With large blue chip companies no longer knocking on banks' doors, bankers today are lending against the receivables of SMEs.
Indeed, small- and medium-sized enterprises (SMEs) are getting loans at interest rates of between 7.5% and 9%, lower than the rates that even some medium-sized companies get.
SMEs are able to leverage their relationship with reputed companies to source low cost funds, either in the form of cash credit or a line of credit for bill discounting.
Galaxy Surfactants and Mool Denpro Private Ltd supply toothbrushes and toothpaste to Hindustan Lever Ltd (HLL). A couple of months ago, both got working capital loans from leading private banks - and had to pay an interest rate of just 6-6.50%. Two years ago, this would have been impossible, says an HLL official.
HLL's suppliers, for example, are going to banks and getting discounts on their receivables at rates as low as the repo rate of 4.5% plus 60 basis points.
