Practical No - 8

Name Of Practical - Visit a bank/financial institution to enquire

about various funding schemes for small scale enterprise

Introduction:
Small and medium-sized enterprises (SMEs) play a crucial role in India's
economic growth and development. However, many small businesses struggle
to access financing due to a lack of collateral or a credit history. To address this
issue, the Indian government and various financial institutions have introduced
several funding schemes specifically designed to support SMEs.

Various Funding Schemes :

Here are some of the most popular funding schemes available for small scale
enterprises in India:

Credit Guarantee Fund Trust for Micro and Small Enterprises

(CGTMSE) :
The CGTMSE is a loan guarantee scheme that provides collateral-free loans up
to Rs. 2 crore ($275,000) to micro and small enterprises.
Here are some of the most popular funding schemes available for small scale
enterprises in India:

Credit Guarantee Fund Trust for Micro and Small Enterprises

(CGTMSE) :
The CGTMSE is a loan guarantee scheme that provides collateral-free loans up
to Rs. 2 crore ($275,000) to micro and small enterprises. The scheme covers up
to 75% of the loan amount in case of default, making it easier for SMEs to access
credit from banks and financial institutions.

Pradhan Mantri Mudra Yojana (PMMY) :

The PMMY scheme provides loans up to Rs. 10 lakh ($14,000) to micro and small
enterprises through various financial institutions such as banks, NBFCs, and
microfinance institutions. The loans are categorized into three segments: Shishu
(up to Rs. 50,000), Kishore (Rs. 50,000 to Rs. 5 lakh), and Tarun (Rs. 5 lakh to Rs.
10 lakh).
Stand-Up India Scheme:
The Stand-Up India scheme is a government initiative that provides loans up to
Rs. 1 crore ($137,000) to women and SC/ST entrepreneurs for setting up
greenfield enterprises in manufacturing, services, or trading sectors. The loan
amount can be used for capital expenditure or working capital requirements.

National Small Industries Corporation (NSIC) Subsidy:

The NSIC subsidy scheme provides financial assistance to small enterprises in
the form of marketing support, raw material assistance, and credit facilitation.
Under the scheme, SMEs can access raw material at a subsidized rate and also
receive a subsidy on the cost of procurement.

SIDBI Make in India Soft Loan Fund for MSMES (SMILE):

The SMILE scheme is a soft loan fund for MSMEs introduced by the Small
Industries Development Bank of India (SIDBI). The scheme offers loans up to Rs.
10 crore ($1.4 million) at an interest rate of 8-9% for financing machinery and
equipment. The loan is repayable over a period of 7-10 vears.

Technology Upgradation Fund Scheme (TUFS):

The TUFS scheme aims to promote the modernization and upgradation of
technology in the textile and jute industries. Under the scheme, SMEs can avail
of a capital subsidy up to 15% for modernizing their existing machinery or setting
up new units.

National Equity Fund (NEF):

The NEF scheme provides equity support to SMEs through a network of state-
level financial institutions. The scheme offers equity participation up to 49% in
SMEs with a minimum investment of Rs. 5 lakh ($6,800) and a maximum of Rs.
50 lakh ($68,000).

Scheme chosen for Digital Marketing small enterprise:

MUDRA Loan:
The MUDRA loan scheme was launched by the government of India to provide
financial assistance to micro and small enterprises. The loan is provided by
various financial institutions such as banks, NBFCs, and MFIs. Under this scheme,
loans of up to Rs. 10 lakhs are offered to micro-enterprises engaged in non-
farming activities, including digital marketing.
Here are some key features of the MUDRA loan scheme:

Types of Loans: MUDRA loan offers three types of loans based on the stage
of the business - Shishu, Kishor, and Tarun. Shishu loan is for businesses in the
initial stage, Kishor loan is for businesses that have established their operations,
and Tarun loan is for businesses that require funds for expansion.

Loan Amount: The loan amount offered under the MUDRA loan scheme
ranges from Rs. 50,000 to Rs. 10 lakhs, depending on the stage of the business
and the financial institution providing the loan.

Interest Rates: The interest rates for MUDRA loans are generally lower than
other types of loans. The interest rates vary from 9.75% to 11.50% per annum.

Collateral: MUDRA loans are collateral-free, which means that the borrower
does not need to provide any security or guarantee to avail of the loan.
Repayment: The repayment period for MUDRA loans ranges from 3 to 5 years,
depending on the loan amount and the financial institution providing the loan.

In conclusion, the MUDRA loan scheme is a suitable funding option for a digital
marketing small enterprise. The loan offers affordable interest rates, flexible
repayment options, and does not require collateral. However, before applying
for the loan, it is important to carefully read and understand the terms and
conditions, eligibility criteria, and application process. The borrower should also
prepare a detailed business plan and financial projections to present to the
financial institution.

Funding Schemes

1. Pradhan Mantri Mudra Yojana (PMMY): Provides loans up to ₹10 lakh to non-
corporate small business segments.
2. Stand-Up India: Offers loans between ₹10 lakh and ₹1 crore to Scheduled
Caste, Scheduled Tribe, and women borrowers.
3. National Small Industries Corporation (NSIC) Funding Scheme: Provides
financial assistance, including raw material and marketing support, to small and
medium enterprises.
4. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGFSMSE):
Provides credit guarantee to micro and small enterprises.
5. Micro Units Development and Refinance Agency (MUDRA): Provides loans
up to ₹10 lakh to micro units.

Financial Institutions

1. SIDBI (Small Industries Development Bank of India): Offers various funding

schemes for small and medium enterprises.
2. National Small Industries Corporation (NSIC): Provides financial assistance,
including raw material and marketing support, to small and medium enterprises.
3. State Financial Corporations (SFCs): Provides financial assistance to small and
medium enterprises.
4. Regional Rural Banks (RRBs): Offers loans to small businesses in rural areas.
5. Microfinance Institutions: Offers small loans to entrepreneurs and small
businesses.

Government Initiatives

1. Make in India: A government initiative to promote manufacturing in India.

2. Digital India: A government initiative to promote digital literacy and digital
infrastructure.
3.Startup India: A government initiative to promote startups and
entrepreneurship
4.Skill India: A government initiative to promote skill development and
vocational training..

Online Resources

1. SIDBI Website:(link unavailable)

2. NSIC Website: (link unavailable)
3. Startup India Website: (link unavailable)
4. Ministry of Micro, Small and Medium Enterprises Website: (link unavailable)

Market Development Assistance Scheme for MSMEs

Another premise for our Indian MSMEs, that could take them to International
community, but left unexplored due to lack of funds, is the International Trade
Fairs and Exhibitions. For this purpose, the government set up the Market
Development Assistance Scheme for MSMEs. This scheme aims at funding
MSMEs in showcasing their products and services at the MSME India Stall in
major International Trade Fairs and Exhibitions. This scheme offers partial
reimbursement of the One-time registration fees or annual fees or similar fees
paid by the MSMEs to participate in the trade fairs.

There are a number of resources available for budding entrepreneurs to realize

their dream of owning a business. These government schemes are aimed at
empowering every individual to build their business with minimal hassle.
Because, it is an established fact that MSMEs are the backbone of any economy
and their growth and development should be the core agenda of the
government.

The Credit Guarantee Fund Scheme for Micro and Small Enterprises

Under this scheme, loan can be applied without any collateral

New and existing MSME units involved in manufacturing or service sector can
apply
Retail trade, Educational institutions, Agriculture and Self-Help Groups (SHGs)
are excluded
Apart from SIDBI, the Government of India has set up numerous other financial
institutions for the progress and development of the MSME sector across the
country.
MSME Lending

MSME lending provides financial assistance to Micro, Small, and Medium

Enterprises (MSMEs) to support their growth and development. The Indian
government has introduced various schemes to support MSMEs, including the
Pradhan Mantri Mudra Yojana (PMMY), which offers loans up to ₹10 lakh to non-
corporate, non-farm small or micro-enterprises ¹.

Types of MSME Loans:

-Term Loans: Traditional loans with a fixed repayment schedule for long-term
investment needs.
- Line of Credit/ Overdraft Facility: Pre-approved credit limit for working capital
requirements.
- Bill Discounting or Invoice Discounting: Financing against accounts receivable.
- Point of Sale Finance: Financing based on future credit or debit card sales.

Government Schemes:

- Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE):
Provides guarantee coverage for loans up to ₹200 lakh.
- Credit Linked Capital Subsidy Scheme (CLCSS):Offers 15% subsidy on
additional investments up to ₹1 crore for technology upgradation.
- Equity Infusion for MSMEs through Fund of Funds: Supports VC or PE firms in
investing in commercially viable MSMEs.

Eligibility and Benefits:

MSMEs can apply for loans through various financial institutions, including
banks and NBFCs. The eligibility criteria and benefits vary depending on the
scheme and lender. Generally, MSMEs with a good credit history, financial track
record, and growth potential are eligible for loans ².

For more information on MSME lending and government schemes, you can visit
the official websites of the Ministry of Micro, Small and Medium Enterprises
(MSME) or the Small Industries Development Bank of India (SIDBI).

Conclusion:

In conclusion, India offers a range of funding schemes to support small scale

enterprises. These schemes provide collateral-free loans, loan guarantees,
subsidies, and equity participation to promote entrepreneurship and business
growth. SMEs should evaluate their business requirements and choose the
funding scheme that best fits their needs.

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