A Story From My Desk
I’ll never forget the day a small manufacturing unit owner walked to my desk, his file tucked neatly under his arm. He was full of energy, telling me about how his new machine would double production and create jobs for ten more workers. His passion was contagious and I wanted to approve his loan right away. But then I opened his file.
- His balance sheet was incomplete.
- Cheque returns appeared in his account statement.
- His DSCR was below 1.
As a banker, I couldn’t look away from these red flags. I had to recommend rejection. He left thinking “Bankers never support us.” I was left thinking “Entrepreneurs don’t understand how bankers think.” That day, I realized the biggest challenge in MSME lending is not just numbers or documents it’s the gap between entrepreneurs and bankers.
Why This Gap Exists?
The problem isn’t that bankers don’t want to lend, or that entrepreneurs lack ideas. The problem is that both sides speak different languages.
- Entrepreneurs talk about growth, potential, and vision.
- Bankers talk about sustainability, discipline, and repayment capacity.
For example:
- An entrepreneur says, “If I get this loan, I’ll expand and profits will grow.”
- A banker thinks, “But if sales dip, will you still repay your EMI on time?”
This difference in perspective creates mistrust. Entrepreneurs feel banks are rigid. Bankers feel entrepreneurs are careless. The truth lies somewhere in between.
How Bankers Evaluate a Loan File?
As a banker, I didn’t just look at balance sheets. I looked for signals of credibility:
- Consistency in bank statements – Smooth inflows and outflows show disciplined money management.
- Timely GST/IT returns – These prove financial transparency.
- DSCR (Debt Service Coverage Ratio) – A ratio above 1.5 shows repayment capacity.
- Debt–Equity Ratio – A balanced capital structure indicates stability.
- Cheque return frequency – Repeated bounces immediately erode trust.
To entrepreneurs, these may feel like “technicalities.” But to bankers, these are signs of character and commitment. Numbers don’t just tell financial stories they tell stories of reliability.
How Entrepreneurs See the Bank?
From the entrepreneur’s perspective, the story looks very different. Many MSME owners told me things like:
- “We have profits, but still our loan was rejected.”
- “Why do bankers need so many documents for a small loan?”
- “Banks don’t understand the ground realities we face.”
The frustration is real. MSMEs often struggle with delayed customer payments, sudden raw material price hikes, or lack of collateral. For them, a loan is a lifeline. When it gets delayed or denied, it feels like a betrayal. But what many entrepreneurs don’t realize is that profit on paper means nothing without cash flow discipline. A loan is not about what you will earn tomorrow it’s about whether you can repay consistently starting today.
My Side of Finance
Every loan file I handled carried human emotions -hopes, stress, fear, and ambition.
- For a banker, a loan rejection is a necessary safeguard.
- For an entrepreneur, it feels like a lost opportunity.
This is why the gap feels so wide. It’s not just financial it’s emotional and psychological. Entrepreneurs put their dreams in front of bankers. Bankers, in turn, are protecting the trust of depositors. Both are right, but both rarely understand each other.
Common Mistakes MSMEs Make (That Bankers Notice Immediately)
From my 11+ years in banking, here are the patterns I saw most often:
- Mixing personal and business accounts – Confuses bankers and reduces clarity of cash flow.
- Over-reliance on unsecured borrowings – High dependence on personal loans or credit cards shows financial instability.
- Incomplete documentation – Missing audited statements or GST returns immediately weaken credibility.
- Unrealistic projections – Inflated sales and profits in CMA data make bankers skeptical.
- Ignoring ratios – Many entrepreneurs don’t even know what DSCR or Current Ratio means, yet these decide loan approval.
What Entrepreneurs Can Do Differently?
Bridging the gap starts with preparation and awareness:
- Keep financial discipline – Avoid cheque returns, regularize EMIs, and keep accounts clean.
- Document properly – File GST and ITR on time, maintain audited financials.
- Plan cash flow – Track actual inflows/outflows, not just profits.
- Learn basic ratios – Understand DSCR, Current Ratio, and Debt–Equity.
- Think like a banker – Before applying, ask yourself: “Would I approve this loan if I were sitting on the other side of the table?”
A Case Study – Two Entrepreneurs, Two Outcomes
- Case 1: A trader applied for a ₹50 lakh working capital loan. Profits looked strong, but his account showed frequent cheque returns and GST filing delays. Loan rejected.
- Case 2: A manufacturer applied for ₹75 lakh term loan. His ratios were healthy, financials were consistent, and documentation was complete. Loan sanctioned quickly.
Both were ambitious entrepreneurs. The difference was discipline and preparedness.
How to Bridge the Gap – My Perspective?
Having lived both sides, I believe the bridge between bankers and entrepreneurs can be built in three ways:
- Education for Entrepreneurs – They must learn how bankers assess risk, what documents matter, and why ratios are critical.
- Communication from Bankers – Instead of just rejecting, bankers should guide borrowers on how to strengthen files.
- Advisors as Bridges – This is where I stepped in. My role today is to simplify finance for MSMEs and mentor credit officers.
When both sides understand each other, trust builds—and trust is the foundation of finance.
My Mission Through “Smart Credit with Sangeeta”
I started this platform with one mission: to close the gap between MSMEs and bankers.
- For entrepreneurs, I create toolkits, blogs, and videos to help prepare for loans.
- For credit officers, I share practical knowledge that textbooks miss.
- For learners, I simplify finance so they don’t fear numbers.
Because I’ve seen too many good businesses lose opportunities not because they were weak, but because they weren’t prepared in a banker’s language.
A Thought To Leave You With
If you’re an entrepreneur, ask yourself: Would my banker trust my file even if I wasn’t in the room to explain?
If you’re a banker, ask yourself: Am I just rejecting a file, or am I rejecting a dream?
Finance is not about distance yes it’s about building bridges. And every bridge begins with understanding.
Your Next Move
👉 Are you an entrepreneur preparing for funding? Download my Loan Sanction Checklist [Click here].
👉 Are you a credit officer who wants sharper insights? Join my Smart Credit Inner Circle [Click here].
👉 Let’s connect on [LinkedIn] and continue this conversation because together, we can close the gap.