SIDBI Growth Capital & Equity Assistance : Small Industries Development Bank of India

Organization : Small Industries Development Bank of India
Scheme Name : Growth Capital & Equity Assistance

Website : http://www.sidbi.com/?q=growth-capital-equity-assistance

Growth Capital & Equity Assistance:

Who is it for:
Existing Small and Medium Businesses in need of Capital for Growth

Related : SIDBI Green Loan Scheme : www.statusin.in/20224.html

Your Needs:
** You would like to have adequate capital to meet the growth aspirations of your business, but without diluting your ownership.
** You would like to make investments in Marketing, Brand Building, Creation of Distribution Network, Technical Know-how, R&D, Software Purchase, etc but the lenders you typically approach are not comfortable with such intangible assets.
** You would like to raise finance on the strength of your business and backing of your cash flows rather than Asset Cover/ Collateral Security.
** You would also like to have a longer initial moratorium on principal instalments to ensure greater chances of success for your ventures.

Scheme Details:
** Growth Capital and Equity Assistance Scheme provides assistance in form of Mezzanine/ Convertible Instruments, Subordinated debt and Equity (in deserving cases).
** This quasi assistance has a higher moratorium on repayment and a flexible structuring.

Key Benefits:
** Bridge the gap in means of finance for scaling up/ expansion/ modernization projects.
** Access long term structured assistance especially for investments in intangible assets
** Leverage Equity / Sub Debt Assistance from SIDBI for raising higher debt funds.
** Avoid complexities of Enterprise Valuation, Exit Issues etc – associated with Equity Investments.

Security (in case of Debt based Instruments):
** Charge on available assets of the beneficiary unit and assets created out of SIDBI assistance
** Personal guarantee of the promoters
** CGTMSE Coverage, wherever applicable.

Eligibility:
** An MSME as per the definition of Government of India (MSMED Act) and
** SIDBI’s existing customers (meeting internal rating criteria)
or
** Units with past 3 years of profitability and 2 years of satisfactory banking credit track record (meeting internal credit rating criteria)
** Acceptable external rating from CRISIL, ICRA, D&B, SMERA etc would be desirable

FAQs :
1. What is Sub Debt?
Sub Debt is shortened form of Subordinated debt, treated as a mezzanine capital. Sub debt is subordinated in security and repayments to senior lenders i.e. lenders which have given secured loans to the enterprise.

The subordination in security to senior lenders is by accepting a residual/subservient charge on the assets of the company. SIDBI’s Sub-debt is generally treated as “quasi equity’ vis-a-vis senior term loan provided by senior lenders.

2. What are GEMs/ Risk Capital products?
Under GEMS, SIDBI provides mainly hybrid products which have the characteristic of both debt and equity. These products are also called sub-debt or Risk Capital products.

These can be categorized broadly in 3 categories. viz.
(i) Non participative debt based products,
(ii) Participative Debt products and
(iii) Equity products.

i) Non participative debt based products- Under Non-participative debt based products, the coupon rate of the Sub-debt is fixed, repayment period is upto 7 years and moratorium period is upto 4 years.

ii) Participative Debt products- Under Participative Debt products, SIDBI provides assistance in the form of Optionally Convertible Sub Debt, Optionally Convertible Debt having conversion option into equity or royalty features or equity kickers or any combination thereof.

iii) Equity products – Under Equity products, SIDBI provides assistance in the form of Optionally convertible cumulative preference shares (OCCPS) or/and and pure equity.

3. What are the eligibility criteria for getting financial assistance under GEMs?
The Eligibility criteria for seeking funding under this scheme are as under :
The enterprise should be a Micro, Small or Medium Enterprise (MSME) as per the MSMED Act at the time of application for assistance; and inter-alia, generally has a profitable track record