Sidbi plans two special schemes for MSMEs

MUMBAI: State-run Small Industries Development Bank of India (Sidbi) said it plans to launch two schemes -- growth capital and equity assistance for MSMEs ( GEMS) and flexible assistance for capital expenditure ( FACE) -- for providing funds to the MSME sector.

While GEMS intends to provide equity or quasi-equity to deserving MSMEs, FACE offers multiple repayment schedules, said the apex financial institution for the micro, small and medium enterprises (MSMEs) in a statement.

"Sidbi has always been a pioneer in understanding and meeting financial needs of MSMEs. GEMs and FACE are significant initiatives to address the evolving needs of the sector," Sidbi Chairman-Managing Director Sushil Muhnot said.

While Sidbi, through its subsidiary Sidbi Venture Capital (SVCL), has been providing equity/equity-linked assistance to corporatised MSMEs, growth capital will provide quasi equity support to MSMEs of all constitutions, the release said.

"Major concerns for MSMEs is investment in pure equity form is difficult.... Most MSMEs are family-owned with value built over generations. They find it difficult to dilute ownership and control in favour of an external entity," Muhnot said.

Under GEMS, fund will be provided on the strength of cash flows rather than asset coverage or security. The initial longer moratorium (3-5 years) on principal instalments ensures greater chances of success of the ventures, he said.

The FACE offers flexibility to plan capex for immovable and other fixed assets jointly or separately. The tenure of each component is linked with its economic life and cash flow and could be in the range of 3-7 years for movable fixed assets and as long as 10 years for land and building, it said.