EDP Notes

There are two main financial institutions available for loans for entrepreneurs on the (federal/ all India level). 1. Industrial Development Bank of India(IDBI) 2. Industrial Finance Corporation of India (IFCI) The Industrial Development Bank of India is the head institution in the area of long term industrial finance. It was established under the IDBI Act 1964 as a wholly owned subsidiary of RBI and started functioning on July 01, 1964. Under Public Financial Institutions Laws (Amendment) Act 1976, it was delinked from RBI. IDBI is engaged in direct financing of the industrial activities The objectives of the Industrial development bank of India are to create a principal institution for long term finance, to coordinate the institutions working in this field for planned development of industrial sector, to provide technical and administrative support to the industries and to conduct research and development activities for the benefit of industrial sector. On the State level finance is available loans can be availed from 1. State Financial Corporation (SFC) 2. State Industrial Development Corporation (SIDC).

Criteria for Business loans: √ Technical assessment of project √ Experience of the entrepreneurs √ Financial & commercial practicality of the project √ Conformity to environmental laws √ Economic viability of the project How to apply for business loans in India – Loan application procedure
 The first step is to submit a detailed project report (business plan)to the financial institution to IDBI, IFCI or any other financial institution from where the loan sanction is sought. In case a license is a requirement for the project, the license should be provided with the project report.
 The financial institution after scrutinizing the project report. If the financial institution requires additional information or clarifications, they usually ask for this in a few days of receipt of project report.
 Representative from the financial institution will arrange to inspect the site etc to make certain the suitability of the project. At this stage discussions on various aspects of the project are discussed and final project costs are calculated.
 The financial institution gives its approval if they find the project feasible.
Loans provided for business ventures can be for equipment and fixed assets as well as working capital. While there is no hard and fast rule that is revealed by financial institutions. I would say that if a project is viable and the entrepreneur has approximately 25% of his own funds. Then 75% can be financed. In addition to this loans can be availed for working capital also. In case you can provide proof of your expertise in the project there is always the possibility that your loans may be sanctioned with a lesser amount of cash investment on your part. Projects costing up to Rupees 5 crores can normally be financed on the state level. Financial institutions follow guidelines such as debt-equity ratio, entrepreneur‟s contribution to the project etc when deciding on loans. It is not uncommon for applicants to inflate their contributions in an attempt to invest the least amount of their own funds.