Assignment 5

Aim: Visit a bank/financial institution to enquire about various funding

schemes from small scale enterprise.

Abstract
Small scale enterprises (SSEs) are vital drivers of economic growth and innovation. This
assignment investigates the various funding schemes available for SSEs through enquiries
made at four different banks/financial institutions. By examining eligibility criteria, interest
rates, collateral requirements, processing fees, and other salient features, this report aims to
provide a comparative analysis that can help SSE owners select the most appropriate financial
products for their business needs.

1. Introduction
In today’s competitive market, securing adequate funding is critical for the survival and growth
of small scale enterprises. Banks and financial institutions have developed specialized schemes
to support these businesses through various types of loans and credit facilities. This report
documents the findings from direct enquiries at four institutions, offering insights into the
funding options available. It also discusses the challenges faced by SSEs when applying for
loans and how these institutions are working to streamline the process.

2. Objectives
The primary objectives of this assignment are:
• To identify and describe the funding schemes available for small scale enterprises at
selected banks.
• To compare and contrast the schemes based on eligibility, interest rates, collateral
requirements, processing fees, and repayment options.
• To evaluate the effectiveness of these schemes in addressing the financial needs of SSEs.
• To propose recommendations that could help improve access to funding for small scale
enterprises.

Methodology
The approach used to gather the required information included:
• Direct Visits and Interviews: Personal visits were made to four financial institutions.
During these visits, formal enquiries were conducted with bank representatives to gather
detailed information on the funding schemes.
• Documentation Review: Brochures, official websites, and policy documents of the banks
were reviewed to verify the details provided by the representatives.
• Comparative Analysis: A checklist was prepared focusing on key criteria such as loan
amount, interest rate, tenure, eligibility conditions, collateral requirements, processing
fees, and special features (e.g., subsidy components, flexible repayment options). This
checklist served as the basis for comparing the schemes.

Enquiry Details from Selected Financial Institutions

4.1 State Bank of India (SBI)

Overview:
State Bank of India is one of the largest public sector banks in the country, with a long-standing
reputation for supporting small and medium enterprises (SMEs) through various tailored
financial products.

Funding Schemes Enquired:

• Mudra Loan Scheme:

• Objective: To provide funding to micro and small enterprises.

• Loan Amount: Up to 80% of the project cost, with sub-categories such as Shishu,
Kishore, and Tarun.
• Interest Rate & Tenure: Ranges from 8% to 12% per annum with flexible repayment
periods.
• Collateral: Often unsecured for loans under a specific limit, though larger amounts
may require collateral.
• Processing Fees: Nominal fees with a streamlined application process.

• Working Capital and Term Loan Schemes:

• Objective: To meet the day-to-day operational expenses and support expansion plans.
 • Eligibility: Based on turnover and financial health of the enterprise.

• Features: Customized repayment options and periodic review of the loan structure.

Criteria for Scheme Eligibility:

To be eligible for SBI's funding schemes, enterprises must have a valid business registration,
a good credit history, and proof of steady revenue. Additionally, financial records
demonstrating the business’s viability and repayment capability are required.

4.2 HDFC Bank

Overview:
HDFC Bank is known for its customer-centric approach and innovative banking solutions. It
has a dedicated focus on serving the needs of small scale enterprises with a range of funding
products.

Funding Schemes Enquired:

• Small Business Loan:
• Objective: To finance the working capital requirements and expansion needs of SSEs.
• Loan Amount: Ranges from a modest amount to higher limits based on business size
and creditworthiness. Up to 75% of the project cost.

• Interest Rate & Tenure: Market competitive rates between 9% and 14% per annum,
with both fixed and floating rate options.

• Collateral: Flexible options with collateral-free loans available for lower amounts.

• Special Features: Pre-approved loan options for eligible customers and quick disbursal
of funds.
• Overdraft Facilities:
• Objective: To provide short-term working capital for operational needs.

• Flexibility: Interest charged only on the utilized amount with minimal documentation
requirements.

Criteria for Scheme Eligibility:

HDFC Bank requires applicants to have a business that has been operational for at least three
years with stable financial records. The creditworthiness and turnover of the business are key
factors in determining loan approval.

4.3 ICICI Bank

Overview:
ICICI Bank offers a comprehensive suite of financial services, with specific schemes designed
for small scale enterprises to encourage entrepreneurial activities.

Funding Schemes Enquired:

• Business Growth Loan:
• Objective: To facilitate business expansion, purchase of machinery, and modernization
efforts.
• Loan Amount: Tailored based on the financial strength and requirements of the
enterprise. Covers up to 85% of the project cost.
• Interest Rate & Tenure: Competitive rates between 10% and 15% per annum with
options for both short-term and long-term financing.
• Collateral: Structured based on risk assessment; both secured and unsecured options
available.
• Additional Benefits: Advisory services to help with business planning and growth
strategies.
• Working Capital Line of Credit:
• Objective: To support day-to-day operational expenses.

• Features: Revolving credit facility with flexible withdrawal and repayment cycles.

Criteria for Scheme Eligibility:

ICICI Bank’s schemes are available to registered businesses with a proven operational
history. The bank evaluates financial statements, tax returns, and previous loan repayment
records before approving loans.

4.4 Yes Bank

Overview:
Smaller financial institutions like local cooperative banks or NBFCs often provide niche
funding solutions specifically designed for the local SSE ecosystem. For this enquiry, [Yes
Bank / a representative NBFC] was selected to understand the alternative funding routes
available outside the larger public and private sector banks.

Funding Schemes Enquired:

• Local Enterprise Loan:
• Objective: To promote local entrepreneurship and provide tailored funding solutions
for small scale businesses.

• Loan Amount: Generally lower compared to large banks but with more flexible terms
for local market conditions. Covers 70% of the project cost

• Interest Rate & Tenure: Competitive interest rates ranging from 7% to 11% per
annum.

• Collateral: Lower collateral requirements with an emphasis on personal guarantees or

community trust.

• Processing Fees: Lower administrative fees and a more personalized customer service
approach.
• Specialized Sector Loans:
• Objective: To support specific sectors (e.g., agriculture, handicrafts, or local
manufacturing) that are prevalent in the region.

• Features: Often include additional advisory services and training to help business
owners maximize the use of funds.

Criteria for Scheme Eligibility:

Yes Bank and similar institutions focus on local businesses, often requiring minimal financial
documentation. Instead, they rely on personal guarantees, community references, and business
potential when approving loans.

5. Comparative Analysis of Funding Schemes

After gathering detailed information from the four institutions, the following key points
emerged:
• Loan Amount & Flexibility:
• Large Banks (SBI, HDFC, ICICI): Typically offer higher loan amounts with
structured schemes for different business stages (start-up, growth, expansion).
• Local/Cooperative Institutions: Offer smaller loan amounts, but with increased
flexibility and personalized support.
• Interest Rates & Tenure:
• Competitive Rates: All institutions offer competitive interest rates; however,
variations exist between fixed and floating rate options.
• Repayment Options: Larger banks generally provide a variety of repayment
schedules, while smaller institutions tend to offer more flexible repayment terms based
on local market dynamics.
• Collateral & Documentation:
• Collateral Requirements: Public and private sector banks might require collateral for
larger loan amounts, whereas local banks often have lower collateral thresholds.
• Ease of Process: Institutions like HDFC and the cooperative bank are focusing on
reducing paperwork and streamlining the application process, making it easier for SSE
owners.
• Additional Features:
• Advisory Services: ICICI Bank’s inclusion of business advisory services and HDFC
Bank’s pre-approved options are significant advantages.
 • Digital Platforms: Banks are increasingly using digital channels to facilitate quicker
approvals and fund disbursement, which is particularly beneficial for time-sensitive
needs.

Conclusion and Recommendations

In conclusion, while all four financial institutions offer schemes designed to support small scale
enterprises, the choice of funding scheme should be guided by the specific needs, financial
health, and growth stage of the business. Key conclusions include:
• Tailored Solutions: Larger banks provide comprehensive and structured products that are
ideal for enterprises with established financial records, whereas local institutions are more
accommodating for startups or enterprises with limited collateral.
• Ease of Access: Simplifying documentation and offering digital processing are effective
measures to make funding more accessible. Institutions that adopt these practices tend to
serve SSEs more efficiently.
• Additional Support Services: Beyond financial products, the provision of advisory
services and business development support can significantly enhance the long-term
success of small scale enterprises.

Created By:-
Name: Aayush Ravsaheb Tikone.
Roll No.: 42.