Loan from Financial Institutions (SIDBI)

Loan from Financial Institutions (SIDBI)

Loan from Financial Institutions (SIDBI)

SIDBI (Small Industries Development Bank of India) was made responsible for administering Small Industries Development Fund and National Equity Fund that were administered by IDBI before. SIDBI is the Primary Financial Institution for promoting, developing and financing MSME (Micro, Small and Medium Enterprise) sector.

Besides focusing on the development of the Micro, Small and Medium Enterprise sector, SIDBI also promotes cleaner production and energy efficiency. SIDBI helps MSMEs in acquiring the funds they require to grow, market, develop and commercialize their technologies and innovative products. The bank provides several schemes and also offers financial services and products for meeting the individual’s requirement of various businesses.

Finance Facilities Offered by SIDBI

Small Industries Development Bank of India, offers the following facilities to its customers

1. Direct Finance

SIDBI offers Working Capital Assistance, Term Loan Assistance, Foreign Currency Loan, Support against Receivables, equity support, Energy Saving scheme for the MSME sector, etc.

2. Indirect Finance

SIDBI offers indirect assistance by providing Refinance to PLIs (Primary Lending Institutions), comprising of banks, State Level Financial Institutions, etc. with an extensive branch network across the country. The key objective of the refinancing scheme is to raise the resource position of Primary Lending Institutions that would ultimately enable the flow of credit to the MSME sector.

3. Micro Finance

Small Industries Development Bank of India offers microfinance to small businessmen and entrepreneurs for establishing their business.

Functions of SIDBI

  • Small Industries Development Bank of India refinances loans that are extended by the PLIs to the small-scale industrial units and also offers resources assistance to them
  • It discounts and rediscounts bills
  • It also helps in expanding marketing channels for the products of SSI (Small Scale Industries) sector both in the domestic as well as international markets
  • It offers services like factoring, leasing etc. to the industrial concerns in the small-scale sector
  • It promotes employment oriented industries particularly in semi-urban areas for creating employment opportunities and thus checking relocation of people to the urban areas
  • It also initiates steps for modernisation and technological up-gradation of current units
  • It also enables the timely flow of credit for working capital as well as term loans to Small Scale Industries in cooperation with commercial banks
  • It also co-promotes state level venture funds

How to apply for loan through SIDBI

For processing a loan through Small Industries Development Bank of India, an entrepreneur would have to go through the below-mentioned process:

Step 1: Recognized consultants empanelled with the SIDBI would prepare the documents needed. Depending on the requirements and information specified by the MSMEs, the consultants would prepare a BIM (Basic Information Memorandum). This document would include all the information related to the rating agencies and banks.

Step 2: The Basic Information Memorandum is approved by MSME entrepreneur. The accredited consultants would then submit the Basic Information Memorandum to Small Industries Development Bank of India.

Step 3: In case required, the proposal would be rated by the rating agency which is approved by the Reserve Bank of India.

Step 4: SIDBI would directly handle the below-mentioned cases:

  • SIDBI would offer equity or quasi-equity to the existing units that are growth-oriented
  • The bank would finance units which are in the service sector
  • It would offer credit to MSMEs for Cleaner Production Processes and Energy Efficient.

Step 5: For other cases, the application for the loan would be submitted to the Public-Sector Banks. SIDBI (Small Industries Development Bank of India) has an MOU (memorandum of understanding) with the public-sector banks for the issuing loans. Small Industries Development Bank of India would help the entrepreneur at each stage until the loan is finally processed. MSMEs stands a better chance of availing the loan in time and also could avoid needless delays.