In the dynamic landscape of business, one fundamental aspect stands tall as the lifeblood of any enterprise – cash flow management. For small and medium-sized enterprises (SMEs), mastering the art of cash flow management is often the key to survival and success. 

We recently had the privilege of hosting a webinar titled “Business Cash Flow Management – How SMEs Can Ace It,” featuring Ayush Bansal as our esteemed speaker.

Ayush Bansal, the Vice President and General Manager of Razorpay Capital and RazorpayX, is a true visionary in the field of finance. 

His mission? To revolutionise how businesses approach and conquer their cash flow challenges. With a diverse background in Key Account Management, SME Sales, Growth, and Business Analytics, Ayush is no stranger to the intricacies of the SME world. As a founding member of Razorpay, he is a respected representative at industry forums and startup events.

In this blog post, we aim to distil the wealth of knowledge shared by Ayush during the webinar. We’ll delve into the critical aspects of business cash flow management and gain insights that could be game-changers for SMEs seeking to navigate the turbulent waters of finance. 

Importance of Efficient Cash Flow Management for Businesses

In the business world, it’s easy to keep an eye on the money a company has in hand or in the bank. But what gets tricky is all the money moving in and out every day from various transactions, causing ups and downs.

Having a healthy flow of money is like the heartbeat of a successful business. It means keeping tabs on the money coming in and going out for things like customer payments, buying materials, paying workers, covering bills, and more.

For smaller businesses, managing this money flow can be tough, especially when there’s not enough cash to go around. It can affect things like getting loans, hiring people, and promoting the business.

Huge Working Capital Gap in the SME Sector

Cash flow management: working capital gap

Working capital is the amount of funds a business needs to run its daily operations. It includes cash, inventory, accounts payable, accounts receivable, short-term loans, and more.

To ensure smooth operations, SMEs and start-ups heavily depend on collecting payments for their services – the cash flow is what keeps the business thriving every single day.

However, as per a 2021 Semrush survey, almost 66% of such businesses face challenges in working capital management.

A gap between accounts payable and accounts receivable can affect a small business considerably – it stuns the business growth, increases company liabilities, puts production on hold, and even forces operations to pause. 

Cash Flow Challenges (Industry-Specific Use cases)

Think of business cash flow like an individual’s income and expenses. In a business context, cash flow refers to the movement of money into and out of a company. Just as an individual receives money from various sources like salary, loans, rent, and reimbursements and must spend on various expenses such as rent, bills, and taxes, businesses also need to collect funds from diverse channels such as sales, payments, and more. They then have to allocate these funds for various purposes, including paying salaries, vendors, handling reimbursements, and meeting tax and compliance obligations.

Industry-specific cash flow challenges

A cash flow crunch is a significant worry for businesses, especially in e-commerce. This happens when there’s a delay between selling products and receiving the money for them. This delay can create problems because it ties up funds that could otherwise be used to buy more inventory and boost sales. Additionally, the fluctuating demand and supply throughout the year can put extra pressure on a company’s finances.

In the case of Ed-tech, they face similar issues. They must pay their teachers and the various staff working behind the scenes, cover technology and cloud service costs, and maintain solutions. Sometimes, payments from customers can get delayed due to various reasons. 

Seasonality plays a significant role in the travel industry, as revenue can fluctuate greatly depending on peak travel times and destination popularity. Additionally, the industry is highly susceptible to external factors like economic downturns, natural disasters, and global events, which can disrupt travel plans and further impact cash flow. Upfront costs, such as hotel reservations, airline tickets, and tour expenses, require significant capital investment before revenue is realised, putting strain on the financial health of travel businesses. 

When SMEs experience these cash flow disruptions, it can lead to problems in managing their working capital, resulting in a shortage of funds. These challenges are not unique to any specific industry. 

The question then becomes: How do you address these inventory and cash flow issues? Most businesses prefer not to use their own money because they want to grow quickly. 

To bridge these gaps, companies often turn to short-term loans to keep their working capital stable. However, this is a particularly significant challenge for SMEs, as they may struggle to access financing options.

Why Is There a Huge Working Capital Gap in the Sme Sector?

We conducted a survey among our extensive customer base, which consists of over a million businesses, with 66% of the respondents saying that they indeed encounter difficulties when it comes to managing their working capital effectively. The working capital gap in a business can vary in duration, ranging from immediate and short-term needs to longer-term requirements, such as loans extending over two or three years. This gap represents the amount of capital a business needs to invest in its operations and growth. In essence, it covers the funds necessary to support and expand the business.

SMEs face several hurdles when it comes to taking loans from banks. This is primarily because they are usually unorganised businesses that lack assets to offer as collateral. Also, banks and traditional lenders offer solutions that are document-incentive with stringent requirements and limited innovation.

As most of the transactions in an SME enterprise occur via cash, they are unaccounted for in their book of accounts. As a result, they are unable to show their expenses, payables, inventory, cash, turnover, etc., when lenders ask for it, making it difficult for them to assess the business’s creditworthiness. 

Thus, most banks consider SMEs as high-risk propositions and are unwilling to provide them with working capital loans. This has led to a credit gap of Rs. 20-25 trillion in India’s MSME sector.

Banks vs. NBFCs vs. Fintechs

Lending players in the market

Banks are like the foundation upon which other financial institutions build. They offer some distinct advantages, such as providing competitive interest rates and being highly reliable and stable. 

With a bank, you can often have a personal relationship manager, adding to the trust factor. But there’s a catch. Dealing with banks can be extremely paperwork-heavy. They’ll ask you for a pile of documents, including bank statements dating back a couple of years. This process can be quite a hassle, especially for business loans where not all businesses can show three years of profitability.

So, while banks are excellent for certain types of loans, especially those secured by assets like housing loans, they may not be the best choice when it comes to business loans

NBFCs are licensed by the Reserve Bank of India (RBI) to offer loans. Unlike banks, they source their loans from banks and then make these loans available to you. NBFCs have a unique advantage – they can provide a broader range of products to meet your specific needs. One interesting concept they offer is Revenue-Based Financing (RBF), a product tailored to certain situations. However, it’s worth noting that NBFCs often charge slightly higher interest rates because their rates are influenced by market dynamics and demand for loans.

While NBFCs offer these advantages, they may not have the same widespread presence as banks. Banks usually have physical branches where you can discuss your requirements, but NBFCs lack this local presence. 

This is where a third type of player comes into the picture, known as Loan Service Providers (LSP) or fintech companies like Razorpay. These entities don’t hold specific licences like banks or NBFCs, but what they bring to the table is an abundance of data, a deep understanding of customers, and a wide distribution network.

Here’s where it gets interesting: a business can come to a fintech company and say they need a loan for a specific duration, they are willing to pay a certain interest rate, and they have a particular loan amount in mind. Fintechs have access to extensive data and insights. They can then connect the business with various NBFCs who can compete to offer the best terms.

It’s like matchmaking – somebody may offer the best service, while another might provide the most competitive interest rate. Fintech companies essentially serve as intermediaries to streamline the lending process, fostering innovation and simplifying access to funds.

A few years ago, Razorpay ventured into short-term lending, and the approach was quite distinct from traditional NBFCs and banks. Banks usually demand a lot of historical financial data, especially for longer-term loans, while NBFCs might ask for one year’s financials. However, Razorpay introduced a game-changer: real-time decision-making.

Imagine you’re an e-commerce business. You’re processing payments, and through our payment gateway, we have insight into customer behaviours without revealing personal data. We can see how many customers are returning to your platform, how many are requesting refunds, and how many are disputing charges. If a lot of customers are asking for chargebacks, that’s a red flag indicating something might be amiss in your business. Conversely, if your chargebacks and refund rates are low, it suggests that your e-commerce operation is well-organised and customers are satisfied, leading to repeat business.

This information allows us to approach NBFCs with strong, data-driven signals, and we can tell them that they don’t need to scrutinise your last year’s or last three years’ worth of bank statements. Using this real-time data, we can facilitate a quick decision and provide you with a short-term loan, often in as little as ten days. We bring innovation to the decision-making process, offering a range of products and serving as the matchmaker in this scenario.

It’s essential to mention that we are not a regulated entity, so the actual transactions happen directly between businesses and NBFCs or banks. Fintech companies like us act as intermediaries to streamline the process, simplify access to capital, and enhance decision-making. This way, we simplify the flow of funds and contribute to making financial services more efficient.

Need of the Hour: Solving the Working Capital Gap

Deviating from the traditional route of business loans, SMEs can instead opt for a flexible line of credit with a predefined credit limit. This provides businesses the freedom to use available credit, repay it as needed, and then utilise it again, eliminating the necessity for borrowing a lump sum from a traditional lender and incurring significant interest charges over the entire loan tenure. With a line of credit, SMEs only pay interest on the amount they withdraw. 

Razorpay offers a collateral-free line of credit of up to Rs 25 lakhs, accessible anytime and anywhere through its streamlined digital process, significantly reducing documentation requirements. Additionally, there are no extra charges for prepayment, making a line of credit a more cost-effective alternative to personal or collateral-based bank loans. 


What sets it apart is that the Line of Credit remains active even after full repayment, and the credit limit can expand alongside business growth, establishing it as a long-term financing solution.

Register with Razorpay today to access this cost-effective line of credit, featuring competitive interest rates starting at just 1.5% per month.

How Can SMEs Apply for a Line of Credit with Razorpay?

The steps to apply for Razorpay’s line of credit are as follows:

Step 1: Navigate to Razorpay’s Line of Credit page and click on “Get a Line Now”.
Step 2: Enter your phone number. Once you receive an OTP, enter the 6-digit code.
Step 3: Enter your name.
Step 4: You will be redirected to the application portal, where you will be requested to provide information for the Probationary Officers approval.

Once Razorpay verifies them and checks the business’s bank statements, the line of credit will be transferred to the linked bank account within a few days.


Opting for a line of credit is an effective way for SMEs to ace business cash flow management and scale their operations in the long run. However, they must keep in mind the applicable interest rates and consider borrowing an amount that they actually need. Thanks to Razorpay’s Line of Credit, availing short-term working capital loans has now become easy with three simple steps – use, repay and repeat!

Frequently Asked Questions

Q1: How can a business which is periodical and has high ups and downs handle its cash flow?
Ans. The simple answer to this is availing a line of credit. It helps a business stay prepared for the ups and downs that it may face. During downtime, it can withdraw money from the credit line and pay it back once it has adequate cash flow.

Q2: Is it possible to customise a line of credit based on transactions in a RazorpayX virtual account?
Ans. Yes, Razorpay allows line of credit customisation. Companies simply need to visit the website, provide their data, and apply. It will get processed within 24 to 48 hours.

Q3: How fast can businesses get a tentative offer from Razorpay?
Ans. Tentative Line of Credit offers from Razorpay depend upon several factors like past transactions, business type, tenure, etc. However, businesses can always apply and get a reply from us within a day or two.

Q4: How can businesses manage their expenses better while not compromising their quality of service?
Ans. Businesses can analyse their unit economics and increase their service costs or find ways to reduce their operational costs. This is an effective way to manage their cashflows while not compromising their service quality.

Q5: Can businesses get access to a Line of Credit only if they use RazorpayX?
Ans. Companies can easily get a Line of Credit by using any general Razorpay product. Additionally, they can get this credit option even if they are not a part of the Razorpay ecosystem.

Q6: Will Razorpay come out with offline payment collection solutions?
Ans. Razorpay is currently working with its partner banks to bring forth a solution in this regard. Customers can expect a solution soon.

Q7: Can Razorpay help businesses track day-to-day expenses?
Ans. Businesses can easily track their day-to-day expenses by opening a RazorpayX current account. By doing so, they can get access to analytics and payout options, which can help them keep track of their expenses.

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    Ashmita Roy
    Author Ashmita Roy

    Ashmita Roy is a Brand Marketer at Razorpay. When she’s not working, you can find her strumming her guitar or writing poetry. Dislikes writing about herself in third person, but can be convinced to do so via pizza or cheesecakes.

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