwhile, they generally stated that the main barriers to access an SME market were (i) complicated procedures to issue shares and (ii) costly issuance of shares such as listing fees and maintenance of their listed shares as far as equity financing is concerned. This suggests that, given the potential demands on SMEs, simple procedures and a low cost structure are key to designing a functioning SME capital market.

need for equity financing

In addition to the challenges of accessing credit, SMEs may also lack awareness of equity, which can be an alternative source of finance. Even for widespread startups, the help of incubators and angel investors who provide funds is required for the creation of a formalized company. High-end ventures require a larger amount of capital, which is then serviced by venture capital funds. In addition to equity, the company also needs borrowed capital for working capital. In all countries, the SME sector has thrived largely due to access to finance through various provisions such as government-backed guarantees, credit insurance for export-oriented entities, and equity finance schemes. These provisions are complemented by an institutional infrastructure for advocacy, technical research, funding platforms and easy access to services.

BCB Finance Ltd. (BSE) and EMERGE (NSE) are the two stock platforms. Because SMEs are small businesses, they are in the early stages of their growth cycle and also at the extreme end of the risk curve – very high returns come with very high risk.

Conclusion

Asia’s largely bank-centric financial systems require narrowing the credit supply/demand gap as a key policy pillar to improve SMEs’ access to finance. Meanwhile, diversification of financing modalities is another key policy pillar to better meet the diverse financing needs of SMEs and expand their financial accessibility, which includes the development of capital market financing for SMEs as a place to provide long-term growth capital.

The discussions propose five core elements for the development of an SME capital market:

(i) Demand generation focusing on target segments such as social enterprises and women-led SMEs, developing a cost-effective structure for SMEs’ access to capital

markets;

(ii) building an investor base providing initial venture capital for potentially growth-oriented SMEs, with promotion of the venture capital industry;

(iii) strengthening market knowledge of potential SME issuers and investors;

(iv) investor protection mechanisms backed by relevant laws and regulations; and

(v) Facilitation measures for access to an SME market, backed by a comprehensive policy support framework with well-organized policy coordination between regulators and line ministries responsible for SME sector development and access to finance.

The demand-side survey determined the long-term financing needs of SMEs. They seek access to formal financing and diversify long-term financing instruments for stable business growth, while reducing their dependence on their own capital and informal financing.