Government Loans for Small Scale Businesses
Government Loans for Small Scale Businesses
Small Scale Businesses or industries need better support and
financial aid in order to have proper growth and flourish well in the face of
stiff competition from companies or organisation that are privately funded or
have an established presence in the market.
Financing provided by the government is preferred because of lower rates
available under government schemes. Such loans also help out in managing the
day-to-day funding requirements of a business. There are many public sector
banks which work in tandem with various government organisations to provide
loans under government-aided schemes. Some of the prominent names are State
Bank of India, Andhra Bank and Bank of Baroda, among others.
Financing
Facilities available for Small Scale Businesses
There are many different facilities as per which loans or financing
options are available to small scale businesses and their entrepreneurs. Some
of the more popular ones are as follows
1. Working Capital
Finance – Can be availed through direct funding or a letter of credit.
This kind of financing can help aid in the operating expenses of a business and
it can also help in purchasing assets related to small scale businesses
2. Corporate Term
Loans – Applied and used for starting new ventures, in the running of
existing business or for expansion in any particular market
3. Term Finance – Term Loans are
helpful in purchasing fixed assets like buildings, machinery and the like. With
floating interest rates, these loans generally have a repayment period that
could go up to 10 years
Specific types of
Loans available from Public Sector Banks
The aforementioned banks have a variety of schemes under which operating
finance is provided to small businesses. An overview of such schemes as per
specific banks is mentioned below.
1. State Bank of India – Probably
the first destination for most small scale entrepreneurs, SBI offers loans and
schemes through multiple channels to allow a holistic financial support for
small scale businesses. The bank extends specialised help to agricultural
businesses and has set up specific centres that are present in rural and
semi-urban branches. A few of its schemes pertaining to the development of
agriculture are
1. Crop Loan
2. Horticulture
Financing
3. Farm Mechanisation
Schemes
4. Land Development
Schemes
5. Minor Irrigation
Projects
6. Agricultural Term
Loans
Some of its funding schemes for businesses other than agriculture are as
follows
1. Working Capital
Finance
2. Corporate Term
Loans
3. Deferred Payment
Guarantees
4. Project Finance
5. Structured Finance
1. Bank of Baroda - This bank
has a few schemes aimed at providing financial aid to small scale entrepreneurs
but they have been quite effective nonetheless and are quite popular in the
same sector. The schemes offered by Bank of Baroda can be listed as below-
o
Working Capital Finance
o
Term Finance
o
Small and Medium Enterprise Loan Pack
o
Small Business Borrowers
o
Traders Loan
2. Andhra Bank - There are a
variety of schemes offered by Andhra Bank and these mainly cater to the
corporate and agricultural sector. A few of the important loan schemes
available for small scale businesses are -
o
Working Capital Loans
o
Export and Import Finance
o
Advance against Shares
o
Term Finance
o
Corporate Loans
o
Project Finance
o
Infrastructure Project Finance
o
Kisan Vikas Card
o
Kisan Sampathi
o
Self Help Groups-Bank Linkage Programme
o
Kisan Green Card
Loan Schemes and
Facilities initiated by the Government of India
Apart from banks which provide financial support to small business
through special loan schemes, the government of India has also set up schemes
and makes use of different associations in order to zero in on businesses which
might require financial support. Most of the programmes initiated by the
government are implemented through the following organisations
Small Industries
Development Organisation (SIDO)
It serves to promote and helps in development of small scale industries.
The major functions of this entity are as follows
Advising the government on new schemes for small scale
industriesConducting surveys on the small scale industry sector and ascertaining
key growth factors
Liaison with central ministry, planning commission, state governments,
financial institutions and other organisations related to the development of
small scale businessesHelping in linking small scale industries to large and
medium scale industriesDevelopment of human resources through training and
skill upgrades
For the above-mentioned functions, some of the schemes put forth by SIDO
are as follows
Credit Linked Capital Subsidy Scheme for Technology Upgradation
Credit Guarantee Scheme
ISO 9000/ISO 14001 Certification Reimbursement Scheme
Integrated Infrastructure Development (IID Scheme)
SSI MDA Scheme
Assistance to Entrepreneurship Development Institutes
Micro Finance Programme
National Small
Industries Corporation Limited (NSIC)
Established to provide specially tailored schemes that facilitate
Marketing support through promotion and other contemporary means of
marketingCredit support through functions like
Equipment financing
Raw material procurement financing
Marketing activities financing
Bank-syndication aided financing
Performance and credit rating system
Technology support which allows material testing, implementation of new
techniques, energy and environment services and training facilities
Small Industries
Development Bank of India (SIDBI)
Established in 1990, this institution is by far the most popular one
when considering the growth and development of small businesses. The schemes
provided by SIDBI are as follows
Direct Assistance Scheme
Indirect Assistance Scheme
Promotional and Development Activities
National Equity Fund, Scheme
Technology Development and Modernization Fund Scheme
Single Window Scheme
Mahila Udyam Nidhi (MUN)
Scheme and Equipment Finance Scheme
National Bank for
Agriculture and Rural Development (NABARD)
It promotes mainly agro-based rural businesses. The financial aid
offered by NABARD is extended mainly to cottage and village industries
