Working capital for tender bidding: what every MSME needs to know
Government contracts are reliable, but they are cash-intensive. Earnest money deposits (EMD), performance bank guarantees (PBG), and delayed payment cycles can strain even a profitable business. Planning your working capital is as important as winning the bid.
Know what ties up your cash
EMD is blocked at bid submission and released for unsuccessful bids. PBG is locked for the contract duration. Add the gap between delivery and government payment — often 30 to 90 days — and you can see how quickly capital gets committed.
Structure capital around the contract cycle
Instruments like bank guarantees, bid-bond facilities, and invoice financing exist specifically for this. The right mix depends on your contract pipeline, not generic financial planning.
The goal is simple: never miss a bid because cash is locked elsewhere, and never win a contract you can't finance to completion.