Sidbi ranks Rs 100cr for startup loans

Digbijay Mishra and Mayur Shetty | TNN

Bangalore/Mumbai: Indian Small Industries Development (Sidbi) has started a working capital loan of up to Rs 2 crore for startups to cover expenses such as wages, supplier payments and rents amid liquidity constraint due to coronavirus. A senior official said he had lined up around Rs 100 million for the same thing and had received more than 50 inquiries on Monday night.

Sidbi has also quadrupled its assistance to small businesses involved in the fight. The limit of SAFE (Sidbi Assistance to Facilitate the Coronavirus Emergency Response), which was launched a few days ago, has been raised from Rs 50 lakh to Rs 2 million rupees to execute government orders. This is applicable to those MSMEs that are eligible under the respective state government's special policy package for interest subsidy/subsidy or capital subsidy.

For new companies that want to take advantage of the Assistance Plan loan for the start of Covid-19, they must meet certain criteria, such as a positive unit economy, at least one round of financing from certified investors, a minimum turnover of 10-60 million rupees and at least 50 employees.

“The idea is to help startups that would have a broader impact on the functioning economy. That is why these conditions have been established, said the official. He added that Sidbi is analyzing 75-100 new companies that will make the cut. The move comes amid a growing number of startups that are considering or have announced wage or job cuts while working on other financial arrangements to survive the coronavirus-affected economy.

Various industry bodies, such as the Indian Private Equity and Venture Capital Association, had also sought a financial package for new government companies. Sidbi's startup loan must be repaid within 3 years with a maximum moratorium of one year.

For small businesses involved in fighting coronavirus, the list of products eligible for financing under SAFE and SAFE Plus has been expanded from 21 products previously to all medical products purchased by respective state governments to address Covid-19.

Previously, the lead institution for small business loans said that small and medium-sized businesses dedicated to manufacturing hand sanitizers, masks, gloves, headgear, overalls, shoe covers, fans, goggles and test labs could obtain loans. These would be up to Rs 50 lakh at a fixed interest rate of 5% for a maximum repayment tenure of the loan of 5 years. These are unsecured loans and can be sanctioned within 48 hours after the request and presentation of documents.