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Government Funding and Schemes
An entrepreneur requires a continuous flow of funds not only for setting up of his/ her business, but also for successful operation as well as regular upgradation/ modernisation of the industrial unit. To meet this requirement, the Government (both at the Central and State level) has been undertaking several steps like setting up of banks and financial institutions; formulating various policies and schemes, etc. All such measures are specifically focussed towards the promotion and development of small and medium enterprises.

The public sector banks are the major source of financial assistance to the industrial sector. They extend credit support to the firms in the form of loans, advances, discounting bills, project financing, term loans, export finance, etc. Some of the major examples of such banks are:-

  1. State Bank of India (SBI) provides a wide range of financial products and services that can cater to any business or market requirement. It deploys multiple channels to deliver integrated solutions for all financial challenges faced by the corporate universe. Its various funding schemes are:-

  2. The bank also provides financial assistance to agriculturists through a network of rural and semi-urban branches. These specialized branches have been set up in different parts of the country exclusively for the development of agriculture through credit deployment. Their schemes cover a wide range of agricultural activities like crop loan, finance to horticulture, farm mechanization schemes, land development schemes, minor irrigation projects, agricultural term loans, etc.

  3. Bank of Baroda offers various products and services that meet the specific requirements of business enterprises, particularly the small scale units. Various schemes relating to the provision of loans and advances by the bank include:-

  4. Andhra Bank has also devised a host of loan schemes to meet the financial requirements of an enterprise. These particularly cater to the corporate and agricultural sector. Some of its important funding options include:-

Small scale industries need credit support on a continuous basis for running the enterprise as well as for its diversification and modernisation. Recognising the need for a focused financial assistance to such industries, the Government of India, together with the State Governments, has formulated several policy packages including schemes and funds for their growth and development. Most of these programmes of the Central Government are implemented through two principal organisations:-

  1. Small Industries Development Organisation (SIDO) is an apex body for promotion and development of small scale industries in the country. Its major activities include:-

    • Advising the Government on formulation of policies and programmes for the small-scale industries.

    • Conducting periodical census/survey of the small scale industry and generating data/reports on various important parameters/indicators of growth and development of the sector.

    • Maintaining close liaison with other Central Ministries, Planning Commission, State Governments, Financial Institutions and other organisations concerned with the development of small-scale industries.

    • Facilitating linkage of small-scale industries as ancillaries to large and medium scale industries.

    • Developing human resource base through training and skill upgradation.

    For achieving its objectives, SIDO has devised a comprehensive range of schemes for providing credit facilities, technology support services and marketing assistance, etc. Some of the major schemes are:-

  2. National Small Industries Corporation Ltd (NSIC), has been established with the objective of promoting, aiding and fostering the growth of small scale industries in the country. It has been assisting small enterprises through a set of specially tailored schemes which facilitate marketing support, credit support, technology support and other support services.
  • Marketing support schemes :- sound marketing is critical for the growth and survival of small enterprises. NSIC acts as a facilitator to promote small industries products and has devised a number of schemes to support small enterprises in their marketing.

  • Credit support schemes:- NSIC facilitates credit requirements of small enterprises in several areas. These include:-

    • Equipment financing:- through schemes like 'Hire Purchase' and 'Term Loan' for the procurement of equipments.

    • Financing for procurement of raw material:- by facilitating bulk purchase of basic raw materials at competitive rates, import of scares raw materials,etc. NSIC also takes care of all the procedures, documentation and issue of letter of credit in case of imports.

    • Financing for marketing activities:- such as internal marketing, exports and bill discounting, etc.

    • Financing through syndication with banks:- by entering into strategic alliances with commercial banks so as to facilitate fund requirement of the small enterprises. It involves an arrangement of forwarding the loan applications of the interested small enterprises to the banks.

    • Performance and credit rating scheme for small industries:- so as to enable the small enterprises to ascertain the strengths and weaknesses of their existing operations and take corrective measures accordingly. NSIC is operating the scheme through agencies like ICRA, ONICRA, Duns & Bradstreet(D&B), CRISIL, FITCH, CARE and SMERA.

  • Technology support schemes:- NSIC offers small units various support services through its 'Technical Services Centres' and 'Extension Centres'. The services provided include advise on application of new techniques; material testing facilities through accredited laboratories; energy and environment services at selected centres; classroom and practical training for skill upgradation, etc.

At the State level, various State Financial Corporations (SFCs) have been set up by the respective State Governments for providing financial assistance to the industrial units. For this purpose, these institutions have brought out several funds and schemes, from time to time. There are 18 State Financial Corporations (SFCs) in the country. For example:-

  1. Kerala Financial Corporation (KFC), incorporated under the State Financial Corporations Act of 1951, is a trend setter in the field of industrial finance. It has been playing a major role in  the development and industrialisation of Kerala by extending financial assistance well-suited for the requirements of the entrepreneurs.   Its main objective is to extend term loan assistance for establishing new industrial units or to extend credit assistance for meeting expansion/diversification/modernisation costs of the existing units, in small scale or medium sectors. Some of its major schemes include:-

  2. Madhya Pradesh Financial Corporation is the premier institution in the State of Madhya Pradesh engaged in providing financial assistance to small and medium industries. This assistance has been extended in the form of a wide range of fund and non fund based services/ schemes. The fund based schemes are available for setting up of business ventures within the State, whereas, non fund based schemes are available throughout the country.

The fund based schemes include:-

  • Term Loan

  • Equipment Finance

  • Asset Credit

  • Short Term Loan

  • Working Capital

  • Loan Replenishment

  • Finance for Market Activities

  • Composite Loan

  • Credit Linked Capital Subsidy for SSI

The non-fund based schemes include:-

  • Public Issue Appraisal

  • Credit Syndication

  • Corporate Advisory Services

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