STEPS TO START AN ENTERPRISE – Part IV

FINANCIAL ASSISTANCE

l Financial assistance is available from institutions such as Nationalized Banks,Rural Banks, Small Industries Development Bank of India (SIDBI), NABARD, Regional Rural Banks, National Small Industries Corporation (NSIC), State Financial Corporations etc. depending upon the project requirement and promoters background.

2. Financial assistance has two components. Loan for fixed capital to acquire Plant and Machinery, Land and Building. Working capital loan is used to meet day to day operational cost of the production.

3. Financial Institutions provide composite loans covering Buildings,plant and machinery and working capital.

4. Any one of the financial institutions can be approached to get funds keeping in view their specific schemes.

5. Evaluate and compare the terms and conditions, including rate of interest and repayment period of loan offered by the different financial institutions.

6. Select the financial institution, which offers funds at minimum interest rate as per your repayment plan to suit the project.

7. Choose the Institution which is in close proximity to the project site if other terms and conditions are similar.

8. The major eligibility criteria are return on the investment and profitability of the project proposed to be set up.

9. Any financial institution will support the project if repayment is assured.

10. 20-25% of Total Investment has to be contributed as margin money by the promoter.

11. Care should be taken to have good cushion of Working capital. The Financial Institutions in most of the cases don’t finance full Working capital. One should keep back up for at least 6 months W.C and at times 12 Months

12. Financial Institutions insist margin money depending upon the category of the entrepreneur, risk factor and existing scheme under which the project will be financed.

13. The amount of loan can be used to cover all types of investments required in the project, such as machinery & equipment, working capital, land and buildings etc.

The general conditions for getting financial assistance are:

* Technical /Economic/Market viability

* Promoters contribution

* Capacity to repay loan

* Collateral Securities/Guarantee