Finance for Msm enterprises – a series
·
Support
agencies providing financial assistance for msme
There are following financial institutions which make
finance available under their schemes for MSM Enterprises.
-
Credit societies
-
Micro finance from SHGs
-
District Co-operative Banks
-
Scheduled Banks
-
Regional Rural Banks
-
Nationalized Banks
-
State Financial Corporations
-
National Small Industries Corporation
-
Small Industries Development Bank of
India etc.
Normally
any institution looks for few aspects before financing the units; i.e. economical
viability of the project, technical feasibility of the project and
entrepreneurial abilities of an entrepreneur.
Financial
assistance has two components. Loan for fixed capital is used to acquire plant
and machinery, land and building. Working capital loan is used to meet day to
day operational cost of the production.
Entrepreneur
has to assess the possibility of providing composite loan from the financial
institution. Composite loan covers plant & machinery, land & building
and working capital.
·
Private
agencies providing financial assistance for msm enterprises
Venture
capital (VC) is financial capital provided to early-stage, high-potential, high
risk, growth startup companies. The venture capital fund makes money by owning
equity in the companies it invests in, which usually have a novel technology or
business model in high technology industries, such as biotechnology, IT,
software, etc. The typical venture capital investment occurs after the seed
funding round as growth funding round (also referred as Series A round) in the
interest of generating a return through an eventual realization event, such as
an IPO or trade sale of the company. Venture capital is a subset of private
equity. Therefore all venture capital is private equity, but not all private
equity is venture capital.
In
addition to angel investing and other seed funding options, venture capital is
attractive for new companies with limited operating history that are too small
to raise capital in the public markets and have not reached the point where
they are able to secure a bank loan or complete a debt offering. In exchange
for the high risk that venture capitalists assume by investing in smaller and
less mature companies, venture capitalists usually get significant control over
company decisions, in addition to a significant portion of the company's
ownership (and consequently value).
It
is also a way in which public and private actors can construct an institution
that systematically creates networks for the new firms and industries, so that
they can progress. This institution helps in identifying and combining pieces
of companies , like finance , technical expertise , knows and how's of
marketing and business models, once integrated these enterprises succeeds by
becoming nodes in the search networks for designing and building products in
their domain.
·
Choosing
the most suitable source of funding
One
has to study the different financial schemes announced by the financial
institutions. It is necessary to evaluate & compare the terms and
conditions mentioned in the schemes. Comparisons of interest rate, the period
of repayment. The location of the institution should also be considered; it
should be near to your enterprises. It is necessary to get the feedback of old
customers of the bank so that you will get an additional information about the
overall approach of the institutions, nature of the institution, after loan
services of the institution, whether they have the development attitude, etc
about the financial institution.
·
The
eligibility criteria for getting a loan
The
major eligibility criteria are Return On Investment (ROI) and the profitability
of the project. Any financial institution sees to it that the repayment is
assured.
·
Investment
from the own resources/funds
Some
portion of the total investment has to be contributed by an Entrepreneur. This
owners contributed is known as margin money. Entrepreneurs are classified in
different categories namely SC/ST, women, defense, physically challenged,
minority, technocrat, open etc; Depending upon the category of an entrepreneur
the financial institutions insist on 7.5% to 30% margin money, one has to study
this category pattern and arrange for his own investment or decide for the
total project cost/investment.
·
The
procedure for getting a loan
Prescribed
loan application forms are available in the financial institutions. One has to
fill up the loan application form. Apart from this one has to prepare and
submit a project report: with enclosures of all supportive documents such as
identity, educational qualifications, residence, land/building proof,
quotations of raw materials, machinery, letters about market potential, collateral
securities. Simply whatever you write should support by evidence as papers. It
is the discretionary power of financial institution to sanction and disburse
the loan or they may give the loan if the project meets all the scheme norms,
terms & conditions.
·
Funding
for the land & building costs
The
Banks & SFCs offer assistance for land/building/shed to certain extent.
However, some qualifying parameters have been laid down by these institutions.
Housing Development Finance Corporation (HDFC) also provides funds for
land/building.
·
State
& Central Government Schemes for financial assistance.
Ø By District Industries Centers
(DIC)
1.
INDUSTRIAL PROMOTION SUBSIDY SCHEME :
Govt. of Maharashtra is one of
the first States implementing Package Scheme of Incentives for decentralization
of industries. Scheme is proven as most effective for indl. decentralization.
Govt. involves the Chamber of Commerce & Industries, Indl. Organizations
while framing the policies. Govt. has simplified the procedural Rule &
Regulations while framing the policy and classified whole State in 6 categories
like A, B, C, D, D+ & No Industry Dist. as per the Indl. development so far
achieved.
2.
REVISED SEED MONEY SCHEME :
To encourage self employment
venture amongst unemployed youths, Govt. has specially announced New Seed Money
Scheme w.e.f.18.5.07 increasing project cost limit from Rs.10 lakhs to 25
lakhs, reducing rate of interest on seed capital from 10% to 6%. A special
rebate of 3% is admissible for regular repayment of seed capital.
Eligible educated unemployed gets
15% soft loan from D.I.C @ 6% as seed money loan for the project cost upto
Rs.25 lakhs and the upper limit of seed money Rs.3.75 lakhs. In the interest of
social justice, for all backward categories and handicapped youths, 20% seed
money loan is eligible for the project cost upto Rs.10 lakhs.
Eligibility:
1. Age limit - 18 to 50 years.
2. Minimum 7th Std. pass.
3. Domicile of Maharashtra State.
3.
D.I.C Loan Scheme:
1. Any rural service and cottage industry
is eligible to get the benefit under the scheme.
2 Soft loan from D.I.C for general
categories 20% upto Rs.40,000/- and 30% for r the SC/ST category upto
Rs.60,000/- against the project cost approved by the Financial Institutions.
3. The value of Plant & Machinery
should not be more than Rs.2.lakhs.Soft loan is admissible @ 4% interest p.a.
4.
NABARD MARGIN MONEY SCHEME :
1.
Any rural small scale industry.
2.
Maximum Project cost upto 25 lakhs.
3.
20% Interest free loan from NABARD with service charges.
Eligibility:
1.
Special high-tech projects are eligible only.
2.
All nationalized and schedule commercial banks are eligible for finance.
5.
Prime Minister's Employment Generation Programme (PMEGP)
:
1.
Ministry of Micro, Small and Medium Enterprises (MoMSME) has launched a new
credit linked subsidy programme called Prime Minister’s Employment Generation
Programme (PMEGP) on 61st anniversary of Indian Independence by merging the two
schemes that were in operation till 31.03.2008 namely Prime Minister’s Rojgar
Yojana (PMRY) and Rural Employment Generation Programme (REGP) for generation
of employment opportunities through establishment of micro enterprises in rural
as well as urban areas. PMEGP will be a central sector scheme to be
administered by the Ministry of MSME.
2.
The subsidy levels under PMEGP are as under:
|
Categories of beneficiaries under PMEGP
|
Owner’s
contribution |
Rate of Subsidy
|
|
|
|
|
(of cost of Project)
|
|
|
Area
|
|
Urban
|
Rural
|
|
General
|
10%
|
15%
|
25%
|
|
Special
(including SC/ STs/ OBCs/ Minorities/ Women, Ex-servicemen, Physically
Handicapped, NER, Hill and Border Areas)
|
05%
|
25%
|
35%
|
3.
The upper limit of the cost of project that could be setup in the manufacturing
sector is Rs.25 lakh while that in the business/service sector is Rs.10 lakh.
There are no ceiling limits of annual income in respect of beneficiaries while
a minimum educational qualification of VIII standard fail will be required for
beneficiaries in respect of projects costing more than Rs.10 lakh in
manufacturing sector and more than Rs.5 lakh in business/service sector. The
beneficiaries would be identified, inter alia, with the help of Panchayats,
Special Awareness Camps and will be provided with a mandatory Entrepreneurship
Development Programme (EDP) training of a duration of two to three weeks. The
scheme envisages electronic tracking of applications, 100 per cent verification
of projects/units that will be established and model project profiles have been
updated in association with banks. The scheme will be implemented at the
national level through Khadi and Village Industries Commission (KVIC), an
organization created under an Act of Parliament reporting to MoMSME which will
place the funds of Government subsidy with the participating banks which in
turn will disburse the same to the beneficiaries on receipt of applications and
their own contribution ‘upfront’ in accordance with the guidelines of the
scheme.
4.
While KVIC has been given the overall responsibility for implementing PMEGP at
the national level, it will directly do so in respect of the targets for rural
areas, as defined in the KVIC Act, through its State Offices and State Khadi and
Village Industries Boards (KVIBs). Implementation of PMEGP in urban areas and
other rural areas will be done through the State Governments {District
Industries Centres (DICs)}. The newly introduced Rajiv Gandhi Udyami Mitra
Yojana of MoMSME can also be tapped for providing handholding support to the
beneficiaries under PMEGP.
6.
VARIOUS SCHEMES OF CENTRAL GOVT. FOR INDL. DEVELOPMENT
1.
MINISTRY OF FOOD PROCESSING, GOVT. OF INDIA:
Scheme
- Grant to Food Processing Industry
Eligible
Industry - Fruit Processing, Vegetable Processing, Milk Processing, Meat
processing, Dal Industry, Edible Oil Industry, Spices, and manufacturing all
other food items.
Grant
Limit - 25% of the fixed capital investment.
Maximum
Limit - Rs.50 lakhs.
Website:
www.mofpi.nic.in
2.
Scheme - Grant to basic infrastructure established for food processing
Industries.
(Food
Park)
Eligibility
- Basic infrastructure required for Food Processing Industry viz. Roads, Water,
Electricity, Cold Storage, Laboratory, Godown, etc. to make such basic
infrastructure available.
Grant
Limit - 25% of the basic infrastructure investment.
Website:
www.mofpi.nic.in
3.
Ministry of Commerce & Industries, Govern of India:
Scheme
- To make modernization of the basic indl. Infrastructure (IIUS)
Eligibility
- Modernization of basic facilities in the industrial area viz. Roads, water,
electricity, etc.
Grant
limit: 75% of total fixed investment.
Maximum
Limit - Rs. 50 crores.
Website:
www.dipp.nic.in
4.
MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES, GOVT. OF INDIA
Scheme
- To provide/ modernize basic infrastructure facilities (IID) up to 5 crores
Eligibility
- Establishment /Modernization of basic facilities in the industrial area viz.
Roads, Water, Electricity etc.
Grant Limit - 40% of the basic infrastructure
investment.
Limit
- Rs. 2.00 Crores
Website:
www.smallindustry.india.com
5.
MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES, GOVT. OF INDIA
Scheme
- To provide basic infrastructure to small scale industrial cluster
Eligibility
- Cluster of small scale industries.
Limit
of project - Rs. 10 Crores
Grant
Limit - 80 % of the capital investment
Limit
- Rs. 8 Crores
Website:
www.laghuudyog.com
6.
MINISTRY OF HEALTH, GOVT. OF INDIA
Scheme
- National Medicinal Plant Board
Eligibility
- Cultivation of medicinal plants, processing, research etc.
Grant
Limit - 30 % of the capital investment in the industry.
Limit
- Rs. 9 Lacs
Website:
www.nmpb.nic.in
7.
DEPT. OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA.
Scheme
- Various Industrial and Scientific Research Project
Eligibility - Institutions / persons willing
to work in this sector
Grant - Income tax concession, Excise duty
concession, Import Duty Exemption etc
Website: www.dsir.nic.in
8.
MAHARSHTRA ENERGY DEVELOPMENT AGENCY (MEDA):
GRANTS:
20 % of total expenditure for the plant & machinery of the project or a
maximum of Rs. 4.00 Lacs (whichever is less).
Website:
www.mahaurja.com
Ø By KVIC in all States
1.
Prime Minister's Employment Guaranty Programme
2.
Scheme of Fund for Regeneration of Traditional
Industries (SFURTI)
3.
Rural Industry Service Centre (RISC)
4.
Export Incentive Scheme
5.
Interest Subsidy Scheme