Steps towards financial self-reliance – In line with Govt’s “Atma Nirbhar Bharath” mission

A new mantra has caught the imagination of the Indian population – self-reliance. Taking inspiration from the “Atma Nirbhar Bharath” mission launched by the Prime Minister, the slogan is driving future business and financial goals of government departments, educational institutions, large corporates, small businesses and even individual citizens.

Self-reliance does not mean functioning in a vacuum. It does not mean doing everything yourself. It simply ensures that the strategic interests of an individual/organization are safeguarded. When everything around us is positive and progressing well, we can afford to take bold risks. Businesses can expand by borrowing more capital, exploring new markets, and investing in the company’s growth. But during times of financial / business stress such as the present times, the most important consideration is “How immune is the business from unexpected external pressures?”

External factors that might adversely affect an entrepreneur are varied in nature. Let us list down some common scenarios, especially relevant to the ongoing crisis:

• Businesses heavily dependent on imported components may have trouble when imports get restricted
• Products entirely meant for export markets may have difficulty in shipments or shrinking of demand
• Companies with large debt might find their repayment difficult when revenues are low
• Not having sufficient emergency funds to tide over low-productivity months
• Labour intensive businesses may see drop in production due to lockdowns

How to build financial self-reliance

Build strong and lasting relationships with customers/suppliers

Instead of having a temporary transactional relationship with your suppliers/customers, build a long-term trust based relationship. Nurture the relationship even during the off-business times. This way, when the goings are tough, you can work out a combined strategy to emerge from the situation. Excessive reliance on international supply chain or market base can prove to be risky during difficult times. A steady state local base is a definite plus.

Beware of profitless growth

Resist the temptation of blindly increasing the number of customers. With aggressive marketing, this strategy may work in the short term. But when the times are stressful, a handful of reliable and regular paying customers are more valuable than hundreds of unreliable customers. Just showing revenue growth on the company balance sheet will not help in the long term, you need to be profitable. Only then you can plough back the profits for debt clearing and future expansion.

Avoid over-dependence on debt for raising capital

For a going concern, obtaining debt is not very difficult. But when a business has an unreasonably high amount of debt, it becomes a high risk liability. A large portion of the income goes in loan interest payment. When unexpected difficulties arise, the debt becomes a huge burden, affecting the companies’ basic survival. 

For short term financing of your planned business needs such as equipment purchase, factory expansion, new product marketing, you might consider using chit funds as a financing option instead of debt. For raising working capital, if you are used to availing an overdraft, a chit fund would work much better. That is because the repayment you make every month only covers the interest when you avail of debt. Whereas with a chit fund scheme, even if you pull out the entire amount early, your monthly payments cover both the principal and interest. Thus leaving you debt free at the end of the tenure.

Chit funds by design are a dual purpose financial instrument. They are an easy mode of saving as well as borrowing. For known expenses that you are likely to incur in the short to medium term, you can plough in your excess revenue into an appropriate chit fund scheme for a tenure of 2-3 years. So when it’s time for the actual expense, your money is ready to use! No debt, no interest. If in the mean-time, you are faced with a financial emergency, the chit fund gives you a quick liquidity option to tide over the crisis. This boosts your companies’ self-reliance and financial security.

Always make backup plans

Good businesses are ready with contingency plans for any major hurdles they may face. Plan for alternate funding sources. Identify various cost saving options for your operations. Forecast your revenue expectations but prepare yourself for the situation when actual revenue is lower than target. It’s not prudent to base all your company’s future success on a single plan of execution. Backup plans for all critical business focus areas is a must, especially with emphasis on worst case scenario analysis.

Think of investing in Chit funds like insuring your funds. When the tenure ends naturally, you get your money back. But for emergencies, you can pull out your funds anytime. That is a smart back up plan.

A self-reliant and strong business eco-system is the building block of a self-reliance and powerful nation. Let us all work together to make the “Atma Nirbhar Bharath” mission a success in the years to come.

About Us

Shantala Chits is in the business of chit funds for over 2 decades now. We are a Government approved chit fund company with a 24 year successful track record and thousands of satisfied customers. Shanthala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our customer satisfaction and secure investments. Get in touch with us and start with an investment scheme. We will be glad to help you out with the right scheme that matches your needs.