MAHARANA PRATAP GROUP OF INSTITUTIONS

KOTHI MANDHANA, KANPUR

(Approved by AICTE, New Delhi and Affiliated to Dr. AKTU, Lucknow)

Digital Notes
[Department of Management]
Subject Name : Innovation &
Entrepreneurship

Subject Code : KMB N 302

Course : MBA
Branch : -
Semester : III
Prepared by : Mr. Mayank Tripathi

Reference No./MBA/MT/IE/MBAN302/21/3

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 Unit – 3

Entrepreneurial Finance, Assistance and Entrepreneurial Development

Agencies

1. Estimating Financial Funds Requirement

Every entrepreneur planning a new venture faces the same dilemma: determining how much money is necessary
to start the business. More often than not, entrepreneurs estimate on the low side. They may simply not allow
for unexpected expenses and lower-than-predicted sales.

It is impossible to know exactly how much a new business will need during its first five years, but it is possible
to come up with realistic estimates. These come from the financial forecast: the income statement, the balance
sheet, and, most important, the cash flow statement.

Like your business plan, estimating your startup costs is part of building a roadmap for your business. Having
even a rough estimate can help you avoid unnecessary risks and stay on track during more volatile months.

To estimate the funding requirement your business faces, take these steps:

1. Create a realistic forecast of your financial situation.

Follow the steps for preparing a pro forma or estimated statement of income, expenses, and profit, along with an
estimated balance sheet and cash flow statement.

2. Estimate your funding need.

Use your financial forecasts, and especially your cash flow projection, to determine how long you anticipate
expenses to exceed revenue and by how much. Doing so helps you get a handle on when you expect expenses to
be incurred, when you expect revenues to roll in, and the amount of funding you need in order to cover the gap.

3. Create a funding time frame.

After you establish how much funding you need, create a schedule for how long you need the funding to last
before your business needs to become self-sufficient. This schedule, called your time frame, should include
dates by which you plan to meet revenue-generating milestones — for example, first customer, first major
contract, first Rs.10,000 in sales, and so on — that you can monitor as indicators that your business is on track
to achieve profitability before funding runs out.

As you forecast how long your funding needs to last, be aware of these terms:

Runway: The amount of time funding needs to last before your business becomes profitable and self-sufficient
or until additional funding will be required.

Burn rate: The speed with which you expect to spend the funding you’ve raised — in practical terms, the
amount of cash required each month to cover the costs of staying in business.

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2. Source of Finance

1. The founders

Do you have some savings left yourself? Did you just receive a nice bonus? Why not invest it in your own company!
However, you don’t necessarily have to invest in terms of cash. If a co-founder or partner invests his/her hours in helping
you start your business while also working his/her own job, that is also an investment. Or, what about a founder making
an office, machines or a technology license available? All of these are sources of investment. Temporarily not paying
yourself any wage is also an option.

2. Family and friends

Before you start approaching professional investors, it might be worthwhile to try to raise some funding within your
network of family and friends. These are often people from your family or social network who are close to you and
mainly invest because they have faith in your idea or in you as a person/entrepreneur. As they are usually not professional
investors, you should not expect a professional assessment of your company strategy from such an investor.

3. Angels/informals

Angel or informal investors are experienced entrepreneurs who have some funds available (often from previously exited
ventures) and invest those in new companies to help other entrepreneurs succeed in their business. Angel investments start
around 50,000 dollars/euros and can amount up to (or more than) a million dollars/euros, as angels sometimes invest
together in groups.

4. Crowd funding

Nowadays, it is hard to imagine that crowd funding once didn’t exist. With crowd funding, the “crowd” finances the
funding need of a company. Usually, crowd funding is performed via an online platform where entrepreneurs offer
investment opportunities on one side of the platform and on the other side of the platform, a large group of people invest
small amounts to meet the entrepreneur’s investment need.

5. Venture capital/private equity

Private equity is the collective name for professional investment firms that invest in companies that are not publicly listed.
Venture capital (VC) is a type of private equity that focuses specifically on (from the investor’s perspective) risky
investments in early stage companies.

6. Suppliers

Is your business heavily reliant on its supply chain? Then try to negotiate favorable payment terms with suppliers. If your
customers have long payment terms, for instance, you can try to agree to longer payment terms with your suppliers as well
so that you do not run into any problems concerning your working capital. On the other hand, you could also try to discuss
discounts in the event you pay your suppliers very quickly.

7. Initial public offering

The holy grail of financing: the initial public offering (IPO)! An IPO is the public listing of a company, which means that
it is the first time a company offers its shares to the general public (instead of to private individuals, investors or
companies). This means that practically anyone in the world (individuals or institutional investors) can invest in the
company by buying shares at a certain value.

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8. Leasing

Do you have to make large investments in assets such as computers and/or machines? Why don’t you lease instead of
purchasing them? By leasing assets companies can spread payments over a longer period of time instead of having to
fulfill the full payment of an investment the moment they decide to purchase an asset.

3. Banks & Financial Institutions

Borrowings from banks are an important source of finance to companies. Bank lending is still mainly short term, although
medium-term lending is quite common these days.

Short term lending may be in the form of:

a) An overdraft, which a company should keep within a limit set by the bank. Interest is charged (at a variable rate) on the
amount by which the company is overdrawn from day to day;

b) A short-term loan, for up to three years.

Medium-term loans are loans for a period of from three to ten years. The rate of interest charged on medium-term bank
lending to large companies will be a set margin, with the size of the margin depending on the credit standing and riskiness
of the borrower. A loan may have a fixed rate of interest or a variable interest rate, so that the rate of interest charged will
be adjusted every three, six, nine or twelve months in line with recent movements in the Base Lending Rate.

A number of support institutions set up by central and state governments help the entrepreneurial activities in various
ways. The activities cover a wide range of services li financing, technical guidance, equipment support, training,
marketing and providing subsidy and grants. The following institutions are available for providing the above mentioned
benefits.

1. Financial Institutions:

i. Industrial Development Bank of India (IDBI)

ii. Industrial Finance Corporation of India (IFCI)
iii. Small Industries Development Bank of India (SIDBI)
iv. National Small Industries Corporation Ltd (NSIC)
v. State Small Industries Corporation (SSIC)
vi. Regional Rural Banks (RRBs)
vii. State Financial Corporations (SFCs)
viii. State Industrial Development Corporations (SIDCs)
ix. Cooperative Banks and Gramin Banks

2. Institutions for technical guidance:

i. Small Industries Development Organisation (SIDO)

ii. District Industries Centres (DICs)
iii. Technical Consultancy Organisations (TCOs)
iv. Small Industries Service Institutes (SISIs)
v. State Small Industries Development Corporations (SSIDCs)
vi. Industrial Development Corporation (IDCo)
vii. Agricultural Promotion and Investment Corporation of Orissa Limited (APICOI)

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3. Training Institutions:

i. Small Industries Service Institute (SISI)

ii. National Bank for Agriculture and Rural Development (NABARD)
iii. Council for Advancement of Peoples Action and Rural Technology (CAPART)
iv. District Industries Centre (DIC)

4. Sources of Finance for a Small Businesses

a. Own Capital / Savings - Number one & the easiest source of finance for a small business is one’s own
savings.

b. Family & Friends - Parents, sibling, extended relatives & friends who have excess cash to lend may be
willing to finance your business.

c. Banks- Banks have a special department dedicated to providing loans to small companies. To get a loan from
a bank, companies have to qualify for bank’s minimum criteria.

d. Small Business Loans – Each country has certain banks or institutions dedicated to providing loans only to
small businesses, an example of such institute in India is SIDBI.

e. Personal Loans- If a company is unable to get a business loan, the entrepreneur might consider getting a
personal loan & using it in their business. The entrepreneur must have a good credit history for raising a
personal loan.

f. Trade Credit - Some small businesses might have suppliers willing to sell on credit. Such credit may range
anywhere from one month to three months.

g. Private Equity Firms - Private equity is a type of equity capital that is not listed on any stock exchange.
These firms raise funds from investors. It then invests these funds to buy capital of promising startups & small
businesses.

h. Venture Capital Firms - Venture capital firms are a type of private equity firms, but venture capitalist
provides funds to only those companies who are in the early stages of their business cycles. These are emerging
small companies with high growth potential.

i. Crowdfunding- Crowdfunding is a relatively new method when we consider sources of finance. It is a

method of raising funds by borrowing a small amount of money from a large group of people.

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 5. Role of govt. in promoting entrepreneurship:
The government plays an important role in the development of entrepreneurship. The central and state
governments have set up a number of institutions to promote entrepreneurship. They are:

i. Small Industries Development Organization ‐ SIDO formulates policies for the development of small
scale industries in the country. It provides support for promotion of rural entrepreneurship.

ii. Management Development Institute ‐ MDI conducts management development programs to improve
managerial effectiveness in the industry.

iii. Entrepreneurship Development Institute of India ‐ EDI has helped to set up twelve state‐level exclusive
entrepreneurship development institutes and centres.

iv. All India Small Scale Industries Board ‐ AISSIB advises the Government on all issues related to the
small scale sector. It determines the programmes and policies for the development of small scale industries.

v. National Institution of Entrepreneurship and Small Business Development ‐ NIESBUD supervises the
activities of the different agencies involved in the entrepreneurial development programmes.

vi. National Institute of Small Industries Extension Training ‐ The objective of the institute is to direct and
coordinate the syllabi for training of small entrepreneurs. It organizes seminars for small entrepreneurs and
managers.

vii. National Small Industries Corporation Ltd. ‐ NSIC provides a vast‐market for the products of the small
industries through its marketing network. It also helps the small units in exporting their products to foreign
countries.

MSME Policy:

The primary goal of Industrial and MSME Policy Resolutions was to advance industrial development and
furthermore decide the example of state help to small industrial units for satisfying financial targets. The
advancement of businesses has been viewed as an essential component of the development system hidden Five
Year plans.

The appearance of a planned economy from 1951 and the consequent industrial policy pursued by the
Government of India, both government and organizers reserved a specific position of Micro, Small and Medium
Enterprises in the Indian economy. Government’s targets and goals towards industry, including small scale
industry were declared through Industrial Policy Resolutions (IPRs).

Industrial Policy Resolution, 1991

For the first time, the Government of India postponed the new MSME Policy titled approach measures for
advancing, reinforcing and enhancing little, modest and town undertakings in the Parliament on August 6, 1991.
This strategy augmented as far as possible for the minor segments expelled the professional limitations and
perceived business and industry related services as small industrial units keeping pace with the modest units.
The Small and Ancillary Industries were exempted from authorizing for all articles of manufacture, which were
not secured by the public sector. The investment of 0.5 million and other area conditions was withdrawn. All

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business linked services and business ventures with an investment limit as those of modest undertakings,
regardless of area, were perceived as small industrial units. Another plan of incorporated infrastructural
advancement for small industrial units was given the cooperation of State Government and Financial
Institutions.

The New Industrial Policy, 1999

The rising financial scenario in the changed labialized and aggressive monetary environment required basic and
major changes in the policy structure set up of the improvement of SSI. The fundamental goal of the Industrial
Policy, 1999 was to make a friendly situation for the small industrial units to adapt to the rising difficulties of
globalization. To concentrate completely on the advancement and improvement of small industrial units, a
different Ministry of Small Industrial Units and Agro and Rural Industries was made. The policy initiatives
were:

The yearly turnover limit for computation of working capital cutoff for smaller industrial units was raised to Rs.
5 crores from Rs. 4 Crores.
The greatest roof limit for Composite Loan Scheme has expanded to Rs. 5 lakhs.
To increment the credit flow to small industrial units, another credit insurance scheme was launched.
Small Industrial units delivering goods in provincial territories are permitted excise exemption on third‐party
branded merchandise.
The meaning ofsmall and auxiliary industrial units was changed by lessening venture limit in plant and
hardware to Rs. 1 crore from Rs. 3 crores.
Special package for the upgrading of small and town enterprises in North Eastern areas was reported. The
industrial units in the North Eastern Region were given an exception from extract obligation for a long time
from the date of the beginning of production
Special accentuation was given to the units which have high export potential.
Through the ministry, the Government has achieved changes in approaches and development support that need
to empower quick and considerable development of MSMEs in India and give them an aggressive edge over
their worldwide nations. A few projects and strategies have been illustrated here. The facilities can be arranged
into three: MSME Policy initiatives, Institutional help, and credit allotment. The accompanying diagram
demonstrates three classified policies.

Schemes For Financing Micro, Small And Medium Enterprises:

Repayment For Iso‐9000 Certification Scheme

The scheme was begun in March 1994, and it gives up to Rs. 75,000 for every small industrial unit which
procured ISO‐9000 Certification. Since the beginning of the scheme of ISO‐9000 repayment, 4101 small
industrial units to the tune of Rs. 1944 crore have been profited up to Nov – 2006.

Laghu Udyami Credit Card Scheme

Laghu Udyami Credit Card Scheme, presented in November 2001, has been executed by the banks for giving
borrower‐friendly credit facilities to small venture.

Credit Guarantee Fund Trust Scheme For Micro And Small Industries The plan covers guarantee free credit
facility reached out by qualified loaning establishments to new and existing Micro and Small Enterprises up to
Rs. 50 lakh per borrowing unit.
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National Equity Fund Scheme (NEF)

The target of NEF Scheme is to provide equity type finance to business visionaries for setting up new tasks in
the tiny or small industrial sector for undertaking extension, modernization, technology upgradation and
enhancement of existing modest, Small Industries and Service Enterprises and for reinstallation of practical
wiped out units. In this scheme, the expense ought not to surpass Rs. 50 Lakhs.

Integrated Infrastructure Development Scheme (IIDS)

IIDS was launched in 1994 with the target of giving essential infrastructural facilities like Power Distribution
network, Telecommunication, Water, Roads, Drainage and Pollution control facility, Storage, Banks, and
Marketing outlets, Common administration facilities and Technological backup administrations, and so on.

The MSME Policy Development Act of 2006 is maybe the most significant of these ongoing strategy changes.
The development of small scale businesses can be assessed in two different ways: To look at the development
rates of units. Work, exports and output of Small‐scale enterprises in 2000 with that of the [Link] determine
the adjustment in the overall commitment of Small Scale venturesto GDP, Exports and Organized Sector work
during the 2000s with that of 1990s. The small scale sector has become quickly throughout the years. The time
of development and the improvement of the MSMEs sector comprised a critical portion of our economy.
MSME Policy is an essential portion of the Indian industrial sector and would keep on assuming an urgent job
in the Indian Economy later on. It additionally got tremendous measures of remote investments into the nation
and gave work opportunities to numerous individuals in the nation which in its turn diminished the dimension
of poverty in the nation. A compensating feature of financial development in India has been a noteworthy
development of current MSMEs.

6. Role of agencies assisting Entreprensuship

A. District Industries Centre (DICs)

In pursuance of the Industrial Policy-1977, a programme for setting up District Industries Centres (DICs) was launched by
the Government of India, to be operational from 1st May 1978. The programme provided for setting up a DIC in each
district of the country, in a phased manned in order to make the district headquarters a focal point for the development of
small-scale and cottage industries, to shift the emphasis from cities and state capitals to the district headquarters and to
provide under a single root, all services and support needed by small and village entrepreneurs. Accordingly the
Government oflndia issued guidelines to the State Government for setting up DIC in each district of the state. In the State
of Maharashtra, District Industries Centre have been set up in the 34 districts. At present 34 districts of Maharashtra DICs
have been functioning.

The main objects of the DIC programme are firstly to make available various assistance and clearance required under one
roof and secondly to promote rural industries.

Following are the schemes under District Industries Centre (DIC):

Prime Minister’s Employment Generation Program (PMEGP)

The objective of this centrally sponsored scheme of Ministry of Micro, Small & Medium Enterprises, Government of
India being implemented since October, 2008 is to provide gainful employment and self-employment opportunities to
educated unemployed persons through activity of industry, service and business.

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Seed Money Scheme
The objective of the scheme is to encourage an unemployed person to take up self-employment ventures through industry,
service and business, by providing soft loans to meet part of the margin money to avail institutional finance.
DIC Loan Scheme
The objective of the scheme is to generate employment opportunities including self-employment to tiny units located in
towns and rural areas having population of less than 1 lakh and with investment in plant & machinery below ₹ 2 Lakhs.
Such identified tiny units falling within the purview of the Small Scale Industries Board and Village Industries,
handicrafts, handlooms, Silk & Coir Industries are covered for financial assistance in the form of margin/seed money
under the Scheme.

Entrepreneurship Development Training Program

This scheme was introduced with the objective of training educated unemployed persons to take up self-employment
ventures or skilled wage employment. Entrepreneurs are given guidance related to industry/service/business activities &
skill upgradation. Entrepreneurs are also guided in respect of choice of activity, necessities of land, project report,
obtaining various no objection certificates, licences and marketing strategy.

District Award Schemes

In order to encourage entrepreneurs establishing small scale ventures and also to acknowledge them for their success and
achievements, the State Government has started honouring such entrepreneurs with District Award Scheme at the district
level. Proprietors / Partner’s / Directors of enterprises who have obtained EM registration with the concerned District
Industries Centre at least three years earlier and in production for two continuous years are eligible for the award.

B. NSIC
National Small Industries Corporation (NSIC), is an ISO 9001:2015 certified Government of India Enterprise
under Ministry of Micro, Small and Medium Enterprises (MSME). NSIC has been working to promote, aid and
foster the growth of micro, small and medium enterprises in the country. NSIC operates through countrywide
network of offices and Technical Centres in the Country. In addition, NSIC has set up Training cum Incubation
Centre managed by professional manpower.

Schemes of NSIC
NSIC facilitates Micro, Small and Medium Enterprises with a set of specially tailored scheme to enhance their
competitiveness. NSIC provides integrated support services under Marketing, Technology, Finance and other
Support service.

Marketing Support
Marketing has been identified as one of the most important tool for business development. It is critical for the
growth and survival of MSMEs in today's intensely competitive market. NSIC acts as a facilitator and has
devised a number of schemes to support enterprises in their marketing efforts, both domestic and foreign
markets.

C. NIESBUD
The National Institute for Entrepreneurship and Small Business Development is a premier organization of
the Ministry of Skill Development and Entrepreneurship, engaged in training, consultancy, research, etc. in
order to promote entrepreneurship and Skill Development. The major activities of the Institute include Training
of Trainers, Management Development Programmes, Entrepreneurship-cum-Skill Development Programmes,
Entrepreneurship Development Programmes and Cluster Intervention. NIESBUD has provided training to
12,37,307 persons till date through 46,837 different training programmes since inception. This includes 5,011
international participants hailing from more than 145 countries throughout the globe.
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 To standardize and systemize the processes of selection, training, support and sustenance of potential
and existing entrepreneurs.

 To support and motivate institutions/organizations in carrying out training and other entrepreneurship
development related activities.

 To serve as an apex national level resource institute for acelarating as well as enhancing the process of
entrepreneurship development, to measure the impact of the same within different strata of the society.

 To provide vital information and support to trainers, promoters and entrepreneurs by organizing
research and documentation activities relevant to entrepreneurship and skill development.

 To create a holistic environment to train the trainers, promoters and consultants in diverse areas of
entrepreneurship and skill Development.

 To offer consultancy nationally/internationally for promotion of entrepreneurship and small business

development at national and international level.

 To provide national/international forums for interaction and exchange of ideas for policy formulation
and its refinement at various levels.

 To share experience and expertise in entrepreneurship development across national frontiers to create
awareness on it at national level.

 To interchange international experience and expertise in the field of entrepreneurship development for
mapping its development at international levels too.

D. NEDB

National Entrepreneurship Development Board (NEDB)

Objectives • The main objective of the National Entrepreneurship Development Board (NEDB) Scheme is
promotion of entrepreneurship for encouraging self-employment in small scale industries and small business.

The scheme covers the following activities:

• To identify and remove entry barriers for potential entrepreneurs (first generation and new entrepreneurs)
including study on entrepreneurship development. • To focus on existing entrepreneurs in micro, tiny and small
sector and identify and remove constraints to survivals, growth and continuously improve performance.
• To facilitate the consolidation, growth and diversification of existing entrepreneurial venture in all possible
ways.
• To support skill up gradation and renewal of learning processes among practicing entrepreneurs and managers
of micro, tiny, small and medium enterprises. • To sensitize to support agencies in the area of entrepreneurship
about the current requirement of growth.

• To act as catalyst to institutionalize entrepreneurship development by supporting and strengthening state level
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institutions for entrepreneurship development as most entrepreneurship related activities take place at the grass
root level and removing various constraints to their effective functioning. • Setting up of incubators by
entrepreneurship development institutions and other organizations devoted to the promotion of entrepreneurship
development

E. EDI
Entrepreneurship Development Institute of India (EDII), an autonomous and not-for-profit institute, set up in
1983, is promoted by apex financial institutions – the IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd. and the State
Bank of India (SBI), with support from the Government of Gujarat. The Government of Gujarat pledged 23
acres of land on which stands the majestic and sprawling EDII campus.

To pursue its mission, EDII has helped set up 12 state-level exclusive Entrepreneurship Development Centres
and Institutes. One of the satisfying achievements, however, was taking entrepreneurship to a large number of
schools, colleges, science and technology institutions and management schools in several states by including
entrepreneurship inputs in their curricula. In view of EDII’s expertise in entrepreneurship, the University Grants
Commission had also assigned EDII the task of developing curriculum on entrepreneurship and the Gujarat
Textbook Board assigned to it the task of developing textbooks on entrepreneurship for 11th and 12th standards
.
In order to broaden the frontiers of Entrepreneurship Research, EDII has established a Centre for Research in
Entrepreneurship Education and Development (CREED), to investigate into a range of issues surrounding small
and medium enterprise sector, and establish a network of researchers and trainers by conducting a biennial
seminar on entrepreneurship education and research.

In the international arena, efforts to develop entrepreneurship by way of sharing resources and organising
training programmes, have helped EDII earn accolades and support from the World Bank, Commonwealth
Secretariat, UNIDO, ILO, FNSt, British Council, Ford Foundation, European Union, ASEAN Secretariat and
several other renowned agencies.

The Ministry of External Affairs, Govt. of India assigned to EDII the task of setting up Entrepreneurship
Development Centers in Cambodia, Lao PDR, Myanmar and Vietnam and Uzbekistan. Five such centres in African
region will be established very soon

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