SME FUNDING

STAGES OF SME FINANCING 1. Stage Of Self-financing 2. Stage Of Debt Financing 3. Stage Of Lease Financing 4.Stage Leading To Emergence Of Equity Financing 5. Stage Of Venture Capital Financing

Organisation needs funds for two purposes: 1. Fixed Capital Requirements (Block Capital)

2. Working Capital Requirement (Circulating Capital)

FIXED CAPITAL
Fixed capital is the capital invested in fixed or long run assets. The amount of fixed capital needed, therefore, varies directly with the amount of fixed assets owned or used by the business. - B.O. Wheeler

FEATURE OF FIXED CAPITAL

1. Purchase Of Fixed Assets 2. Meeting Long Term Needs 3. Permanent In Nature 4. Low Liquidity 5. Sources (Long-term Sources) 6. Act As A Sources Of Strength 7. Requirement Of Fixed Capital Varies 8. Fixed Capital- Total Capital Ratio 9. Appreciation And Depreciation 10. Fixed Capital Management

IMPORTANCE/SIGNIFICANT OF FIXED CAPITAL

1. Promotion Of An Enterprise 2. Expansion And Diversification 3. Automation 4. Replacement Of Obsolete/Outdated Assets 5. Continuous Upgradation Of Technology 6. Production And Distribution

FACTOR DETERMINING FIXED CAPITAL REQUIREMENTS:

1. Nature Of Business 2. Types Of Products 3. Size Of The Firms 4. Diversity Of Production Lines 5. Method Of Handling Production 6. Method Of Acquiring The Fixed Assets 7. Technique Of Production 8. Type Of The Industry 9. Government Subsidy 10. Subcontracting Facility 11. Nature Of Competition 12. Purchase Of Second Hand Machinery

SOURCES OF FIXED CAPITAL

1. Equity Shares 2. Preference Shares 3. Rights Issue Of Shares 4. Private Placement Of Shares 5. Debentures 6. Term Loans 7. Retained Earnings 8. Lease Financing 9. Venture Capital

WORKING CAPITAL
Circulating capital means current assets of a company that are changed in the ordinary course of business from one to another, as for example, from cash to inventories, inventories to receivable, receivable into cash. -Gerstenberg

TYPES OF WORKING CAPITAL

1. Permanent Working Capital (a) Initial working capital (b) Regular working capital

2. Variable Working Capital (a) Seasonal working capital (b) Special working capital

FEATURES OF WORKING CAPITAL

1. Short Period 2. Meeting Recurring Expenses 3. Easily Convertible/Offers More Liquidity 4. Sources 5. Ensures Smooth Functioning 6. Amount Of Working Capital 7. Different Connotations 8. Forms Of Working Capital

IMPORTANCE OF WORKING CAPITAL

1. Continuity In Business Operations 2. Regular Dividend Payment 3. Goodwill 4.Increased Creditworthiness 5. Face Competition 6. Withstand Seasonal Fluctuations 7. Increased Efficiency And Productivity 8. Payment Of Long-term Loans

FACTORS DETERMINING WORKING CAPITAL

REQUIREMENTS 1. Size Of The Firm 2. Nature Of Business 3. Type Of Production Process 4. Length Of Operating Cycle 5. Inventory Turnover 6.Terms Of Credit 7. Banking Facilities 8. Seasonal Variations 9. Contingencies

10. Terms Of Purchase And Sale 11. Importance Of Labour 12. Production Policy 13. Cost Of Raw Materials 14. Regular Availability Of Raw Materials 15. Dividend Policy Of The Management 16. Expansion And Diversification 17. Degree Of Competition

WORKING CAPITAL MANAGEMENT

1. Cash Management 2. Inventory Management 3. Accounts Receivable Management 4. Accounts Payable Management 5. Purchase Management 6. Investment Management

SOURCES OF WORKING CAPITAL

1. Trade Credit 2. Accruals 3. Bank Credit (A) Overdraft (B) Cash Credit (C) Loans (D) Discounting Of Bills (E) Letter Of Credit 4. funds from operations

5. issue of debentures 6. short term loans from financial institutions 7. self- financing 8. inter-corporate deposits (a) call deposits (b) three deposits (c) six month deposits 9. commercial paper 10. public deposits 11. dealer advances

INSTITUTIONAL FINANCES TO ENTREPRENEURS

1. Industrial Development Bank Of India (IDBI) 2. Industrial Finance Corporation Of India Ltd (IFCI) 3. Industrial Credit And Investment Corporation India Ltd (ICICI) 4. Life Insurance Corporation Of India (LIC) 5. Unit Trust Of India (UTI) 6. Small Industrial Development Bank Of India (SIDBI) 7. Industrial Reconstruction Bank Of India (IRBI)

8. State Financial Corporation (SFCs) 9. National Bank For Agriculture And Rural Development (NABARD) 10. Export Import Bank Of India (EXIM Bank) 11. Regional Rural Bank (RRBs) 12. National Industrial Development Corporation Ltd. (NIDC) 13. Khadi And Village Industrial Commission (KVIC) 14. Commercial Banks

VENTURE CAPITAL
Venture capital is an activity by which investors support entrepreneurial talent with finance and business skills to exploit capital gain -Bank of England

FEATURES OF VENTURE CAPITAL

1. High Risk 2. Equity And Financing 3. New Or Untried Technology 4. Professional Entrepreneurs 5. Participation In Management 6. Long-term Investment 7. Expectations 8. Stages Of Investment 9. Importance Of Exit Route 10. Broad In Its Scope

SEED CAPITAL
Seed capital initial capital used to start a business. Seed capital often comes from the company founders' personal assets or from friends and family. The amount of money is usually relatively small because the business is still in the idea or conceptual stage. Such a venture is generally at a pre-revenue stage and seed capital is needed for research & development, to cover initial operating expenses until a product or service can start generating revenue, and to attract the attention of venture capitalists.

FEATURES OF SEED CAPITAL SCHEME

(a)

(b)

(c)

The person should be minimum 7th standard pass and should be in the age group of 18 years to 50 years the educated unemployed must be a resident of the state continuously for 15 years. Two guarantors having fixed assets are required. the seed capital is disbursed through District Industries Centre (DIC)

for projects below Rs. 1 lakh, the seed capital available would be as follows: General category 15% General category but economically weak 20% Backward class but not economically weak 20% Backward class but economically weak 22.5%

SEED CAPITAL SCHEME

1.

2. 3.

Special Seed Capital Assistance Scheme by State Financial Corporation (SFCs) Seed Capital Assistance Scheme by IDBI Risk Capital Foundation Scheme by IFCI

TAX BENEFITS
The various tax benefits available to small scale industries are in the respect of the following : 1. Tax Holiday 2. Depreciation Allowance 3. Expenditure On Scientific Research Allowance 4. Investment Allowance 5. Rehabilitation Allowance 6. Amortisation Of Preliminary Expenses

7. Tax Concessions For Small Scale Industry In Rural Areas 8. Expenditure On Acquisition Of Patents And Copyrights 9. Exemption On Excise Duty 10. Profits From Business Of Publication Of Books 11. Tax Benefits For Amalgamation Of Sick Units 12. Income Tax Concession To Small Scale Industries Established In Backward Areas 13. MODVAT Scheme

SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)

SIDBI has been assigned the task of being the main agency for term finance to small scale sector in the country. Though finance is provided in the following ways : 1. Refinance 2. Discounting of bills 3. Direct finance 4. Venture capital 5. Assistance to National Small Industries Corporation (NSIC)

VARIOUS SCHEMES OF FINANCIAL ASSISTANCE OF SIDBI TO SSI

Schemes for cottage, village and tiny industries (a) composite loan schemes (b) scheme for SC/ST and physically handicapped persons 2. Scheme for small road transport operators 3. Scheme for professionals 4. Scheme for medical profession (a) schemes for hospitals/nursing homes (b) scheme for acquisition of electro-medical and other equipments
1.

5. Scheme for marketing organisations 6. Schemes for tourism related activities 7. equity-type assistance scheme (a) seed capital scheme (b) national equity fund scheme

SMALL INDUSTRIES SERVICE INSTITUTE (SISI)

The main functions of SISI includes : 1. To serve as interface between central and state govt. 2. To render technical support services 3. To conduct entrepreneurship development programmes 4. To initiate promotional programmes

The services rendered by SISI can be classified in the following categories: 1. Technical advisory services 2. Economic advisory services 3. Managerial and technical training services 4. Management consultancy services