SME JoinUp Blog (2012)

Articles and News relevant to the SME community

Finance schemes available for SMEs January 26, 2011

Filed under: Finance Schemes — smejoinup @ 12:27 pm

Apart from the finance schemes that SIDBI has for SMEs, which we talked about in part I of the article, there are some other financing schemes for SMEs as well. The other financing schemes for SMEs are listed below:

1.      Credit Linked Capital Subsidy Scheme- This scheme was launched in 2001 by the Government of India and has been revised in 2005. This scheme is primarily aimed at SMEs in the SSI sector and assisting them with technology upgradation. Every type of entity viz. sole proprietorship, partnership, cooperative, private as well as public limited companies which are operating in the SSI sector are eligible for this scheme.

Under this financing scheme, SMEs can avail a loan of up to Rs 1 crore. It involves a subsidy rate of 15% which is calculated on the purchase price of plant or machinery.

2.      Credit Guarantee Scheme- This scheme was also launched by the Government of India. With this scheme, the government aims to make bank credit available to SMEs without any collaterals or third party guarantees involved.  The basic idea of this scheme is to make the lender give loan primarily on the basis of asset security.

The scheme also aims to make composite credit available to SMEs from a single source. Composite credit is term loan credit as well as working capital. Under this financing scheme for SMEs, businesses can avail a loan of up to Rs 100 lakh from recognised financing institutions. In turn, the government assures the lender that in case of debt failure, it will repay the lender up to 85 percent of the credit given.

The assured cover percentage is different for different criteria. The cover percentage is 80% for SMEs run by women as well as SMEs from the north eastern region of the country. It is 80% again for a guarantee cover of up to Rs 65 lakh. However, the cover goes up to 85% for micro financing i.e. a credit of up to 5 lakh.

3.      Financing schemes by SBI- State Bank of India is the biggest SME financer in India. It runs various financing schemes for SMEs for different sectors which include technology, health, education etc. Here are some of the financing schemes offered by SBI:

a. Open Term Loan- This scheme is meant for SMEs looking for technology upgradation, ISO certification or looking for international expansion. Under this scheme, SMEs in the service sector can avail a loan of upto Rs 100 lakh while SMEs in the manufacturing sector can avail a loan of upto Rs 250 lakhs. The repayment period of loan under this scheme is 5 years.

b. School Plus- As the name suggests, this SME financing scheme is meant for schools and colleges who are looking to buy new land or upgrade their infrastructure. There is no upper limit for loan under this scheme. However, SMEs can only get 85% of the total project cost if they avail School Plus. The repayment loan period is 7 years and there are different rate of interest slabs, depending on the amount of loan.

c. SBI Shoppe- This SME financing scheme from SBI provides loans to SMEs which are looking to purchase shops, training centres etc. or expand or modernise their existing infrastructure. A maximum of Rs 20 lakhs can availed under this scheme which needs to be repaid within 7 years.

There are various other SME financing schemes that SBI has which are sector specific like Doctor Plus, Dental Doctor Plus, Transport Plus etc.

We hope this two-part write up about the various SME financing schemes available in India can help the SMEs out there gather knowledge and select the best option available.

For any assistance on any of the schemes mentioned please email on finance@smejoinup.com

Contributed by “The Writing Lab” for SME JoinUp

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One Response to “Finance schemes available for SMEs”

  1. NEERAJ JAIN Says:

    Government has started many schemes to promote SMEs but the truth is bitter. Recently, I approached a nationalised bank to get loan under Credit Guarantee Scheme & asked to give me loan of Rs. 25 lacs with out guarantee under the scheme on my new project. I would like to tell you that I am already running same business on much larger scale with different company name. The reason for new unit was meant to have dedicated unit to a particular client. To my great surprise the branch manager (of AGM level) refused to give that loan saying that lot of paper work is involved dealing with GOI, hence any loan can be disbursed only on the basis of colateral.


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