Finance for the SME: Government Funding and Schemes

Every SME requires a continuous flow of funds not only in the initial start-up phases, but also for ensuring successful operational efficiency.

Raising funds for the SME: various ways:
There are multiple ways for SMEs today to raise funds. Also there are multiple factors which the SMEs need to consider while raising funds. At various stages of business the requirement of funds are different. They could range from setting up a new business vertical, to scaling up in terms of human resources to expanding geographically.

Some of the popular existant ways to raise funds for the SME are:

1. Angel Funding
2. Venture Capital
3. Private Equity
4. Government Schemes
5. Banks

Focus: Government supported schemes!
There are many ways to meet financial requirement for the SMEs, the Government (both at the Central and State level) has taken several steps like formulating various policies and schemes, setting up of banks and financial institutions; etc.

This clearly shows the focus of the government towards emerging realization of the power of the growing and emerging SME segment in India. All such measures are focused towards helping the SMEs scale to the next level and play an empowered role towards nation building.

Banks:
The public sector banks are the major source of financial assistance to the SMEs. They extend credit support to the firms in the form of loans, advances, discounting bills, project financing, term loans, export finance, etc. Some of the active banks extending schemes for the SME are:

• State Bank of India (SBI)
• Bank of Baroda
• Andhra Bank
• IDBI Bank

Policies and Schemes for the SMEs by the Government:

Finance for the SME is a continuous need, basis the business. Recognising the need for a focused financial assistance to such industries, the Government of India, along with State Governments, has formulated several policy packages including schemes and funds to fuel the growth and development for the SME. Most of these programs of the Central Government are implemented through two principal organisations:-

National Small Industries Corporation Ltd (NSIC): has been established with the objective of promoting, aiding and fostering the growth of small scale industries in the country. NSIC has been assisting emerging enterprises through a set of specially tailored schemes which facilitate marketing, credit, technology and other supporting services.


Small Industries Development Organisation (SIDO) : is an apex body for promotion and development of small scale industries in the country. The major activities it undertakes are:-

• Conducting periodical census/survey of the small scale industry and generating data/reports on various important parameters/indicators of growth of the SME sector.
• Maintaining close liaison with other Central Ministries, Planning Commission, State Governments, Financial Institutions concerned with the development of small-scale industries.
• Advising the Government on formulation of policies and programmes for the small-scale industries.
• Facilitating the development of human resources by creating the necessary infrastructure for enabling skill upgradation through training.

At the State level, various State Financial Corporations (SFCs): have been set up by the respective State Governments for providing financial assistance to the industrial units. These local financial corporations emerge out as a close window of opportunity for emerging companies across India.