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  • SIDBI

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  • Small industrial Development Bank of India (SIDBI) is the top development financial institution in the country and was formed on 2 April 1990, following the Indian Parliament Act to offer financial solutions for Micro, Small and Medium Enterprises (MSME) sector. Headquartered in Lucknow, SIDBI has bank branches across the country in popular cities such as Bangalore, Chennai, Mumbai, Delhi, etc. The chairman of SIDBI is Mohammad Mustafa.

    Loan schemes offered by SIBDI

    Listed below are the key details of the loan schemes offered by SIBDI:

    Loan Scheme Loan Tenure Loan Amount Eligibility Criteria
    Small Equipment Finance (SEF) Up to 72 months Loans up to Rs.1 crore Should have 3 years' experience in the financial or business sector
    SIDBI Make in India Soft Loan Fund for MSME (SMILE) Up to 10 years Between Rs.10 lakh and Rs.25 lakh New or existing enterprises
    Working Capital (Cash Credit) As per the terms and conditions Depends on the financial ability of the applicant Existing customers under SIBDI or of other banks can apply
    Loans under partnership with OEM (Original Equipment Manufacturer) Up to 5 years Minimum loan amount of Rs.1 crore Should have 3 years' experience in the financial or business sector
    SIDBI Trader Finance Scheme (STFS) Up to 5 years Between Rs.10 lakh and Rs.1 crore Should have retailing, financial or business experience of 3 years
    Funds of Funds for start-ups As per the terms and conditions Depends on the financial ability of the applicant Start-up companies that required additional funding
    India Aspiration Fund As per the terms and conditions As per the size of the fund As per the terms and conditions
    Assistance to NBFCs Between 2 years and 5 and a half years Based on the needs of the company Should be in business for 5 years and registered under the RBI
    Refinance Scheme Up to 5 years Depends on the financial ability of the applicant Should be in business for at least 3 years with earned profit in 2 years
    Assistance to Small Finance Banks (SFBs) As per the terms and conditions Depends on the financial ability of the applicant Should be registered under the RBI and have earned profits for 2-3 business years
    Aspire Fund Up to 6 years Depends on the financial ability of the applicant All enterprises enlisted with SIBDI

    Benefits of availing a loan from SIBDI

    Listed below are the key benefits of availing a loan from SIBDI:

    • Offers loans as per the requirement of the business.
    • Loans are offered at attractive interest rates.
    • Benefit of a relationship manager to advice businessmen on the type of loan they should apply for.
    • No security or collateral for loans up to Rs.1 crore.
    • Provides sufficient capital for the business.
    • Invest in venture capital funds through SIDBI Venture Capital Limited.
    • Avail loan subsidies.
    • No hidden charges, the whole loan process is transparent.
    • Tailor-made - SIDBI designs loans according to the needs of your enterprise. If your needs do not fall into the usual and ordinary category, SIDBI will help fund you in the right way.
    • Specialised Size - Loans are altered according to the size of the enterprise. So micro, small and medium enterprises can get different loans tailored to suit their business.
    • Attractive Rates - SIDBI has a tie-up with many banks and international financial institutions and can get concessional rates of interest. The tie-ups include KfW, World Bank and Japan International Cooperation Agency.
    • Assistance - SIDBI doesn’t just give you a loan, it also gives your assistance and much needed advice. Relationship managers help entrepreneurs make the right decisions and provide assistance till the end of the loan process.
    • Collateral Free - Entrepreneurs can get up to Rs. 100 lakhs without offering collateral. This is done through the establishment of a Trust called Fund Trust for Micro and Small Enterprises (CGTMSE).
    • Risk and Growth Capital - Without diluting the ownership of the company, entrepreneurs can acquire sufficient capital to meet growth requirements.
    • Venture and Equity Funding - SIDBI has a wholly owned subsidiary called SIDBI Venture Capital Limited that can provide growth capital in the form of equity through venture capital funds that are focussed on MSMEs.
    • Government Subsidies - Take advantage of various schemes that have concessional rates and relaxed terms offered by the Government. SIDBI has a wider understanding and in-depth knowledge of loans and schemes available and can help you make the best decision for your company.
    • Transparency - The process and rate structure is transparent. There are no hidden charges.

    Objective of SIDBI 

    The objective and goal of SIDBI is to offer short-term loans and refinancing solutions to companies listed in the Micro, Small and Medium Enterprises (MSME) sector as well as for financial institutions directly related to such companies – offering loans for development and sustenance. 

    Key functions of SIDBI

    Listed below are the chief functions of SIDBI:  

    • Aid financial institutions (cooperation and commercial banks) lending to small-scale industries in the Small and Medium Enterprises (MSME) sector to ensure their financial health.  
    • Offer SIBDI direct loans to companies categorised in the Small and Medium Enterprises (MSME) sector.  
    • Carry out marketing initiatives for small-scale industries on a global scale.  
    • Offer venture funding possibilities for industries in the Small and Medium Enterprises (MSME) sector. 
    • Promotion of employment and upgradation of technology in the sector.  
    • Offer job opportunities for individuals who wish to work in the sector. SIDBI recruitment updates are displayed on the website - https://www.sidbi.in/en/careers/archived 
    • Loan offers for development and maintenance of small-scale industries in the country.
    • Marketing of small-scale industries on a global scale.
    • Promotion of employment-oriented industries in the small-scale industry sector.
    • Ensure technology upgradation in the small-scale industry.
    • Ensures the financial health of cooperation banks and commercial banks' lending to small-scale industries.
    • Promotion of venture funds.

    Loan Facilitation by SIDBI

    SIDBI offers a loan facilitation and syndication service through partnerships with banks, accredited consultants and rating agencies. SIDBI helps existing manufacturing and service sector units get loans from banks through a structured mechanism. The process is transparent and strives for timely loan sanction or consideration of these loan applications. This initiative helps business avoid delays in the loan application process. It enhances the flow of financial assistance to the MSME sector.

    • SIDBI assists enterprises in securing a loan by generating complete and accurate applications, furnishing all documents necessary to sanction the loan.
    • A second check is provided through an independent validation by the accredited consultants (ACs) of the information furnished by MSMEs in the loan applications. This makes the information more reliable so the banks feel more comfortable accepting the loan application.
    • An optional step is the rating of the loan proposal. Ratings are done by rating agencies who will provide an independent opinion as and when needed. This helps banks consider the loan applications promptly.

    Accredited Consultants

    The accredited consultants provide a number of useful services for the purpose of loans.

    • The ACs provide guidance to existing and new entrepreneurs.
    • They make the entrepreneurs aware of the different schemes available from SIDBI and commercial banks.
    • They also educate MSMEs on the benefits and subsidies under Government schemes.
    • They provide debt counselling for loan applicants.
    • They prepare the Basic Information Memorandum (BIM).
    • They help in responding to queries raised by banks.

    5 steps to apply for a loan from SIBDI

    Applicants should follow the steps mentioned below to apply for a loan from SIBDI:

    Step 1: Visit the official website of SIBDI

    Step 2: Click on the ‘applicant’ tab.

    Step 3: Enter your username and password.

    Step 4: The applicant has to then enter the desired loan amount and choose a scheme.

    Step 5: The applicant has to enter personal details such as his/her name, username, email ID, mobile number, business address, state, district, etc. Click on ‘register’ to complete the application process.

    Process of Loan Application through SIDBI

    To process a loan through SIDBI, the entrepreneur will have to go through the following process.

    Step 1: Accredited consultants empanelled with SIDBI will prepare the documents required. Based on the information and requirements indicated by the MSMEs, the ACs will draft a Basic Information Memorandum (BIM). This document will contain all information relevant to the banks and rating agencies.

    Step 2: The BIM is approved by the MSME entrepreneur. The ACs will then submit the BIM to SIDBI.

    Step 3: If needed, the proposal will be rated by a rating agency approved by the RBI.

    Step 4: SIDBI will directly handle the following cases:

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

    Step 5: For any other case, the loan application will be submitted to Public Sector Banks. SIDBI has a memorandum of understanding (MOU) with public sector banks for the purpose of loans.

    SIDBI will assist the entrepreneur through every stage till the loan is processed. MSMEs have a much better chance of getting their loan sanctioned in time and can avoid unnecessary delays.

    Finance Schemes for Sustainable Development including Energy Efficiency and Cleaner Production in MSMEs

    These schemes are aimed at helping companies and manufacturers who deal with saving energy, facilitating cleaner production and the like. These schemes strive to provide attractive rates of interest to encourage energy saving projects. Companies can reduce their energy costs and enhance their profit. The schemes help achieve waste reduction, control pollution, recover valuable by-products during production and participate in sustainable growth.

    Purpose

    • To promote energy efficient enterprises in the MSME sector.
    • Contribute to reducing the severity of climate change by reducing greenhouse gas emission especially Carbon Dioxide.
    • Use financial products to help reduce pollution and emissions.
    • Provide support for MSMEs who want to increase their scale, and invest in the development and commercialization of projects based on innovative technology.

    Funding

    The schemes are funded in the following ways:

    • Direct funding by SIDBI
    • Refinance to Primary Lending Institutions (PLIs)
    • Refinance to Non-Banking Financial Companies (NBFCs)

    Usage

    The financing received through these schemes are intended for the following use:

    • Existing energy-saving equipment that involves acquisition, installation, upgrading and remodelling.
    • Wind Energy (Windmills)
    • Solar Energy (Photovoltaic & Thermal)
    • Micro Hydro Energy
    • Biomass and Bagasse (Gasifier/Cogeneration)
    • Municipal Solid Waste based power generation
    • Equipment which can reduce Greenhouse Emission
    • Installation of building envelopes, heating systems, equipment, lighting, other equipment, electrical power and motors that comply with the energy performance standard according to the Energy Conservation Building Code (ECBC) GRIHA, LEED and IGBC.
    • Effluent and Waste Treatment
    • Recycling
    • Activities that promote cleaner technology
    • Activities related to Energy Efficiency or Clean technologies such as pollution control and management consultancy services, environmental compliance audit, energy audit, ratings, certification, and so on
    • Energy Service Companies (ESCOs)

    Eligibility

    • Micro, Small and Medium Enterprises (MSMEs) that are interested in investing in Energy Efficiency and Cleaner Production. For all investments in machinery, plants and production processes that could help save energy, reduce the carbon footprint and increase profitability, SIDBI offers these schemes to help these enterprises financially.
    • Original Equipment Manufacturers (OEMs) who deal with manufacturing equipment that is more green, energy efficient and enhances cleaner production.
    • Energy Service Companies (ESCOs) that provide renewable energy solutions, energy efficiency and cleaner production.

    Schemes

    • JICA Phase 3 - Scheme for Energy Saving Projects in MSME Sector
    • Sustainable finance Scheme (SFS)
    • Financing End to End Energy Efficiency Investments in MSMEs (4E Financing Scheme)
    • Green Loan Scheme (GLS)

    Performance Linked Grant (PLG) Scheme

    The aim of this project is to encourage and improve energy efficiency through commercial investments. The target of this scheme is the small and medium enterprises that invest and deal with energy efficiency goods and services that help reduce greenhouse gases. MSMEs can apply for finance under such grants by submitting an application to SIDBI with a brief about the business and requirements.

    World Bank – GEF Project - Financing Energy Efficiency at MSMEs

    Under this initiative, World Bank and Global Environment Facility (GEF) are helping MSME clusters in India through SIDBI and the Bureau of Energy Efficiency (BEE) to reduce greenhouse gases and improve energy efficiency through better financing. On September 13th, 2010, the grant agreement was signed and was effected on 28th October, 2010. SIDBI was granted $9.05 million under this grant to be utilized over a period of four years. GEF also granted $2.25 million to BEE to be utilized for the implementation of energy efficiency in MSMEs in India.

    Project Management

    SIDBI set up a Project Management Unit at New Delhi to coordinate the disbursement of the grant to the target group which consists of five energy intensive clusters.

    • Foundry cluster at Kolhapur
    • Forging at Pune
    • Limekilns at Tirunelveli
    • Chemical at Ankleshwar
    • Mixed at Faridabad

    Activities under the grant

    • Activities to increase investments in energy efficiency in MSMEs
    • Activities to build capacity and awareness for energy efficiency in MSMEs
    • Project management
    • Programme knowledge management

    SIDBI’s Role

    SIDBI played a major role in this project providing the following services.

    • Assistance for completing Energy Audits
    • Preparation of DPRs
    • Providing support in acquiring financing from the Indian local banks to ensure the implementation of the EE measures
    • Support to BEE for energy efficiency implementation in additional 25 clusters

    Growth Capital & Equity Assistance

    SIDBI helps existing small and medium business meet their needs for capital in order to grow.

    Under this scheme, SIDBI provides assistance in form of mezzanine or convertible instruments, subordinated debt and equity to deserving enterprises.

    Objectives

    • To ensure the business has adequate capital to promote growth and meet aspirations without diluting ownership.
    • To fund investments in brand building, marketing, research and development, creation of distribution network, purchasing software and so on.
    • To help businesses with funds with a longer initial moratorium period so that the chances of success of the venture are higher.
    • SIDBI provides loans to businesses who want funding based on the strength of the business backed by cash flows rather than collateral and assets.

    Benefits

    • SIDBI offers a higher moratorium period to repay the loan so that companies have a higher chance for success on their investment.
    • Loan applicants have access to flexible structuring of the loan to suit individual business needs.
    • Companies can avail of long-term structured assistance especially in cases where the investment is directed to intangible assets.
    • SIDBI provides finance to meet needs rising out of modernization, expansion and upscaling.
    • MSMEs can get assistance with leverage equity and sub debt assistance to raise higher debt funds.
    • Under this scheme, enterprises can avoid the issues of enterprise valuation, exit of investors and other complexities that are associated with equity investments.

    Security

    For debt-based instruments, SIDBI requires the following security to be provided when applying for finance under this scheme.

    • Personal guarantee of the promoters
    • Charge on assets available in the unit of the beneficiary
    • Charge on assets to be created out of SIDBI’s assistance
    • CGTMSE Coverage in cases where it is applicable

    Eligibility

    • MSMEs that fall under the definition of Government of India (MSMED Act).
    • Existing customers of SIDBI who meet the criteria of internal rating.
    • Enterprises that have been profitable for the past three years. It must have two years of satisfactory conduct related to banking credit history. The enterprise must either meet the internal rating criteria or submit external ratings from ICRA, D&B, SMERA or CRISIL.

    Receivable Finance Scheme

    Many MSMEs face the problem of delayed payments for the credit sales made to larger purchaser companies. SIDBI recognises the problems that can arise out of this situation for the MSME and how it can significantly affect the financial health of the company. Therefore, it devised a scheme under which these companies can acquire finance against the bills or invoices that the MSME holds against the credit purchase made by the purchaser company.

    Objectives

    To help MSMEs maintain their financial health which depends greatly on how quickly their receivables are realised. This scheme helps reduce the issues suppliers face with receivables belonging to MSMEs. It aims to help them improve their liquidity and cash flow. The scheme’s objectives are to help the MSMEs in the following activities.

    • Efficient Cash Management
    • Discounting at competitive rates
    • Quicker realization of receivables

    Usage of Funds

    • The finance covers discounting of bills of exchange and invoices that arise out of sale of indigenous components, accessories, parts, sub-assemblies, intermediates by an MSME.
    • The finance also covers the services provided by an MSME in the services sector to a Purchaser Company.

    Eligibility

    • The seller or the purchaser must qualify to be an MSME in the manufacturing or service sector.
    • MSMEs that are engaged in undertaking or manufacturing related to the sale of components, accessories, parts, sub-assemblies, intermediates and services to large and medium scale units.
    • Large Corporates that procure raw materials from MSMEs.

    Finance for Upgradation / Modernisation

    There is a need for constant upgrading when dealing with technology. Companies need to modernize and upgrade their technological processes to stay on par with the current conditions. Companies also need to expand their capacity every now and then. SIDBI plays an important role in these situations to help companies meet their financial needs. SIDBI has been marked as a Nodal Agency to help in assisting and monitoring the interface and coordination with banks, financial institutions and the Government.

    Schemes

    • Technology and Quality Upgradation Support to Micro, Small and Medium Enterprises
    • Credit Linked Capital Subsidy Scheme (CLCSS)
    • FPTUFS – Scheme for Food Processing Industries
    • Integrated Development of Leather Sector Scheme (IDLSS)

    TIFAC- SIDBI Revolving Fund for Technology Innovation

    Under this scheme, SIDBI provides financial assistance to MSMEs who want to invest in development and upscaling. It also helps out in the demonstration of innovative technology based projects and the need for commercialization.

    Funding

    SIDBI provides assistance in the form of early stage “debt” funding. The terms are relaxed to help the MSME in developing, demonstrating and commercializing new innovations. The scheme supports emerging technology, new products, unproven technology and new processes that have not been commercialized yet. Assistance granted is usually 80% of the cost of the project. The maximum funding granted per project is Rs. 100 lakhs. It could exceed this limit in special cases based on the innovative factor of the project.

    Process

    • Once a proposal for finance is submitted, it will be subjected to a technical evaluation by TIFAC.
    • The proposal will have to be evaluated for financial viability by SIDBI.
    • The Project Approval Committee (PAC) consisting of officials of SIDBI and TIFAC will ten approve the assistance?

    Usage of funds

    • Capital expenditure which includes factory shed or industrial housing, and plants. It also includes machinery, equipment, utilities, quality control and testing equipment.
    • Working capital margin
    • Cost of manpower
    • Pre-operative expenses
    • Intangible asset expenses such as copyrights, patents, technology transfer fees, marketing, licensing, research and development, and branding.
    • Contingencies
    • Any other overheads that are required for the project

    Interest Rate

    The Project Approval Committee is in charge of approving the interest rate granted under this scheme. The interest rate offered does not exceed 5% per annum.

    Other Charges

    An upfront fee of 0.5% of the sanctioned amount + taxes is charged.

    Repayment

    The loan should be repaid within 6 years from the date of project completion. This 6-year period includes the moratorium period granted. In special cases, this period can be extended.

    Security

    • Personal guarantee of the promoters
    • First charge on moveable and immoveable assets created out of the project.
    • First or second charge on other assets of the unit to be created. This depends on if the prior charge is insufficient.

    Eligibility

    New and existing MSME units are eligible to apply for finance under this scheme.

    SIDBI has a lot to offer to MSMEs and has been identified as a Nodal Agency when it comes to Government Schemes for this sector. Enterprises can secure finance more conveniently. SIDBI will provide assistance to go about it the right way and get the most which will benefit the company and ultimately benefit the country.

    FAQs 

    1. Are MUDRA loans offered by SIBDI? 

    Ans: Yes, MUDRA loans are one of the loan products offered by SIBDI.  

    2. What documents should I submit if I wish to apply for a SIDBI direct loan? 

    Ans: Applicants for the SIBDI direct loan should submit proof of identity and address, PAN card, documents proving their business, etc.  

    3. Is the credit score of the individual taken into consideration when applying for a SIBDI loan? 

    Ans: No, the credit score of the individual or partners are not taken into consideration.  

    4. What the types of finance offered by SIBDI? 

    Ans: SIDBI offers direct finance, in-direct finance and Micro Finance.  

    5. Is SIBDI a subsidiary of the Reserve Bank of India? 

    Ans: No, SIDBI is listed under the Reserve Bank of Indian and the Department of Financial services. In fact, State Bank of India, Life Insurance Corporation and the Government of India are the largest stakeholders in SIBDI.  

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