In his speech during MSME Sparks 2026, Eklavya Gupta presented a viable approach for founders aiming to finance their ventures built on understanding the goal of financing rather than concentrating on available options.
The founders of most MSMEs hardly apply a financing method. They borrow from a bank when there is an opportunity, raise equity when an investor shows interest, and patch the financing gaps with what is available at that time. Eklavya Gupta, founder of Recur Club, used a fireside chat at MSME Sparks 2026 in Bengaluru to explain the patchwork practice and suggest that the first question any founder should be asking before raising capital must be: what, actually, is this money for?
Matching Capital to Purpose
Gupta’s framework begins with figuring out the type of need. Short-term working capital needs, delayed payments from customers, and excessive stock can be financed through such instruments as invoice discounting, usually designed for 60-120 days. Long-term purchase of asset, such as machinery or building a plant can attract funding provided that physical assets are available for securing a loan. It is harder to finance growth projects, e.g. entering a new market, expanding the sales team, or investing in the promotion, from traditional sources of funding.
When Equity Makes Sense and When It Does Not
Gupta questioned the eagerness of business owners to resort to equity too fast. He has a simple rule: if the result of investment is unpredictable, equity is the right choice since there is no obligation to return loans, if the investment fails. In all the other cases, debt is the more efficient. Gupta drew an interesting analogy saying that equity is giving away a room in a house forever, while debt is renting it for some period of time.
Regarding leverage ratios, he provided general guidelines: the debt-to-equity ratio for an early-stage company should stay at or below 2, while a mid-stage one should stay at 3. For a more established firm, the debt-to-equity ratio can be at most 4, below which it has little room for maneuver in the event of a crisis.
Cash Flow Is Ultimately What Counts
Gupta also explained what lenders want to see. Regardless of what lending practices have changed with GST data and bank statements, the basic premise remains. Lenders focus on cash flow as opposed to the books. The commonest causes of lenders thinking that an apparently fine business is weak include failure to comply with various filings, related parties’ agreements, and a large concentration of customers in the business.
