Source of Finance
No SSI unit can take off without monetary support. This need for finance can be classified into following types:
Long and medium term loans
Short term or working capital requirements
Risk Capital
Seed Capital/Marginal Money
Bridge loans
Financial assistance in India for SSI units is available from a variety of institutions. The important ones are
SIDBI: Small Industries Development Bank of India (refinance and direct lending)
SFCs: State level Financial Corporation e.g. Delhi Financial Corporation.
NSIC: National Small Industry Corporation.
Small Industry Development Corporations of various states.
Commercial/Co-operative Banks.
DIC: District Industry Centre.
Long and medium term loans are provided by State Financial Corporations, SIDBI and State Industrial Development Corporations. Banks also finance term loans. This type of financing is needed to fund purchase of land, construction of factory building/shed and for purchase of machinery and equipment. Term loans are secured against mortgage of assets such as land, building, machines, equipment and other stocks. The short-term loans are required for working capital requirements, which fund the purchase of raw material and consumable, payment of wages and other immediate manufacturing and administrative expenses. Such loans are generally available from commercial banks.
There is, however, a SINGLE WINDOW SCHEME, for SSI units. Under the scheme, one agency, either the bank or the financial institution, funds both the term loan and working capital requirements. This scheme applies to all SSI projects with project cost upto Rs. 5 million. The working capital loan is generally secured against
Pledging of stocks, raw materials and finished goods,
Advances against work-in-progress (WIP),
Advance against bills.
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