January 2026
Issue: 25
Why Businesses Still Struggle to Access Credit?
Quote of the Month
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
Did you Know?
Rūpya
The word “Rupee” comes from the Sanskrit word “Rūpya”, meaning wrought silver, and silver coins were used in India as early as the 6th century BCE.
India Economic Pulse
7.3%
According to Moody’s Ratings Report, India’s economy is projected to grow 7.3% in the fiscal year ending March 2026. In FY25, GDP per capita rose 8.2% year-on-year to USD 11,176, while headline GDP growth stood at 6.5%, reflecting steady consumption and investment momentum.
India’s Power Pivot
Thermal power’s share in India’s electricity generation is set to fall below 70% next fiscal for the first time. The share is expected to decline to around 72% this year from nearly 75% in FY25, with plant load factors easing to 64–66% from 69% last year. Meanwhile, renewable energy generation is projected to grow at a 18–20% CAGR over this and the next fiscal year, supported by 75–85 GW of capacity additions.
The Working Capital Paradox
For many businesses, growth does not stall due to lack of demand but due to timing.
Invoices are raised on time. Orders are delivered. Yet cash arrives weeks or months later.
Extended credit terms, delayed approvals, and long payment cycles can quietly stretch working capital, even for profitable enterprises.
This mismatch affects daily operations, supplier payments, payroll, inventory management and, most critically, the ability to take on new orders.
Over time, this strain slows operational momentum and limits growth potential.
Bridging this gap requires short-term finance solution aligned to specific trade transactions, rather than collateral or asset based borrowing.
That’s where Invoice Factoring also commonly known as Factoring Finance comes in. By converting accounts receivable into immediate working capital, Factoring helps businesses fund transactions as they occur keeping cash flows in step with operations.
Invoice Factoring is:
- Collateral-free, as financing is backed by receivables
- Designed for immediate working capital, aligned to business cash flows
True growth comes from both "Higher Sales and Timely Payments"
Turning Accounts Receivable into Instant Cash
Creditworthiness
Why Businesses Still Struggle to Access Credit?
Many businesses are operationally sound but financially misunderstood.
Despite steady orders, reputable buyers, and predictable cash inflows, accessing formal finance is difficult as approvals often depend more on collateral and legacy financial statements than on actual business performance.
As a result, growing enterprises may find themselves under-funded, over-leveraged, or locked out of timely credit, precisely when capital is needed to respond quickly to new opportunities in a dynamic market.
Addressing this challenge requires a shift in how creditworthiness is assessed, moving from asset-based lending to cash-flow or transaction-led evaluation.
When financing is linked to actual trade, accepted invoices, and business credibility, capital can flow in line with real business momentum.
This approach enables MSMEs to access funding based on what they do and deliver, not just what they own helping them grow sustainably without stretching their balance sheets.
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Disclaimer: The information provided in this blog is for general informational purposes only. The specifics of financial products, including eligibility, terms, and benefits, may vary based on multiple factors.
121 Finance does not guarantee the accuracy or applicability of the information for every individual case.