How to raise funds from SIDBI?

Introduction

For many MSMEs in India, finding the right funding partner can be a major challenge, that is where SIDBI comes in. It was created to help MSMEs grow by offering various loans and investment options. Whether you are launching a new business or scaling up an existing one, knowing how and when to approach SIDBI can make your funding journey much smoother. In this article, we will break down the funding options SIDBI provides, including the key schemes currently open for applications.

Finance Facilities Offered by SIDBI

1. Direct Finance

SIDBI offers a range of financial solutions to MSMEs based on their needs. These offerings include, but aren't limited to:

• Loan for the purchase of Machinery and Equipment
• Project Financing and Term Loan
• Working Capital Support
• Green Capital Financing Support
• Equity assistance
• Energy Saving scheme

2. Indirect Finance

In addition to direct lending, SIDBI also offers refinancing facilities to existing Primary Lending Institutions, such as commercial banks, financial institutions and more. SIDBI ensures that these PLI’s continue to maintain liquidity and financial capacity. This results in an adequate flow of funds being maintained for the businesses in the country.

SIDBI Loan Schemes for MSMEs

Recognizing the financial requirements at various stages of business maturity throughout an enterprise's lifecycle, SIDBI has developed multiple loan schemes for MSMEs. The currently active schemes are described below:

1. Machinery Loans

SIDBI provides tailored financing options for machinery through Express and Speed schemes, offering up to ?15 Crore with flexible repayment terms. These schemes are especially advantageous for:

• Manufacturing MSMEs looking to enhance their production technologies

• Businesses that want to automate their processes to increase productivity

• Enterprises in need of specialized equipment to improve quality.

2. Project Loans

For businesses looking to expand or set up new facilities, SIDBI offers project financing schemes like Arise, Ubharte Sitare, and Stapan. These options are perfect for:

• Companies aiming to grow geographically with new manufacturing facilities

• Businesses wanting to diversify their product offerings and requiring new manufacturing sites

• Export focused units that want to boost their production capabilities.

• New age entrepreneurs with industry know-how who are starting new ventures.

• MSMEs that are planning significant technical upgrades.

3. Green Finance Loans

SIDBI is leading the way in green financing with its Green Finance Scheme and End to End Energy Efficiency Scheme, helping businesses shift towards more sustainable models. These initiatives are designed for:

• Manufacturing units that are investing in renewable energy setups

• Businesses that are adopting energy efficiency practices

• Companies focused on waste management or recycling efforts

• Enterprises in electric mobility and clean transportation

• MSMEs in the green value chain aiming to enhance their environmental contributions

4. Working Capital Solutions

To meet operational funding needs, SIDBI offers a range of schemes like Working Capital, SWIFT, and STEP, each with its own limits and structures. These options are especially beneficial for:

• MSMEs that have cyclical business operations and need flexible cash flow management

• Service sector businesses that rely on project-based revenue

• Manufacturers who face seasonal demand for raw material.

• Rapidly growing companies that require additional operational funds

• Businesses with long receivable cycles that need interim financing

View detailed loan schemes and eligibility criteria

SIDBI Venture Capital Fund

SIDBI Venture Capital Limited has been established to offer growth capital to MSMEs in exchange for equity. They make these equity investments through various VC funds. This provides an additional financing avenue for businesses that are seeking alternatives to traditional funding methods for their expansion plans.

The equity financing approach is suited for enterprises like:

• Tech startups experiencing high growth with scalable business models

• Innovative companies which require funds for research and development.

• Manufacturing startups that are working on developing proprietary technologies

• Service oriented businesses with unique intellectual property or a strong market presence

• Export focused companies looking to expand into global markets

• Regional startups in areas like Assam and Tripura that are looking for local backing

SIDBI Venture Capital Limited has established specialized funds designed to support MSMEs. These funds address the specific needs of different enterprise categories.

View details of currently active VC Funds

Documents For SIDBI VC FUNDS Application

Securing venture capital from SIDBI requires a well-structured business plan that reflects the venture's potential. The submission of the documents should have a comprehensive list of operational details and future projections through a consistent document structure that addresses:

Company Overview and Leadership

• Executive summary with project details and required financing

• Management team credentials, references, and expertise

• Shareholding structure (existing and proposed) with major stakeholders' interests

• Human resource planning including future requirements and ESOP schemes if applicable

• Details of subsidiary/associate companies and their existing financial relationships

Performance and Market Position

• Performance history covering finances and operational achievements

• Technical partnerships and technological strengths compared to competitors

• Quality certifications and systems implemented

• Marketing strategy and key client relationships

• Global presence including overseas offices and international operations

Project Details and Financial Planning

• Venture cost breakdown and proposed financing structure

• Current project status and implementation schedule

• Financial projections with clearly stated assumptions

• Risk analysis and mitigation strategies

• Well-defined exit plan for investors

• Complete contact information including digital channels

Advantages of Financing from SIDBI

SIDBI offers various unique financial instruments having its own advantages for entrepreneurs, startups, and MSMEs that are seeking financial support for their business ventures:

• Financial Solutions: SIDBI crafts various loan schemes that cater to the needs of various entrepreneurs, ensuring that funding requirements of businesses are addressed. The loan amounts and terms are created to fit the size and needs of each business, enabling MSMEs to access the financial products that align perfectly with their operational and growth goals.

• Competitive Interest Rates: SIDBI offers loans at much cheaper and more attractive rate to these businesses compared to other financial institutions as they have managed to partner with global financial institutions like the World Bank and the Japan International Cooperation Agency. They make it more accessible and affordable for small businesses to secure the capital they require.

• No-Collateral Financing: Entrepreneurs who run their business on asset-lite model can obtain loans of up to Rs. 1 crore without needing to pledge any assets as collateral. The Credit Guarantee Fund Trust for Micro and Small Enterprises was established specifically to support collateral-free lending.

• Transparency in Processes: The loan application and approval process are marked by transparency, with clear disclosure of interest rates, processing fees, and other charges. There are no hidden costs, and the application procedure is streamlined - Application through online portal or mobile app, Document submission, Credit evaluation and Application tracking. 

• Comprehensive Business Support: In addition to financial support, SIDBI plays a vital role in guiding businesses through essential areas of development, including Technology adoption strategies, Programs for developing skills, Expertise in managing projects and insights from market research.  

• Access to Government Subsidies: SIDBI facilitates access to various government schemes with concessional interest rates and favorable terms. The institution leverages its deep understanding of available schemes to help businesses select the most advantageous options for their specific needs.

Conclusion

SIDBI has set a platform for young entrepreneurs to get inspired and start something of their own. While a solid strategy, perfect timing, and innovative ideas are essential for business success but having access to the funds remains the most important factor for implementation. Through its various loan programs and venture capital funds, SIDBI has managed to empower and boost the startup culture in India. At ILO Consulting, we're here to help you get your business ready to secure funding from SIDBI, setting you up for your next big opportunity.

Loan Schemes

VC Funds