Frequently asked Questions

1.Which are the agencies providing financial assistance for starting and running Small Enterprise?  

Ans: Financial assistance is available from institutions such as Tamilnadu Industrial Investment Corporation (TIIC), Nationalised Banks, Small Industries Development Bank of India (SIDBI), Regional Rural Banks, National Small Industries Corporation (NSIC), etc. depending upon the project requirement and promoters background.

Financial assistance has two components.
(i)   Loan for fixed capital is used to acquire plant and machinery, land and building.
(ii)  Working capital loan is used to meet day to day operational cost of the production.

TIIC provide term loan for fixed capital.
Nationalised banks provide working capital loan.  Nationalised banks also provide fixed capital loan. National Small Industries Corporation generally provides working capital. However also provide a composite loan covering plant and machinery and working capital.

2. What are the financial assistances provided by TANSIDCO to start Small Enterprise?   

Ans: TANSIDCO provides mainly non-financial assistances.
For setting up a new small enterprise, term loan assistance may be obtained from TIIC or Nationalised Banks.
However, TANSIDCO is allotting Sheds/Developed Plots on Hire Purchase basis, which will also be deemed as financial assistance.

For Micro Enterprises, to be set up in SIDCO Industrial Estates Composite Term Loan (CTL) assistance to the extent of Rs.25 lakhs is provided for shed / plot, building, plant & machinery and working capital, under "NSIC-TANSIDCO Consortium Scheme" which is implemented jointly by National Small Industries Corporation Ltd. [NSIC] and TANSIDCO under Single Window concept.

3. How to choose the most suitable source of funding?  

Ans: Any of the financial institutions can be approached to get funds keeping in view their specific schemes. Evaluate and compare the terms and conditions, including rate of interest and repayment period of loan offered by the different financial institutions. Select the financial institution, which offers funds at minimum interest rate as per your repayment plan to suit your project. Choose the Institution which is in close proximity to the project site if other terms and conditions are similar.

4. How much money the entrepreneur is required to invest out of his own resources?

Ans: Some portion of total investment has to be contributed by the Entrepreneur out of own sources. This is called margin money. Financial Institutions insist on 10 to 25 percent margin money depending upon the category of the entrepreneur, risk factor and existing scheme under which the project will be financed.

5. What are the advantages available if unit is established in TANSIDCO Industrial Estates?  

Ans: The Industrial Estates of TANSIDCO are developed with all necessary basic infrastructure facilities with the approval of concerned Government Departments. Entrepreneurs who wish to start units in TANSIDCO Industrial Estates can easily get power connection and other required clearances from various Government        Departments / undertakings.
Entrepreneur will be in a position to start unit within a short period without any time delay in getting required electricity power for the unit.

The entrepreneur is entitled to avail 50% stamp duty concession at the time of registration of the shed / plot purchased in the TANSIDCO Industrial Estates.
Entrepreneur will have advantage to outsource his requirements / entrust job works to other units inside the industrial estate itself.

6. Whether TANSIDCO can get all clearances from statutory bodies and other concerned Government Departments for starting unit in a developed plot of TANSIDCO?  

Ans: There is "Single Window Clearance" system looked after by the General Manager, District Industries Centre in each District to get all such clearances for starting industrial unit. The entrepreneur can file their requests even for the units started in TANSIDCO Industrial Estates and TANSIDCO will assist to expedite it.

7. Whether TANSIDCO will cancel the allotment, if the plot allotted is not utilised within the stipulated time?  

Ans: The developed plot allotted is subject to cancellation if it is not utilised within the stipulated time as per the allotment terms & conditions. However, the request of entrepreneur to extend time to start unit in the plot will be considered based on the merit of the case and on payment of penalty (after the prescribed period).
8. Is it necessary for an entrepreneur to get permission from TANSIDCO to sell the shed / plot allotted to him/her to another entrepreneur? 
Ans: Yes. Such permission is required for sale of shed / plots from one entrepreneur to another since it will help the purchasing entrepreneur to get all clearances from other Govt. Departments / undertakings and start his / her business without any legal constraints. TANSIDCO will give such permission as per the prevailing conditions.

9. Whether a shed or plot allotted can be leased entirely or partly to another unit by the allotter?  

Ans: Yes. You can lease entire or part of your allotted shed or plot to another industrial unit for industrial activities. TANSIDCO issues permission for such arrangements as per the prevailing conditions.
10. Whether required quantity of water for manufacturing activity will be provided if unit is started in industrial estate? 
Ans: TANSIDCO provides water only at 500 litres per day for human consumption. Water for manufacturing process will not be provided by TANSIDCO. The entrepreneur has to make own water arrangement from out side industrial estate for his manufacturing activity.

11. Whether the title deed for the developed plot or shed allotted, will be made available to entrepreneur at the time of allotment so as to get financial assistance?  

ns: The sale deed for shed or plot will not be executed and made available at the time of issue of allotment order itself.
In the case of shed, if purchased on outright basis, the sale deed will be executed by TANSIDCO and made available to entrepreneur only on collection of full cost of Shed.
If the shed is purchased under hire purchase, the sale deed will be executed by TANSIDCO only at the end of collection of final installment i.e. collection of all installments without any dues from the allottee or even at the earlier closure of hire purchase account by the allottee.
In the case of Developed Plots, the sale deed will be executed by TANSIDCO only after the construction of work shed and on commencement of production in the allotted plot by the allottee.
However, TANSIDCO issues No Objection Certificate to financial institutions to mortgage the shed or plot on the request of allottee enabling them to get financial assistance before payment of full cost of shed or plot.

12. How the account will be settled if the hire purchase installments' account is settled earlier than the time schedule prescribed? 

Ans:  (a) The principal with applicable interest & penal interest till the date of such settlement and
         (b) the principal without interest in the balance installments for the period from the date of such settlement to the end of time schedule.

13. Whether a particular shed or developed plot, as per the choice of an entrepreneur, will be allotted by TANSIDCO?

Ans: Yes, subject to availability of such shed or plot at the time of submission of application and its seniority among the waiting applications for allotment.

14. What is the definition of women entrepreneur owned enterprise to get allotment in women industrial estates?

Ans: A woman enterprise is a small scale unit where one or more women entrepreneurs have not less than 51% financial holding.

15. Whether the amount Rs.13, 000/- paid along with the application form for allotment of shed / plot is refundable?

Ans: In the amount of Rs.13,000/- [Rs.10,000/- towards EMD + Rs.3,000/- towards Application processing fee] in the case of Small / Medium Enterprise and Rs.10,000/- [EMD of Rs.7,000/- + Application processing fee of Rs.3,000/-] in the case of Micro Enterprise paid along with the application form, the application processing fee is not refundable.
The EMD will be treated according to the cases as follows:
(i) If the allottee withdraws application form before issue of allotment order (or) the application is not considered for allotment by TANSIDCO, then the EMD will be refunded.
(ii) If the allottee accepts the allotment order issued and pays the full cost of the shed or plot, the EMD will either be adjusted in the last payment towards cost of shed / plot or refunded to the allottee.
(iii) If the allottee does not acknowledge the allotment order or surrenders it after issue of allotment order, the EMD will be forfeited.

16. Whether all types of raw materials are distributed by TANSIDCO for SSIs?  

Ans: TANSIDCO distributes iron & steel, paraffin wax / match wax, potassium chlorate, TNPL copier & printing paper. The Availability of Raw Materialsat Raw Material Department of TANSIDCO can be seen on this web-site. 

17. What is the advantage if Raw Material is purchased from TANSIDCO?

Ans: The Iron and Steel is procured from the main producers like SAIL, RINL, IISCO, TISCO. The Paraffin Wax and Match Wax are procured from CPCL. Potassium Chlorate is procured from Karaikal Chlorates Ltd. The paper is procured from TNPL. Quality of materials is assured because of the procurement from main producers. The Small Enterprise can procure raw materials at fair prices as and when required in small quantities from TANSIDCO without locking up their funds. 

18. Whether TANSIDCO gives raw materials on credit?

Ans: The Raw Materials are also being supplied on credit basis against Bank Guarantee furnished by the Small Enterprise customers.

19. What are the varieties of papers supplied by TANSIDCO and terms of supply?

Ans: TANSIDCO supplies TNPL Copier and Printing papers of various types and GSMs. A minimum quantity of 0.5 MT is to be ordered for direct delivery from the TNPL mill. The printing paper will be supplied only as mill delivery. The copier paper will be delivered as mill delivery as well as through our sales points at our Corporate Office and at our Branch Offices at Madurai, Coimbatore, Tiruchy, Tanjavur, Virudhunagar, Vellore, Krishnagiri & Tirunelveli.

20. How do I market Small Enterprise products?

Ans: The question of marketing Small Enterprise products must be assessed right from the time when one is planning to enter a particular business. A market survey or a market assessment must be made before setting up a project. The prevailing price, the level of competition and the quality of your product must be seen and examined before deciding to set up a unit. Experience has shown that Small Enterprises  do well in markets in the following conditions:-
(a) Where markets are local and the unit can cater to local tastes.
(b) As part of a larger chair whereby the Small Enterprise product is used by a larger unit.
(c) Where the Small Enterprise is able to meet a specific requirement for a specific scheme commonly known as niche requirements.
Any Small Enterprise can also register with (i) NSIC and (ii) TANSIDCO under their Marketing Assistance Schemes to take advantage of Government's Price and Preference Policy for supply to Government Departments and Undertakings.
Small Enterprises can also join together and form a consortium to market their products jointly.

21. What is PMRY Scheme?

Ans: Prime Minister Rojgar Yojana is a centrally sponsored self-employment for educated unemployed youths desirous of setting up an enterprise of his/her own. Persons between the age group of 18 to 35 years with annual family income of less than Rs.40, 000/- are eligible.  The age limit is relaxed upto 45 years in case of SC/ST, Women, Physically handicapped and Ex-servicemen.  One can set up any industry/business or service activity and can avail of financial assistance upto Rupees Two Lakhs for promoting an enterprise as an individual under PMRY

22. Who operates PMRY Scheme?

Ans: PMRY Scheme is primarily operated by Small Industry Development Organization, Ministry of SSI & ARI through Industries Commissioner & Director of Industries and Commerce. The implementation of the scheme is done through GM DICs in all districts of the State.

23. How does an Entrepreneur get assistance under the PMRY Scheme?

Ans: A simplified procedure is in operation. An application in prescribed Performa has to be submitted to the concerned General Managers DICs along with proof of residence, Affidavit of family income and birth certificate etc. A committee scrutinizes the applications before forwarding all eligible application to the designated bank(s). The banks in turn provide funds after formal examination and acceptance.

24. What is the interest rate at which PMRY loan is available?

Ans: The PMRY is an attractive scheme offering loan @ normal bank rate. The repayment of the loan is required in 3 to 7 years depending upon the capacity and viability of the project.

25. What value addition do SMEs provide to the Indian banking scenario?

SMEs produce about 8,000 products in India and create around 50% of jobs in the manufacturing industry. Many SME products are also used as input material for bigger industries, e.g., Textile and Auto auxiliary industries, which are successful due to their input material suppliers. With the inclusion of the service sector in the definition of SMEs, the latter will need more finances. Not only special banks like SIDBI, but even the main PSU and private banks will be required to lend money to SMEs under various sectors.
      In fact, in a globalize business scenario Indian SMEs have a large untapped growth potential provided they can prove themselves competitive which would require investments in new technologies and business methods like ICT (Information and Communication Technologies). Banks, on the other hand, would stand to gain in lending to SMEs by widely dispersing their credit risk (as the lending quantum to SMEs is small and their numbers very large compared to large Corporates) apart from tapping a high growth area for their credit growth, so as to optimize their earning potential

26. Are alternative methods available in India for adequate SME financing?

Bigger and listed organizations have access to even international funds in the forms of equity, FCCBs, FII and FDI. SMEs have to mostly depend on bank lending and even the equity market is out of their reach. In the UK, the concept of Alternative Investment Market (AIM) under the LSE to access capital market by way of equity is available to the SME entrepreneurs. In India, however, the SMEs have to solely be dependent on bank lending and that too mainly on the Public Sector Banks.
For sustainable double digit growth rate, innovative financing methods will have to create particularly for the SMEs. The SMEs may be allowed access to Capital Market by way of a concept similar to AIMs. If an SME company like Noida Toll Bridge can get access to equity funds at the AIMs market of LSE, why can't the same be done within India itself? Though India experimentation has not been so successful with OTCEI, with the changing scenario and with much transparency and demutualization of equity, the problems concerning the liquidity of the same have been resolved thru electronic based trading and by doing away of the risk of signature default. We can contemplate restarting the OCTEI for the smaller companies with less trading charges and exemption from STTs. We should also encourage the habit of more mutual funds, venture funds, and pension & insurance funds for SME financing

27. The SME rating agency of India is helping small and medium enterprises receive loans at discounted interest rates. Many banks are offering concessions to the SME segment based on SME ratings. How do you see the future of SME finance in the near future?

Though the SME sector contributes about 40 per cent of the country's domestic production, and almost 50 per cent of India's total exports, their growth is mired due to lack of adequate financing in the country.
This is where rating agencies play a role. SMERA and CRISIL are able to really provide answers to the SMEs' problems with their ratings. One of the SMEs' main concerns in financing is also their inability to negotiate competitive interest rates on loans due to their low credit ratings. Since SMERA & CRISIL ratings not only take financial capabilities into consideration but also the technical and managerial capabilities of the SME firms, their credit ratings reflect the actual & comprehensive assessment of the SME repayment abilities. This substantially upgrades the SME credit risk ratings making way for higher willingness by banks to lend to these units apart from charging lower interest rates.

28. SME units are preoccupied with concerns of meeting capital needs. on the other hand, the formal banking sector employs a conservative attitude in lending to this sector due to a higher risk perception. Do you think the perception/ misconceptions will change?

Yes, it will change with proper information dissemination on SME financial database, and such third party ratings can be one of the major catalysts for the same. Currently, banks perceive SMEs as a high risk proposition due to their high historical default rates. Most SMEs get constrained in their expansion plans due to a dearth of Term Loans from the banking sector. However, with globalization, business opportunities are multiplying and the same scenario does not hold true.

30. How switching over to Basel II would lead to the much needed enhancement of credit growth to better rated SME. Comment?

Any business which is profitable gets the finance from banks. Banks source their money from the people and are accountable to give back appropriate returns to their creditors and shareholders.
Credit Ratings and Basel II norms will bring efficiency in bank financing by linking availability and pricing of loans to the inherent credit risk of the SME borrower entity. This will make way for higher financing opportunities for the SMEs which enable them fructify their expansion and Technology Upgradation plans.
The best option from the SME point of view will be to make available the equity option to the SMEs by having a special national stock exchange for the upcoming/ companies. Making such alternative financing available will also help SMEs in getting more finance from banks by improving their debt-equity ratio. Currently, high debt-equity ratio is one of the major handicaps for SMEs in seeking adequate finance from banks.

Source: http://www.nmcc-vikaas.gov.in/