Kumud Das Mumbai

Growthand valuation will always matter, but for revenue-generating startups and SMEs, the quality and predictability of cash flows are becoming just as important in deciding how a business is financed.

Founders are already voting with their balance sheets. India's venture debt market has grown from about $80 million in 2018 to $1.3 billion in 2025, and now accounts for nearly 9 per cent of annual VC deployment. The larger opportunity is in SMEs. SIDBI-TransUnion CIBIL data shows only around 41 per cent of commercial enterprises have formal credit access. Real-time cash-flow visibility can complement traditional credit assessment, helping lenders back growing businesses that lack large collateral bases.

Talking to Bizz Buzz, Eklavya Gupta Co-Founder Recur Club says, “The shift is from simply raising capital to building the right capital structure for founders. Cash-flow-based financing lets them match each need - working capital, inventory, receivables or expansion - to an instrument repaid from the returns it generates.”

This doesn't mean debt replaces equity. Equity remains right for long-term, high-risk bets. But using it for predictable, short-cycle needs means paying for working capital with the most expensive currency a founder has: ownership. The future isn't debt versus equity. It's equity for long-term risk, and the right debt for growth with clear repayment visibility.

As lenders become more data-driven, the assessment of startups and SMEs is increasingly moving beyond traditional indicators such as valuations, funding history and topline growth. Revenue visibility, cash-flow consistency and payment behaviour are becoming important signals of underlying creditworthiness. Predictable cash flows offer lenders a clearer view of a borrower’s ability to meet financial obligations, while revenue visibility helps assess the sustainability of the business model. Payment behaviour provides another layer of insight into how consistently a business manages its financial commitments and existing credit relationships.

“Technology is enabling lenders to bring these signals together more efficiently. AI-led underwriting can analyse transaction patterns, cash-flow trends and other structured and alternative data points to create a more contextual view of credit risk,” says Amit Bansal, Co-founder, VimanoTech.

For startups and SMEs, this shift can make credit assessment more closely aligned with the fundamentals of their business rather than relying predominantly on legacy metrics. The focus is increasingly on understanding the quality, predictability and resilience of financial activity, enabling lenders to make more informed and differentiated credit decisions.