What is SIDBI?, Documents Required for SMILE, Objective of a SMILE Scheme and Eligibility Criteria under SMILE

Introduction

The government of India also introduced the SIDBI Make in India Loan for Enterprises (SMILE) scheme. The scheme intends to aid MSMEs in participating in the government of India’s Make in India initiative. The focus of the ‘Make in India’ programme will be on twenty-five specific categories, with a particular emphasis on small business funding in the MSME sector. The SMILE plan ensures a timely and appropriate cash supply for the 25 industries chosen. In this article information such as Objective of a SMILE Scheme, Eligibility Criteria under SMILE, Documents required for SMILE, and Application for SIDBI Make in India Loan for Enterprises (SMILE).

Before going through the understanding of a SMILE, Let’s have a quick look at “What is SIDBI?”

What is SIDBI?

SIDBI (Small Industries Development Bank of India) is a wholly-owned subsidiary of IDBI (Industrial Development Bank of India), which was founded under a special Act of Parliament in 1988 and went into effect on April 2, 1990.

SIDBI was tasked with managing the Small Industries Development Fund and the National Equity Fund, both of which were previously managed by IDBI. SIDBI is the major financial institution for the promotion, growth, and financing of MSME (Micro, Small, and Medium Enterprise) businesses. SIDBI encourages greener production and energy efficiency in addition to focusing on the development of the Micro, Small, and Medium Enterprise sector.

SIDBI helps SMEs get the money they need to expand, market, develop, and commercialise their unique products and technology. The bank offers a variety of programmes as well as financial services and products to satisfy the needs of individuals and businesses.

Objective of a SMILE Scheme

SIDBI Make in India Loan for Enterprises (SMILE) programme aims to help new and existing MSMEs gain growth opportunities.

This major new national programme aims to help MSMEs foster innovation, investment, intellectual property protection, skill development, and the development of best-in-class manufacturing infrastructure by providing financial assistance to meet the required debt-equity ratio for the formation of a business.

Eligibility Criteria Under SMILE (SIDBI Make in India Loan for Enterprises) Scheme

The SIDBI Make in India Loan for Enterprises is open to the following businesses.

• Entities covered by the MSME Act of 2006.
• Manufacturing and service industries are home to new businesses.
• Existing businesses are investing in infrastructure growth, technology advancement, and other projects to help them grow.
• Loans made under the SMILE programme cannot be used to pay-off previous loan obligations.
• Loans from the SIDBI Make in India Loan for Enterprises (SMILE) programme cannot be utilised to repay previous loans.

The SMILE sector’s scope is not limited to the items listed above. Other industries can participate in this programme as well, as long as their proposals are relevant.

Documents Required for SMILE

Below are the documents required for SMILE:

• Udyog Aadhar Memorandum Registration
• Passport, driver’s licence, voter’s ID card, PAN card, and signature identification from the proprietor’s, partner’s, or director’s current bankers
• Proof of address: Recent phone bills, property tax receipts, electricity bills, Proprietor’s Voter ID Card, Director’s Partner’s Voter ID Card (if a company)
• Proof of business address – As per SIDBI’s Non-Individual KYC application form
• Company and Partnership Memorandum and Articles of Association (MOA) Deeds of partnership, and so forth.
• Promoters’ and guarantors’ net worth statements, as well as their most recent income tax returns.
• If relevant, a lease agreement and approval from the pollution control board are required.
• Balance sheets for the next two years if working capital constraints are met, as well as for the loan duration in terms of the term loan
• All of the properties being offered as primary and collateral securities have photocopies of their lease deeds and title deeds.
• Documents proving whether the candidates are from the SC or ST categories
• The ROC issues a certificate of incorporation to determine whether the company’s majority stakeholder is a person who falls under the SC, ST, or Woman categories.
• The unit’s profile
• The balance sheets of the Associate and Group Companies for the previous three years.
• Manufacturing Process Details in a Detailed Project Report.

Application for SMILE Scheme

The application method for the SMILE (SIDBI Make in India Loan for Enterprises) scheme is discussed below:

Step 1:

MSME requires to Apply for a loan at the appropriate branch.

Step 2:

Fill out the application form and attach any required documents.

Step 3:

Following the validation of the application’s details, the relevant authorities, namely SIDBI, will evaluate the application and, as a result, transfer the desired loan amount to the beneficiary’s accounts.

Types of loan available under SMILE Scheme

To achieve the needed debt-equity ratio for the foundation of an enterprise and for pursuing prospects for expansion for existing MSMEs, the government provides a soft loan in the nature of quasi-equity and term loan on comparatively light terms to MSME.

• Soft Loan for MSME

• • Amount

For entities supported by ST, SC, Individuals with Disabilities, and Women, 10% of the project valuation is subject to a maximum of Rs 20 lacs, and 15% of the project valuation is subject to a maximum of Rs 30 lacs (controlling stake of at least 51 percent).

• • ROI (Rate of Interest)

9.15 percent to 9.35 percent every year over the first three years. From the fourth year onwards: 11.70% – 12.70% per annum, depends on the bank’s PLR rating (rate is not necessarily fixed).

• • Upfront Fees

Under the SMILE scheme, qualified MSME sectors are required to submit 0.50 percent of the loan amount as a security/upfront charge.

• • Prepayment and Repayment Period

The SMILE plan will not impose any premiums. The payback period for soft loans under the SMILE plan is up to ten years, including a three-year moratorium.

• • Other information

Following the expiration of three years from the date of issuance, the outstanding soft loans, along with any outstanding amounts due, will be converted into a secured term loan, with the entire loan amount carrying an applicable interest rate based on the borrower’s internal rating.

• Term Loan

• • Amount

The loan amount under the SIDBI Make in India Loan for Enterprises (SMILE) programme is a minimum of Rs.50 lakh for new businesses and Rs.25 lakh for existing businesses.

• • ROI (Rate of Interest)

For the first three years, the rate is fixed at 9.45 percent to 9.95 percent per year (depending on the rating) and from the fourth year onwards, the annual rate ranges from 11.70 percent to 12.70 percent. PLR / Internal Rating of the Bank.

• • Information on Term Loan

The term loan offered under the SIDBI Make in India Loan for Enterprises are 75 percent of project costs up to Rs.100 lakh, with the remaining 2/3rd subject to promoter participation and DER standards.

• • Prepayment and Repayment Period

For SIDBI Make in India Loan for Enterprises, there would be no premium (SMILE). Up to 10 years, including a three-year moratorium.

• • Financial Incentives

The loan amount for the general category is ten percent of the project cost, up to a maximum of Rs.20 lakh. 15 percent of the project cost, up to a maximum of Rs.30 lakhs, for firms sponsored by Scheduled Caste, Scheduled Tribe, Persons with Disabilities (PWD), and women. Persons who fall into one of those described above groups must own a controlling interest in the company (i.e. 51 percent or higher).

Conclusion 

The Government of India’s Make in India project intends to improve local manufacturing capabilities, which would not be achievable without the support of the MSME sector. Through better fiscal aid, the SMILE scheme, which was created as part of this initiative, assists MSMEs in ensuring interrupted and quality products.