FAQs on SBL

What is SBL?

SBL is Secured Business Loan extended to MSMEs for their various business needs against

an immovable property which can be residential / commercial property within municipal

limits and industrial / commercial property in an industrial area.

Who are eligible?

All the MSMEs with registered Entrepreneurship Memorandum / Udyog Aadhar

Memorandum under MSMED Act, 2006

Which Property can be considered as collateral for Secured Business Loan?

Self-occupied Residential or Commercial property within municipal limits or industrial

property in industrial area can be considered as collateral.

Is there any upfront to be paid for processing application?

Yes, there is an upfront fee upto 1% of the loan amount is payable at the time of collecting

sanction letter.

What is the maximum tenure to repay under the scheme?

A Secured Business Loan can be sanctioned for a minimum tenure of 36 months and a

maximum tenure of 120 months. This, however, depends on the average gross cash accruals
as per audited / provisional balance sheet available and loan to value criteria as per nature

of property for arriving at the eligibility.

What is the maximum loan I can get as loan against my Property?

The amount of loan varies depending on the type of security, gross cash accrual of previous

two years, value of security etc and also tenure of loan. Subject to above, maximum loan

amount has been capped at `10 crore.

Are there any charges for loan Pre-payment?

A prepayment interest of 4% will be charged for prepayments made during first two years

period and for prepayment thereafter charges would be as per Banks policy prevailing for

the scheme.

FAQs on SMILE

What does SMILE Stand for and what is its objective?

SMILE stands for SIDBI Make in India Soft Loan Fund for Micro, Small & Medium

Enterprises. The objective of the Scheme is to provide soft loan, in the nature of quasi-

equity, and term loan on relatively soft terms to MSMEs to meet the required debt-equity

ratio for establishment of an MSME as also for pursuing opportunities for growth for

existing MSMEs
Who are all eligible?

New Enterprises, existing enterprises (belonging to the identified 25 sectors covered under

Government of Indias Make in India Programme) undertaking expansion, to take advantage

of new emerging opportunities, as also undertaking modernization, technology up gradation

or other projects for growing their business will be covered.

Is there any upfront fee to be taken for processing application?

Upfront fee @ 0.50% on loan amount is charged.

What are the concessions available under the scheme?

The Loan would carry rate of interest based on the internal rating of the customer at the

time of loan sanction. The scheme however, offers concession in rate of interest for the first

3 years of the tenure of the loan.

What is the minimum amount of loan eligible under SMILE?

Minimum Term Loan size eligible under the Scheme is Rs.25 Lakh.

What is the minimum promoters contribution under the scheme?

15% of project cost for projects up to `1 Crore and 20% for the rest subject to overall Debt-

Equity Ratio not exceeding 3:1

What is the maximum tenure to repay Loan?

The repayment period is 7 years with upto 1 year moratorium for term loan and upto 2

years for soft loan. In new projects having longer implementation period and coming under

specified sectors viz., hospitality, renewable energy, longer repayment period upto 10 years

with moratorium upto 3 years for soft loan as well as term loan could be allowed.

Whether CGTMSE cover is available or not?

CGTMSE coverage is available for term loans up to `1 crore.

Is there any Benefit for SC/ST and woman entrepreneur?

Yes, SC/ST and woman entrepreneur will get loan at concessional interest rate. A higher soft

loan1 up to 15% of the project cost will be considered for the enterprises promoted by

Scheduled Caste (SC) / Scheduled Tribe (ST) / Persons with Disabilities (PwD) and women,

subject to a maximum of `30 lakh.

 General FAQ

Q.1. What is the definition of MSME?

The Government of India has enacted the Micro, Small and Medium Enterprises
Development (MSMED) Act, 2006 in terms of which the definition of micro, small and
medium enterprises is as under:
As per the MSMED Act 2006 the enterprises which are engaged in the manufacturing or
production of goods pertaining to any industry specified in the First Schedule to the
Industries(Development and Regulation) Act,1951 can be classified by their size of
investment in Plant and Machinery as follows-

Classification Amount of Investment in plant & machinery

 Micro Does not exceed ` 25 Lakh

Small More than ` 25 Lakh but less than ` 5 Crores

Medium More than ` 5 Crores but less than ` 10 Crores

In the case of the Enterprises engaged in providing or rendering services can be classified
by their size of investment in equipment as follows-

Classification Amount of Investment in equipment.

Micro Does not exceed ` 10 Lakh

Small More than ` 10 Lakh but less than ` 2 Crores

Medium More than ` 2 Crores but less than ` 5 Crores

Q.2. What is SIDBI?

Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of
Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and
Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-
ordination of the functions of the institutions engaged in similar activities.

Q.3. What is the mission of SIDBI?

To facilitate and strengthen credit flow to MSMEs and address both financial and
developmental gaps in the MSME eco-system.

Q.4. Who are eligible for financial assistance from SIDBI?

New / existing MSME units, as per the definition of the MSMED Act 2006, shall be eligible
for financial assistance from SIDBI. The amount of assistance considered would be as per the
costs proposed in the project and other financial parameters as per policy of SIDBI.

Q.5. What are the different schemes of SIDBI?

SIDBI provide financial assistance to MSME units under different schemes. Different schemes
of SIDBI are given below:

Schemes under manufacturing & service sector are given below:

I. Direct Credit Scheme

II. Privileged Customer Scheme
III. Secured Business Loan to MSMEs (SBL)
IV. Working Capital / WCTL to MSMEs
V. Asset Backed Assistance to Service Sector Entities
VI. Asset Light Scheme for Service Sector Entities

Schemes to be considered under Risk Capital sector are given below:

I. Growth Capital and Equity Assistance Scheme (GEMS)

II. Start-Up Assistance Scheme

Besides the above SIDBI accepts fixed deposits, issues of Letters of Credit (both inland and
foreign), and issues of Guarantee (performance, financial and deferred payment).

Q.6. Does SIDBI provide collateral free loans?

SIDBI provides collateral free loans to eligible MSME units by securing cover for credit
facility up to `100 lakh from CGTMSE. The Ministry of MSME, Government of India and
SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with
a view to facilitate flow of credit to the MSE sector without the need for collaterals/ third
party guarantees. A guarantee and annual service fee is charged by the CGTMSE to avail of
the guarantee cover. Presently the guarantee fee and annual service charges are to be
borne by the borrower.

For further details please visit www.cgtmse.in (subject to compliance of terms and
conditions).

Q.7. What is the repayment period allowed by SIDBI for Direct Loans?

The repayment period generally varies from minimum 3 years to maximum 12 years
depending on the gestation/cash flow of the project

Q.8. What is the support available for technology upgradation?

MSME Ministry implements a scheme called Credit Linked Capital Subsidy Scheme (CLCSS)
for technology upgradation of Micro and Small enterprises in the country. Under the
scheme, 15 per cent capital subsidy, limited to maximum of `15 lakh is provided to the
eligible MSEs for upgrading their technology with the well-established and improved
technology as approved under the scheme. 48 products / sub-sectors have been approved
under the CLCSS till date. If you are an MSE manufacturing a product and want to upgrade
the technology of manufacturing the product with the well established and improved
technology as approved under the Scheme, then you may have to approach to the nodal
agencies/eligible financial institution/bank for sanction of term loan for purchase of eligible
machinery.

Q.9. What are different modes of finance available for sustainable development of
MSMEs.?

a) SIDBI operates Scheme for Energy Saving Projects in MSME Sector under which
finance for certain energy saving equipments are extended at softer terms

b) Assistance to ESCO - SIDBI provides financial assistance to ESCOs in MSME sector for
implementing Energy Efficiency Projects through Performance Guarantee Contract.
c) Financing End to End Energy Efficiency Investments in MSMEs (4E Financing Scheme)
- SIDBI is implementing a World Bank (WB)-Global Environment Facility (GEF) funded project
viz. Financing Energy Efficiency at MSMEs. With a view to create a demonstration effect of
financing of energy efficiency measures, a revolving fund has been created to provide loans
for such energy efficiency projects to MSMEs at concessional interest rates and soft terms.

Q.10. What is SRIJAN Scheme?

SRIJAN Scheme was launched jointly by TIFAC (Technology Information, Forecasting and
Assessment Council under Ministry of Science and Technology) & SIDBI on November 01,
2010, aims at facilitating development, demonstration and commercialization of technology
innovation projects pertaining to new product or process development to encourage and
promote development of capabilities in MSMEs to innovate and to bring high-risk
innovations to the market for opening up opportunities for business linked with innovations.

TIFAC created a Revolving Fund for Technology Innovation and placed it with SIDBI to
provide assistance to MSMEs for development, up-scaling, demonstration and
commercialization of innovative technology based projects.

Q.11. What are the Government Subsidy Schemes operated by SIDBI?

SIDBI has been identified by Government of India as a Nodal Agency for the releasing of
assistance, monitoring, interface and coordination with Financial Institutions, Banks and the
Government of different Government schemes.

Technology Upgradation Fund Scheme for The Textile Industries (TUFS)

Credit Linked Capital Subsidy Scheme (CLCSS)
Integrated Development of Leather Sector Scheme (IDLSS)
Technology and Quality upgradation Support to Micro, Small & Medium Enterprises
(TEQUP)
FPTUFS Scheme for Food Processing Industries
Q.12. Why is credit rating of the micro small borrowers important?

With a view to facilitating credit flow to the MSME sector and enhancing the comfort-level
of the lending institutions, MSME units may get credit rating done from reputed credit
rating agencies.

Q.13. Is credit rating mandatory for the MSE borrowers?

Credit rating is not mandatory but it is in the interest of the MSE borrowers to get their
credit rating done as it would help in credit pricing that is cost of funds (interest and other
charges etc.) of the loans taken by them from banks.

Q.14. How the rate of interest for loans lent by SIDBI arrived at?

SIDBI has its own internal credit rating system which is used to rate its borrowers and the
rate of interest differs from product to product and case to case. Such interest can be either
in fixed or floating in nature (floating linked to PLR of SIDBI) depending on the product and
quantum of loan.

Q.15. Does SIDBI levy any other charges?

Other charges actually incurred in processing of a proposal viz., title verification, ROC
verification, valuation etc., are collected from the borrowers.