Sidbi Loan Schemes

SIDBI has created a series of equity and loan schemes for the MSME sector to support growth oriented small businesses in India. In this article, we look at some of the most popular SIDBI schemes like marketing assistance scheme, vendor development scheme, SME IT loans, international finance, marketing assistance for women entrepreneurs and risk capital.

Marketing Assistance Scheme

Term loans are offered to MSEs for the purpose of marketing of their products. The loan amount is usually not below Rs.10 lakh if obtained directly from SIDBI. The debt-equity ratio is normally not more than the ratio 2:1.

Vendor Development Scheme

The scheme is for help to vendors of OEMs and other large corporates. The vendors could be SMEs in the industrialized or service sector. Assistance is therefore extended through term loans for the purpose of expansion/modernization of SMEs and by means of invoice/bill discounting facility for working capital requirements. SIDBI has entered into a Memorandum of Understanding with large corporates, PSUs and MNCs permitted a good SME vendor base for the scheme.

SME IT Loans

SIDBI and Intel have come together with a first-of-its kind program to help SMEs set-up or step-up the IT in their business. Termed SME IT LOANS, it enables a simple access for SMEs to get both the finance and the technology to implement newer technology, particularly since the loan is obtainable for hardware, software, installations and service. Finance is obtainable from Rs. 5.0 lakh to Rs. 25 lakh. Interest charged is at a rate of 11.5% p.a. on a diminishing balance basis.

Bills Discounting Scheme

Under the bills discounting scheme, medium and short term finance is offered to purchasers/sellers of equipment, machinery, components and parts, one of which must be in the SSI/SME sector or an appropriate service sector unit including those in the construction and transportation sector. Bills discounting scheme guarantees timely payment to units.

Refinance through Banks and SFCs

Refinance is offered through banks, State Finance Corporations (SFCs) and (SIDCs) for creating new small scale units or expansion, modernization, diversification etc. of accessible units and for all other activities entitled for assistance under the service sector. Service sector activities comprise professional practice or consultancy ventures, tourism related activities or hospitals or nursing homes or polyclinics or hotels or restaurants or marketing and industrial infrastructural projects. SIDBI offers long term credit or refinance to banks, State Level Financial Institutions and State Level Industrial Development Institutions for loans that are given by them to MSMEs. Cost of project under Refinance Assistance with respect to service sector units should not be in excess of Rs.20 cr. for banks. The project cost limit therefore for SFCs/SIDCs is lower.

International Finance

The schemes that are covered under this head are:

Pre-shipment Credit
Post-shipment Credit
Term Loans in Foreign Currency
Opening of Foreign Letters of Credit
Booking of Forward Contracts.

Pre-shipment credit is offered to SMEs in USD or Euro or in rupees. The period of credit is maximum 180 days. Margin is a minimum of 10% and a maximum of 25%. The rate of interest is not in excess of 0.75% over 6 month LIBOR. Post-shipment credit is offered in foreign currency to SME unit or Export or Trading House for sourcing their requirements from SMEs. Finance is supplied for sourcing requirements up to Rs. 1.0 cr. The rate of interest for export bills financing is the same as that of pre-shipment credit. For post-shipment credit it is according to RBI guidelines. The foreign currency Term Loans are also given for the setting up of new projects and expansion, diversification and technology up gradation. Repayment is therefore within a maximum period of five years. The interest rate is in the range of 3.5%-4% above six month LIBOR.

Marketing Fund for Women

The aid under the fund is available to help women entrepreneurs and organizations involved in the marketing of products manufactured by women entrepreneurs to improve their reach, both in the domestic and international markets. Finance from the fund is offered to marketing associated service providers either organizations or units in the corporate or co-operative or NGO sectors which are ensuring support services like internet, trade related information, advertising, marketing research etc.

Risk Capital to MSMEs

SIDBI has created the ‘SIDBI Foundation for Risk Capital for MSMEs’ under which it has created new products and mechanisms for providing risk capital to MSMEs in diverse size groups and varied industry segments. Some of the products that are introduced are equity and equity similar instruments and mezzanine instruments such as optionally convertible debt and subordinate debt for MSMEs. Apart from direct funding by SIDBI, different delivery channels like Banks, VC funds, etc. would be utilized for supplying risk capital to MSMEs.

Back to Learn

Frequently Asked Questions

Common questions about SIDBI Loan Schemes for MSME Growth in India.

The SIDBI Marketing Assistance Scheme offers term loans to MSEs (Micro and Small Enterprises) for the purpose of marketing their products. The loan amount is typically not less than Rs. 10 lakh if obtained directly from SIDBI, and the debt-equity ratio is normally not more than 2:1.

The SIDBI Vendor Development Scheme aims to assist vendors of OEMs (Original Equipment Manufacturers) and other large corporates, which could be SMEs (Small and Medium Enterprises) in the industrial or service sector. SIDBI provides term loans for expansion/modernization of SMEs and invoice/bill discounting facilities for working capital requirements under this scheme.

The SME IT Loans scheme, introduced in partnership with Intel, is designed to help SMEs set up or enhance their IT infrastructure. It provides easy access to finance and technology for implementing newer technologies. Loans ranging from Rs. 5 lakh to Rs. 25 lakh are offered at an interest rate of 11.5% per annum on a diminishing balance basis.

Under the Bills Discounting Scheme, SIDBI offers medium and short-term finance to purchasers/sellers of equipment, machinery, components, and parts, where at least one party must be in the SSI/SME sector or an appropriate service sector unit. This scheme ensures timely payment to the units involved.

The SIDBI Refinance Scheme provides refinance to banks, State Finance Corporations (SFCs), and State Industrial Development Corporations (SIDCs) for creating new small-scale units or expanding, modernizing, or diversifying existing units. It also covers service sector activities such as professional practice, consultancy, tourism, hospitals, hotels, and industrial infrastructure projects.

SIDBI offers various international finance schemes, including pre-shipment credit, post-shipment credit, term loans in foreign currency, opening of foreign letters of credit, and booking of forward contracts. These schemes assist SMEs with their export-related financing requirements.

The Marketing Fund for Women provided by SIDBI aims to help women entrepreneurs and organizations involved in marketing products manufactured by women entrepreneurs, improving their reach in both domestic and international markets. Finance is offered to marketing-related service providers, such as organizations or units in the corporate, cooperative, or NGO sectors, that provide support services like internet, trade information, advertising, and marketing research.

SIDBI has created the 'SIDBI Foundation for Risk Capital for MSMEs' to provide risk capital to MSMEs in diverse size groups and industry segments. The products offered include equity and equity-similar instruments, as well as mezzanine instruments like optionally convertible debt and subordinate debt. Risk capital can be provided directly by SIDBI or through delivery channels like banks and venture capital funds.

For service sector units, the project cost limit under the SIDBI Refinance Scheme should not exceed Rs. 20 crore for banks. The project cost limit for State Finance Corporations (SFCs) and State Industrial Development Corporations (SIDCs) is lower than this limit.

SIDBI offers foreign currency term loans for setting up new projects, expansion, diversification, and technology upgradation. The repayment period for these loans is a maximum of five years, and the interest rate ranges from 3.5% to 4% above the six-month LIBOR rate.