Schemes for self employed

Gauri Chhabra

China  just devalued its currency. This kicked off a chain of events – a battle of currencies, a downslide of global stocks, an erosion of exports. Is the current market turmoil foreshadowing yet another region-wide bust?Will the economy slow down? If yes, should we be keeping our food where the mouth is? If you are about to start a new venture or have just invested in one, you should know from where you can get money to start, survive and thrive.
Like all financial tsunamis do, they teach us to be innovative. We think of ways to cut costs and explore options to generate cash. So, if you have been toying with the idea of setting shop,do not be bowed down by the current turn of events. As they say, man and the moment seldom unite, and when they do, time is always opportune and magic is created.
So, if you are looking at starting your own business, here are some options that have existed and you can consider exploring:
If you have enough cash, now is the time to invest. The investment will create a virtuous cycle and by the time the economy revives itself, your business would have overcome the initial hiccups and would be in full swing. Nitin Maheshwari, co-founder and Chief Executive of Medixion, a Chandigarh based community space for Physiotherapists says: “Many people keep working in their job or contract in order to slowly get their business started. You keep on testing the waters, but if you do that for too long, the disadvantage can be that you lag behind as someone else may have the first – mover advantage. By the time you enter the market, you would already have a set of competitors who are ahead of you just by virtue of their timing and speed. So, in case you are sitting on a pile of cash, you can start your new venture before you go in for other options”.
Collateral free loans
If you thought that taking a loan would be an extra burden on you, hold on. You can go in for collateral free loans covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, introduced by Government of India and SIDBI.
Under this scheme, the bank offers collateral free loans up to Rs. 1 crore to realize the areas of those entrepreneurs who have viable projects or proposals but lacks adequate collateral security to offer. The purpose is Fund Based: Working Capital and Term Finance for capital expenditure or takeover of existing loans and non-fund based limit viz., Bank Guarantee (BG) and Letter of Credit (LC). The eligible segments are Micro Enterprise (manufacturing/ services) as defined under MSMED Act and by RBI.
Unlike any other loan scheme where banks ask for collateral, track record, revenue flow to the company, last 3 years balance sheet etc, under this scheme those are not the parameters to analyze a proposal. Banks analyze the promoter team, investor’s profile, innovative idea and revenue visibility and the following terms and conditions:
*It should be a private limited company and should have SME /SSI registration
*Should have been funded by angel investor.
*There should be a share purchase agreement and share allotment proof is mandatory
*Extent of financing of the project cost: 10% from promoters, 20% from investors (any angelfunds, VCs, individuals
*Term loan or working capital assistance will be provided
*Term loan is for a maximum period of 7 years and maximum moratorium period of 3 years
*Expenses eligible for assistance are Product development expenses, Purchase of machinery, tools, computers etc
Besides, ICICI Bank also provides two types of collateral free loans- the Smart Business Loan (SBL), which is an unsecured overdraft facility up to Rs. 25 lakh given to existing ICICI Bank customers and under CGTMSE scheme up to Rs. 1 Crore
Government schemes
You can also explore the option of ‘The Pradhan Mantri MUDRA (Micro Units Development Refinance Agency) Yojana’, which has a corpus of Rs 20,000 crore, can lend between Rs 50,000-Rs 10 lakh to small entrepreneurs and will act as a regulator of all ‘Micro-Finance Institutions’.MUDRA scheme is aimed at funding the unfunded.It has been set up for development and refinancing activities relating to micro units.
It also provides refinance to banks and other institutions at 7 per cent.MUDRA’s delivery channel is conceived to be through the route of refinance primarily to NBFCs / MFIs, besides other intermediaries including Banks, Primary Lending Institutions etc.It has already created its initialproducts / schemes. The interventions have been named ‘Shishu’-covering loans upto 50,000/, ‘Kishor’-covering loans above 50,000/- and upto 5 lakh and ‘Tarun’-covering loans above 5 lakh to 10 lakhto signify the stage of development and funding needs of the beneficiary micro unit or entrepreneur and also provide a reference point for the next phase of graduation growth.Bank of Baroda has started providing loans under Mudra Scheme.
Equity finance
You can also raise capital in return for handing over a share of the business normally comes from venture capitalists or business angels who are “high net worth” individuals.Unlike lenders, these kinds of investors don’t normally have the legal right to charge interest or to be repaid by a particular date. The return on their investment is usually paid in dividend payments and depends on the growth and profitability of the business.
You can share your business idea with any incubator. In case they like your idea, they would invest in it for a dividend in return. There are all kinds of efforts in this direction – Govt supported Institute based technology incubators, Private business incubators started by industry veterans and startup accelerators supported by companies and VC funds. There are differences between how they incubate, structure the program, operate, fund and accelerate the ventures.
Some incubators and
*Indian Angel Network (IAN) Incubator: Established from the support of National Science and Technology Entrepreneurship Development Board (NSTEDB), Department of Science & Technology (DST), Govt. of India. The ventures are incubated for 18-24 months.
*Technology Business Incubator, IIT Delhi: Proposals are accepted from ventures that should be initiated by one or more members of academic staff, students or alumni of the Institute or a faculty-student led company for this technology incubator.
*GSF: multi-city accelerator with presence in Delhi, Mumbai and Bangalore.
“*Technology based Incubator Society (TBIS), University of Delhi , South Campus
*Microsoft Accelerator at Bangalore
*NSRCEL, IIM Bangalore: Physical incubation facility at IIM Bangalore campus. Support includes subsidized facilities like office space, power and infrastructure and services like finance, legal, HR etc.
Crowd funding
One of the new concepts of raising capital through the use of internet or social networking sites is Crowd funding. In this method, if you want to raise funds, you would be required to create an online profile and explain your project and fund-raising goals and share the same with public at large, including your peers, relatives, and the like. It connects investors with small business startups and projects through an online transaction portal that removes barriers to entry.
Of the three crowdfunding models, namely the Donation model, lending model and the investment model – donation-based crowd funding is the most pragmatic approach as of now. Lending-based microfinance platforms like KIVA need approvals from the central bank. However, there are legal issues around crowdfunding in India, since equity-based online crowdfunding is not legalized in India.
Summing up
Therefore, if you are planning to start your business, do not be under the downturn weather. Weather it out by exploring the options you have hitherto unexplored, and turn it around- into an opportunity.


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