In the new economic order, growth is extremely challenging for large organizations as pricing pressures get built up with intensifying competition. Large organizations require large markets for growth. Every product or service that had been innovated will start small and grows into a big market gradually. As industries are witnessing a shakeout, it is generally the slower organization which is being taken over by a faster organization. Large organizations move slowly while small have the advantage of speed. When a large organization is witnessing stagnant sales or low growth, it loses key talent. These keymen are encouraged to join hands with other like minds and set up their own small firm. Small businesses grow faster than larger ones and a rapid pace of growth makes entrepreneurs to take a bet and dive into this small business world. Essentially, in the IT and ITES space, key employees of large organizations visit on-site or regularly interact with clients from offshore. This strong touch point is leveraged by a key employee when he leaves a large organization. He takes away clients with him and has a promising business model to start up. Even in traditional businesses also there are rich opportunities in support activities such as ancillaries and distribution centers. Against this backdrop, there is a mushroom growth of micro, small and medium enterprises in the Indian economy.

Small businesses in the startup phase cannot get the financing from the organized banking sector as the firm doesn't have an established track record. The initial capital support is generally promoter’s contribution for the day-to-day working capital needs personal loans are availed till the business gains some traction. As the business attains momentum with new orders, it requires sourcing inputs from suppliers/vendors involving payments upfront. The processing of these inputs into a saleable output consumes further cash as labor is engaged. The resultant finished output cannot be sold against cash warranting further wait till the cash flows into the business. It means the business will generate future cash flows when the orders are executed and debtors are liquidated. Banks do not provide cash flow financing (based on future performance) as they are specialists in balance sheet financing (based on past performance).

Against this backdrop, entrepreneurs take the line of least resistance by swiping personal credit cards that are so very convenient to meet the financial needs of purchase, travel, and entertainment. But this convenience comes at a huge cost as unsecured credit cards impose an unsustainable burden on the enterprise. The business gets over-leveraged with a higher dosage of borrowed capital from outside sources and margins will be wiped out as the cost of money is prohibitive. A sustainable financial solution for a small business entrepreneur is not staying focused on a convenience product that is expensive but look at long-term borrowing option to finance working capital needs. As there would be seasonality in any business resulting in cash surpluses (during slack season) busy and cash deficits (during busy season) a unique financial product that can meet these twin objectives is Group Fund. Group Funds are the most appropriate as they provide greater flexibility to save and borrow simultaneously and optimally.