Another concern for the SME’s is to minimize their dependence on fund-based credit. Inorder to fulfill the working capital requirements of the business, the entrepreneursnormally take up various types of fund-based credit facilities namely cash credit,overdraft, demand loan, bill discount/purchase etc. from banks, but this sometimesincreases their operating cost and hence makes them less competitive. The funds lent tothe unit get paid on realization of sale proceeds towards the end of the production cycle, but it creates a problem for the unit in case payments are delayed from the debtors. Thusworking capital facilities are intended to finance current assets.
Other important components of working capital are cash and inventory. Cash is one of the mostimportant components of the working capital. It allows a business to meet its day-to-dayexpenses and
inventory is a list for goods and materials, or those goods and materialsthemselves, held available in stock by a business. Problems related to the aspects arediscussed in the report.The report also discusses about some of the initiatives taken by the Government of Indiain this regard like setting up of SIDBI, NABARD and other schemes.Finally the report concludes with the suggestions and conclusions.2