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42% of startups, SMEs out of cash, closed down; Atma Nirbhar scheme offers little help

Coronavirus impact: On whether the respondents are to benefit from the Rs 3 lakh crore Atma Nirbhar Bharat stimulus package announced by the government, 57 per cent said 'no', while another 29 per cent said they were unsure

twitter-logoJoe C Mathew | July 7, 2020 | Updated 13:26 IST
42% of startups, SMEs out of cash, closed down; Atma Nirbhar scheme offers little help
Coronavirus crisis: Startups fce major cash crunch

India's startups are facing a major cash crunch, hints a survey conducted by community social media platform LocalCircles. The survey, which saw over 28,000 responses from more than 8,400 startups, small and medium scale enterprises and entrepreneurs located across India, suggests that 38 per cent of respondent firms are already out of cash, and another 4 per cent are shutting down operations due to lockdown troubles. About 30 per cent said they have cash for another one to three months. Only 16 per cent of the respondents indicated that they have enough cash to manage monthly operating costs for the next three to six months.

The Unlock 1.0 is yet to have its impact on businesses. When compared, the percentage of startups and SMEs out of funds has only risen from 27 per cent to 42 per cent from April to June. The revenue drop for most businesses during the last two months have been 80-90 per cent making it hard for them to even sustain their business, the survey findings show.

On whether the respondents are to benefit from the Rs 3 lakh crore Atma Nirbhar Bharat stimulus package announced by the government, 57 per cent said 'no', while another 29 per cent said they were unsure. Only 14 per cent felt the central government package will help them. While the companies need to have existing debt/loans on their books to qualify for the scheme, most startups usually opt for venture capital funding, and hence remain ineligible.

The survey also found that startups and small enterprises have been adopting multiple measures to cut down costs and sustain their businesses during COVID period. Majority of the respondents -- 64 per cent -- have said they have cut or deferred marketing costs, cut or deferred human resource costs, cut or deferred fixed operating costs as well as deferred tax payments during this period. Another 6 per cent said they have limited the cost cutting to marketing expenses. Ten per cent couldn't do much.

A silver lining though was the increasing confidence among startups that things will improve from now. Between April and June 2020, the percentage of startups and small enterprises seeing growth in the next 6 months has risen from 13 per cent to 35 per cent. However, majority of the respondents still expect scaling down or shut down in the next 6 months.

All the respondents of the survey, conducted online via the LocalCircles, are registered validated users on the platform. LocalCircles claims to be the leading community social media platform that enables citizens and small businesses to escalate issues for policy and enforcement interventions and enables the Government to make policies that are citizen and small business centric.

Also read: Indian space-tech startup prepares to launch 24 satellites; aims to send first one by Nov

Also read: 'Finally found the startup I was looking for,' says Anand Mahindra; invests $1 million in Hapramp

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