Small Industries Development Bank of India SIDBI: A Comprehensive Analysis & Loan Application Guide
I. What is SIDBI
SIDBI, in full, is known as Small Industries Development Bank of India. SIDBI was established in 1988 and came into force on 2 April 1990 as a wholly owned subsidiary of Industrial Development Bank of India (IDBI). The bank is primarily responsible for managing the Small Industries Development Fund and the National Equity Fund and is a key financial institution for the promotion, development and financing of micro, small and medium enterprises.
II. SIDBI provides financing services
SIDBI provides diversified financing services to its clients, including venture capital, direct financing, indirect financing and microfinance. Specific services are listed below:
1. SIDBI Venture Capital: Provides start-up capital for start-ups, covering the life cycle as well as SIDBI interventions.
2. Start-up life cycle and SIDBI interventions: assisting banks, NBFC and SFB with funding.
3. Funds of funds for start-ups: support for various alternative investment funds (AIFs) to help innovative companies grow.
4. Aspire Fund: provides financial support to start-ups in their early stages.
5. India Aspiration Fund: Promotes equity and equity investments in the start-up and MSME sectors.
III. Functions of SIDBI
SIDBI's key features include:
1. Refinancing of small industrial units.
2. Provision of bill discounts and rediscounting.
3. Expansion of marketing channels for products in domestic and international markets.
4. Provision of factoring, leasing and other services.
5. Encouragement of employment-oriented industries that create jobs.
6. Promote the modernisation and technological upgrading of existing units.
IV. Advantages of SIDBI
SIDBI's strengths include:
1. Tailor-made loan programmes.
2. Credits and loans are adjusted to the size of the enterprise.
3. Offer attractive interest rates.
4. Provide professional assistance and counselling.
5. Loans of up to Rs. 1 million can be obtained without collateral.
6. Provision of equity and venture capital.
7. Various schemes with favourable interest rates and generous conditions are available.
8. Transparency of processes and rate structures.
V. Direct financing loan schemes offered by SIDBI
SIDBI offers a wide range of direct financing loan schemes including:
1. SIDBI Soft Micro, Small and Medium Enterprises Loan Fund for Manufacturing in India (SMILE): Minimum loan amount for equipment financing is Rs. 10 lakhs and the maximum loan tenure is 10 years.
2. Smile Equipment Finance (SEF): Minimum loan amount is Rs. 1 million and maximum loan tenure is 72 months.
3. Working capital (cash credit): the amount of the loan is determined on the basis of the applicant's financial capacity.
4. SIDBI Loan for Purchase of Equipment for Enterprise Development (SPEED): up to 1001 TP3T for machinery cost with a maximum loan tenure of 2-5 years.
5. SIDBI Loan for Purchase of Equipment for Business Development (SPEED PLUS): up to 1001 TP3T for machinery cost with a maximum loan tenure of 2-5 years.
6. Supplementary Loan on Demand (TULIP): Maximum limit of Rs. 20 million and maximum loan tenure of 5 years.
VI. How to apply for a loan through SIDBI
To process a loan through SIDBI, a business needs to follow the following process:
1. Prepare the required documents, including the Basic Information Memorandum (BIM).
2. Obtain approval from the entrepreneur and submit the BIM to SIDBI.
3. Rating, if necessary.
4. SIDBI processes loan applications, including provision of equity or quasi-equity, financing of service sector units, etc.
5. In other cases, the loan application will be submitted to the public sector banks.
SIDBI will help the business throughout the process to ensure smooth processing of the loan application.
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