All of us know that in India MSME Sector is contributing the process of economic growth, employment generation and export along with remarkable contribution to GDP.
But this sector is still facing problem of financing, even after so many Govt. schemes and inclusion of SME finance in priority sector by banks.
The problem is not Govt and Banks policies but is lack of knowledge among the entrepreneurs. SME financing in India primarily is being done in normal mode by commercial banks, NSIC, SIDBI, MFI(Micro Financing Institutions) to support the sector.
Govt has introduced schemes like CLSS (Capital Linked Capital Subsidies), CGTMSE(Credit Granted Trust For Micro and Small Enterprises).
For taking finance from banks & SIDBI entrepreneurs were facing problems like collateral securities & lack of margin for capital good finance & high cost of modern machineries was also main hurdle for aspiring entrepreneurs.
CGTMSE Solution to Problem of Collateral security
The First problem the collateral securities has been addressed by central govt. by introducing CGTMSE (Credit guarantee Fund Trust for Micro and Small Enterprises).
It is for collateral free credit for micro & small enterprises for start up, expansion, technological upgradation and working capital requirements.
Presently all the nationalize banks & SIDBI etc are financing term loan & working capital to micro & small enterprises up to 100 laks without collateral securities as they getting credit grantee from CGTMSE.
Coverage to financial institutions available 75%to85% for a very small fee, which the lender banks are charging from the borrower MSE.
CLCSS Solution to High Technology upgradation cost
Central govt addressed the second problem ,the high cost for modern machineries by introducing CLCSS throw ministry of SSI govt of India .This scheme is to fecilitate technical up gradation for micro & small enterprises in specified sectors by providing 15% capital subsidy.
Details of schemes are available at http//www.sidbi.com/clcss.asp.
Alternative modes of finance in SME sector:-
Apart from normal financing by commercial and financing institutions there are other alternative mood also like factoring services ,ventual capital, private equity.
These moods are at staring stages or not so well known .But when SME moves ahead on its success path with help of banks finance and their own recourses , then for enhancing capacity &technological up gradation at a much higher scale is required. Solutions to this problems lies on this alternative moods. Details of this moods ,I will be covering in my next article.