Small and Medium Enterprises (SMEs) are the engines that drive the global economy.

In India, SMEs and MSMEs are the backbone of the economy, contributing to over 30 percent of the country’s GDP.

Small businesses contribute significantly to the social and economic development of the country by encouraging entrepreneurship, creating employment opportunities and manufacturing processes that contribute to the industrial developments. Having said that, finance has always been a major constraint to the growth and expansion of small businesses. Small businesses face a huge demand-supply finance gap besides other factors such as weak credentials, expensive interest rates and long time-periods for loan approvals which limit their working capital.

Hence, efforts are being made to curb this issue in order to uplift small businesses and boost our domestic economy.

Despite playing an important role in the economy, small businesses often get shut down solely because of capital inadequacy. This has created a need for a strong lending sector for small businesses. Various schemes by the government, private sector banks and NBFCs have helped them take a step forward to pace their growth. Given the nature of these businesses, specialised financial provisions are available. Following are ways in which small businesses and MSMEs can avail those facilities and solve the financing issue.

SME Loans

Loans that cater to the financial needs of the Small and Medium Enterprise (SME) segment are known as SME loans.

These loans are designed to suit the needs and requirements of SMEs. SME loans may be used to finance working capital and/or capital expenditure requirements of businesses involved in trading, manufacturing and service sectors. Though the specific requirements to avail loan for SMEs and MSMEs may vary depending upon the lending institution, following are the essentials to apply for an SME loan.

  • ‌KYC documents
  • ‌Proof of business ownership
  • Profit and loss statements with balance sheets
  • ‌These loans should be applied for business purposes only
  • Note: You may also be asked to submit additional documents, if required.

You need to be mindful to look at the particular lender’s lending criteria before applying to reduce the possibility of rejection.

There are start-ups and companies who have dedicated themselves solely to small businesses, right from easy procurement of raw materials to order deliveries, thereby covering not just the financial issues but also helping with other ground work to ease the load.

List of some FinTech start-ups aimed to help small businesses

  • Vistaar Finance 
  • NeoGrowth
  • FlexiLoans 
  • CoinTribe 
  • SMEcorner 
  • Capital Float
  • Bikayi

Government Schemes for SMEs and MSMEs 

The Ministry of MSME runs numerous schemes targeted at: 

  1. Providing credit and financial assistance
  2. Skill development training
  3. Infrastructure development
  4. Marketing assistance
  5. Technological and quality up-gradation 
  6. Other services for the MSMEs across the country

A list of those schemes related to credit facilities and financing is as follows – 

  1. Prime Minister’s Employment Generation Programme (PMEGP)

This scheme is a credit-linked subsidy programme aimed to generate self-employment opportunities in rural as well as urban areas of the country through setting up of new micro-enterprises. Besides, the scheme also seeks to provide continuous and sustainable employment to all segments of traditional and prospective artisans and rural/urban unemployed youth in the country so as to help arrest the migration of rural youth to urban areas. The scheme also focuses on increasing the wage-earning capacity of artisans and contributes to an increase in the growth rate of rural and urban employment.

  1. Credit Linked Capital Subsidy Scheme (CLCSS)

The CLCSS  was launched by The Ministry of Micro, Small and Medium Enterprises to facilitate technology to MSEs through institutional finance for induction of well-established and proven technologies in the specific sub-sectors/products approved under the scheme.

 

  1. Credit Guarantee Trust Fund For Micro and Small Enterprises (CGTMSE) 

The basic aim of CGTMSE is to encourage first-time entrepreneurs to establish SMEs and MSMEs by availing of collateral-free loans from eligible financial institutions. The objective is to strengthen the credit delivery system and facilitate the flow of credit to the MSE sector. Guarantees are provided for extending collateral-free lending to micro and small enterprises through banks and financial institutions (including NBFCs).

The scheme covers collateral-free credit facilities (term loan and/or working capital) extended by eligible lending institutions to new and existing micro and small enterprises up to Rs. 200 lakh per borrowing unit. The guarantee cover provided is with a uniform guarantee at 75 % of the credit exposure above Rs. 50 lakh and up to Rs. 200 lakh (85 % for loans up to Rs. 5 lakh provided to micro-enterprises, 80 %for MSEs owned or operated by women and all loans to NER). A composite all-in annual guarantee fee up to 1.80 þ p.a. of the credit facility (2 %for retail trade) sanctioned is charged on the outstanding loan amount with the minimum guarantee fee being 1 % per annum.

  1. Interest Subvention Scheme for Incremental Credit to MSMEs

As  part of the initiative on support and outreach for MSMEs,  Prime Minister announced the Interest Subvention Scheme for Incremental Credit to MSMEs 2018 on 2nd November 2018. The scheme offers 2 % interest subvention for all Udyog Aadhar Number (UAN) and GST registered MSMEs on fresh or incremental loans to the extent of Rs. 100 lakh. 

Other Resources Available For SMEs and MSMEs 

  1. Performance and Credit Rating
  2. Bank Credit Facilitation 
  3. Raw Material Assistance
  4. Single Point Registration 
  5. Infomediary Services
  6. Marketing Intelligence Services Lease 
  7. Bill Discounting
  8. Technology  and  Quality  Upgradation  Support  to MSMEs 
  9. Design  Clinic  for  Design  Expertise  to  MSMEs Manufacturing Sector (DESIGN)
  10. Building Awareness on Intellectual Property Rights (IPR) 
  11. NSIC Infrastructure –  Exhibition Hall, Hyderabad – A perfect venue  for  organising  Exhibitions/ Conferences
  12. IT Incubator 
  13. Exhibition-cum-Marketing Development Business Park 
  14. Software  Technology  and  Business Parks 
  15. Exhibition Grounds, New Delhi 

The above mentioned are some of the many schemes and resources made available for the SME and MSME sector.

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