Capital refers to cash or any asset owned by a business, which is useful for generating income and for further development. Just as blood is important for the functioning of the human body, in the same way, capital is required for the smooth functioning of any enterprise. It is the sum total of the funds required by the enterprise to achieve the goals. Capital can be divided into two parts they are starting capital and working capital.
The initial amount required by the entrepreneurs for starting and for setting up a business is termed as startup capital. It is an important step in the process of launching your business. It covers all the expenses for getting your new business up.
It is the part of the capital which is required for day to day operations. It is an indicator of the financial position of your organization in the short term. Difference between current assets and current liabilities is termed as working capital.
Thus for these operations, you need adequate capital but Small Scale industries do not have adequate funds. No need to worry!
Here are some of the ways by you can get financial help and a well as various other assistance as well they are:-
The easiest source of finance for small scale industries is one’s own savings. At any stage, when a business needs capital and entrepreneur can tap into his personal assets such as stock, mutual funds, real estates etc to raise money.
Family and friends
Parents, siblings, extended family and friends who have excess cash to lend money and may be willing to do so, they may lend in form of a loan or take an equity stake into your business.
Small scale industries might have suppliers willing to sell on credit. Such credit ranges from one to three months. It is an expensive and a good method for meeting short term fund requirements.
Facing a problem in getting a business loan? Then consider applying for a personal loan and using the same for your business. You have to mortgage your house, jewellery, or any other asset and should also have a good credit score.
Commercial Banks play an important role in the growth and development of small scale industries. They have not combined themselves to a mere extension of finance to small entrepreneurs, but have also shown genuine concern for their progress and development. They have now entered a challenging field of promoting new small scale enterprise through Entrepreneurship Development Program. They have a special debt to provide loans to small scale industries. For meeting the capital requirement you can take a loan from the commercial banks by mortgaging something and have to pay interest on it.
Small industries development organization an apex level organization set up with the main objective of policy making, coordinating and monitoring agency for the development of small scale industries. The three main functions of SIDO are classified into:
- Industrial Development
- Extension service
State financial corporations have been established in different states under SFC’s Act 1951. This corporation provides medium and long term loans to small and medium scale industries. Loans are given to both new as well as to existing industries.
Small Industries Development Bank of India was set up with the view of ensuring the large flow of financial and non-financial assistance to the small scale sector. SIDBI was set up under a special act of parliament in 1989 as a wholly-owned subsidiary of IDBI. The three main areas in which SIDBI works are as:-
- To initiate steps for up-gradation and modernization of technology of existing units.
- To expand the channel for marketing products for small scale industries in domestic and international markets.
- Promote employment-oriented industries specially in semi-urban areas.
National Small Industries Corporation was set up in 1955 to supply machinery and equipment to small scale industries on hire purchase basis and assist them in procuring Government orders. Various function of National Small Industries
- To develop small scale units as an ancillary unit to large scale industries.
- To provide machinery to small scale industries on hire purchase basis.
- To assist small scale industries with marketing facilities.
- To distribute basic raw material through their depots.
- To import and distribute components and parts to small scale industries.
Industrial Development Bank of India was established as a wholly-owned subsidiary of Reserve Bank of India in 1964. The main aim of setting up was to provide credit facility and other facilities to small scale industries. To overcome problems and help small scale industries IDBI came up with the scheme called Seed Capital Scheme
Industrial Finance Corporation of India Limited is the first Development Finance institution set up in 1948. IFCI extends financial assistance to the industrial sector through rupee and foreign currency loans, underwriting etc. It guarantees and also offers financial services through its facilities for equipment leasing, finance, hire-purchase etc. It has started many new promotional schemes to assist small scale entrepreneurs. The main aim of these schemes is to encourage the growth of small scale industries.
The Export and Import Bank of India was established in 1982 for financing, facilitating and promoting foreign trade. EXIM bank also discharges duties of coordination, the activities of financial institutions, providing finance for import and export of goods and services. The export-oriented small scale industries get financial assistance from EXIM bank.
When you need any financial help do tap into these options to get a quick fix for your problem and have a smooth functioning of your business.