1. Managing Entrepreneurship: Small & Medium Scale Business
FINANCING THE NEW/SMALL ENTERPRISES

2. SCOPE Intro to Financial Planning
Bank Finance : The Indian Perspective
Types of Loans
Financial Institutions for Small Enterprises
Financial Institutions and Their Role
SIDBI (Small Industries Development Bank of India)
NSIC (National Small Industries Corporation)
SFC (State Financial Corporations)
State Level Small Scale Industrial Corporations
Commercial Banks
Scheme for Providing Self-employment to the Educated Unemployed Youth

3. OBJECTIVES By the end of the session, you will be able to:
develop a framework for assessing your financing requirement as an entrepreneur,
Learn about the institutions which provide financial assistance to SSE,
Explain in detail the various types of loans that may be availed from these institutions as well as the attendant requirements, and
Elaborate upon the defined role of the various financing institutions in respect of SSEs .

4. Importance & Need of Financial Planning

5. Financial Planning
Financial Planning is an appraisal of the financial aspects likely to come up in the future for which decision on the course of action to be adopted has to be taken now.
In other words, Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives.
The process of financial planning in business is designed to forecast future financial results and determine how best to use the company’s financial resources in pursuit of the organization’s short- and long-range objectives
Financial planning is concerned with the general business policies, trends in business and their impact on the financial position as well as condition of the enterprise.

6. Financial Planning
Questions that are addressed through Financial planning may include:
Amount of finances required
Exploring the sources of raising the capital – Friends/ Bank?
Duration for which funding is required & by when will the cash flow start?
How much working capital is required?

7. Financial Planning
Goal-setting: in terms of profits, sales, market share, acquisition of assets, etc.
Financial Forecast: The second step shall involve forecasting or determining the most probable course of events. Involves estimation of :
Capital requirements
Working Capital requirements,
Capital structure (debt-equity ratio),
Credit Policy, and
Contingencies.

8. Short Term & Long Term Finance
For Operational requirement of business
Internal
Sources
External
Short Term
(1-3 years)
Long Term
(Over 10 yrs)

9. Sources of Short Time Finance

10. Sources of Long Term Finance
Equity
(Owner’s Capital)
Deposits/ Loans given by Partners
Seed capital, margin money, subsidy, soft loans from Government/Financial Institutions
Machinery purchase under IDBI Bill Rediscounting Scheme
Hire purchase/leasing facility from National Small Industries Corporation or similar organisations
Credit facilities from commercial banks

11. Factors to be considered while arranging funds
Cost of borrowing,
Time required for obtaining such finance,
Period for which funds required,
Repayment capacity keeping future profit generation pattern in view,
Conditions stipulated by lenders of money

12. Bank Finance Problems in getting Finance –
The capital base of SSEs is weak mainly because they are not in a position to offer appropriate collateral security
Not considered as Safe Credit Risk
Information about the quality and marketability of the products manufactured by the small enterprises was not available
Risk of slow moving accounts, petty defaults and greater office work in follow ups

13. Credit Guarantee Scheme” was put in place By Govt on 30 Aug 2000 to guarantee advances to small scale industries was launched by the Reserve Bank of India
The Credit Guarantee fund Trust Scheme for Micro, Small and Medium Enterprises (CGTMSE Scheme) provides a framework for the Banks to extend upto Rs.1 crore of loan without any collateral security toward term loan and working capital requirements of a business (NOT for marketing or technology development). Therefore, startups that require capital assets or inventory can utilize the CGTMSE scheme to obtain collateral fee loans from bank. 

14. The main objective is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. The other objective is that the lender availing guarantee facility should endeavor to give composite credit to the borrowers so that the borrowers obtain both term loan and working capital facilities from a single agency. The Credit Guarantee scheme (CGS) seeks to reassure the lender that, in the event of a MSE unit, which availed collateral free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 75 / 80/ 85 per cent of the credit facility.

15. SHORT TERM LOANS Vs. LONG TERM LOANS
Types of Loans
SHORT TERM LOANS Vs. LONG TERM LOANS

16. Self Study & Presentations

17. Thank you!