41% start-ups, MSMEs run out of cash or have less than one month of funds left: Survey

The second wave of Covid-19 has added to the miseries of start-ups and MSMEs in the country with a latest survey claiming that 41 per cent of them have either run out of cash they have on hand or have less than one month of funds left.

The survey by Local Circles, which collected responses from start-ups and medium, small and micro enterprises (MSMEs) in 171 districts of the country said 22 per cent of them have over three months runway.

According to the survey, 33 per cent of 2,140 companies who responded to a question on the money it has, claimed that they have only less than one month of cash remaining, while another 8 per cent said they are already out of funds.

Only 22 per cent have more than three months of runway, 11 per cent have it for over six months, and 37 per cent have funds for one-three months, it said.

With funds drying up, the businesses were asked what they did in the last two months and what they plan to do in the next couple of months.

According to the survey, 7 per cent said they would reduce advertising, marketing and new initiative costs, while another 9 per cent said they would reduce employee compensation and benefits costs and 13 per cent said they would reduce other fixed operational costs.

Breaking down the poll, 7 per cent chose reducing advertising costs, employee costs and benefit costs options from their aforementioned business operation, 13 per cent chose reducing employee compensation and benefit costs as well operational costs, while 33 per cent chose all the three options.

Per aggregate response suggests close to half of 2,083 who answered the question -- 49 per cent -- said they plan to reduce their employee compensation and benefits costs by July to sustain themselves.

The survey also showed that only 22 per cent start-ups and MSMEs of 2,101 see growth in their business in the next six months, while 59 per cent expect to scale down, sell off, or shut down -- 37 per cent said they will scale down their operation, 14 per cent said they might shut down, whereas, 8 per cent would sell off their business in the next six months and 19 per cent did not give an opinion.

It also said 88 per cent small businesses need the government to let PSUs provide price escalation on all MSME/small business contracts where supply of commodities like steel, copper, etc., is involved.

To another question, 92 per cent of small businesses wanted the government to provide a time extension of three-six months on all Government and PSU contracts to avoid any liquidated damages to them.