The SMILE initiative from SIDBI was introduced to give a boost to the ‘Make in India’ campaign. This scheme provides soft term loans to MSME enterprises to meet the debt-equity ratio for their establishment. The emphasis is on a set of 25 sectors defined under the 'Make in India' programme, with a focus on financing small enterprises in the MSME field.
SIDBI plays a significant role in the implementation of this scheme. The scheme is expected to benefit approximately 13,000 enterprises, with employment for nearly 2 lakh persons. This allows existing MSME units to take advantage of emerging opportunities. They can also be supported by growth, restructuring, technical improvements and other projects to expand their business.
Objective of the SMILE Scheme
The scheme aims at offering soft loans, in the form of a quasi-equity and long-term loan on relatively low terms to MSMEs, in order to meet the debt-equity ratio needed for the establishment and to seek growth opportunities for established MSMEs.
A snapshot of the SMILE Scheme
|Financing type||Quasi – Equity (Soft Loan)|
|Interest Rate||Based on the MSMEs profile and requirements|
|Min. Loan amount||Rs.10 lakh for equipment finance|
|Max. Loan amount||Rs.25 lakh|
|Repayment period||Max. 10 years, including a moratorium of up to 36 months|
|Minimum Promoter Contribution||15% - subject to Maximum Debt Equity Ratio (DER) of 3:1|
|Security|| First charge over all assets
Personal guarantee of promoters
Key features of the SMILE initiative by SIDBI
Attractive interest rates
Shorter loan repayment terms
Quicker fund disbursement
Funding towards commitment of the Partial Promoter by soft borrowing methods
Contactless platform for speedy dispensation of machinery loan
Lower amount of promoter contribution for SMILE equipment finance
Eligibility Criteria for the SMILE Scheme
Smaller enterprises within MSME are the main benefactors of the scheme. Focus will be on the incorporation of new companies in the manufacturing and services sectors.
Established businesses undertaking expansion to take advantage of the emerging opportunities, as well as pursuing modernisation, technological improvements or other initiatives to expand their business, will also be covered.
Rate of Interest
For the first 3 years the ROI is fixed at 9.15% to 9.35% p.a.
From the 4th year onwards it can vary between 11.70% – 12.70% p.a., based on the bank's internal guidelines
The scheme offers a repayment tenure of maximum 10 years, with an initial moratorium period of 3 years
Additional Reading: What Government Loans Are Available For Entrepreneurs?
Quantum & Nature of Loan Offered
The financing is provided in the form of term loans on relatively soft terms. Minimum of Rs.50 lakhs for new enterprises and Rs.25 lakhs for existing units can be availed. A maximum of up to 75% of the project cost, subject to a Rs.100 lakh limit and 2/3rd for the rest, subject to promoter’s contribution and DER norms.
First charge over all assets created under the project perusing the scheme financing
Personal guarantee of the Promoters
Fixed Asset Coverage of at least 1.4 times including collateral security
Term loans of up to Rs.2 crore may be covered by the CGTMSE Credit Guarantee Scheme
For the general category, 10% of the project cost, subject to a maximum of Rs.20 Lakh is provided as the loan amount
15% for undertakings promoted by Scheduled Caste (SC)/Scheduled Tribe (ST)/Persons With Disabilities (PWD) and women, subject to a limit of INR 30 Lakh
Persons belonging to these groups should have a controlling stake in the business, i.e. 51% or more
End Note: The SMILE initiative by SIDBI has given the much needed boost to the ‘Make in India’ campaign by placing soft term loans in the hands of deserving MSME enterprises.