A Startup is defined as a young company that has been founded by one or more entrepreneurs in order to develop a unique product or service and bring it to market. In the past few years, the Government of India has introduced more than 50 startup schemes in order to boost the Indian startup ecosystem. In January 2016, Prime Minister of India had launched Startup India Initiative. Following are some of the startup schemes that had been launched by the Government of India.
The Stand-Up India Scheme has been launched for financing Scheduled caste or Scheduled Tribes and/or Women Entrepreneurs. The Scheme facilitates bank loans between Rs. 10 lakh and 1 core. The Loans under this scheme is available for an only greenfield project, which means the first time venture of the beneficiary in the manufacturing, services or trading sector. Following are eligible under such schemes:
- SC/ST or Woman entrepreneur who is above 18 years of age.
- In a case where there is a non-individual enterprise than at least 51% of the shareholding and controlling stake should be held by either an SC/ST or Woman entrepreneur.
- Such borrower should not be in default to any bank or financial institution.
The Venture Capital Assistance Scheme
The Small Farmer’s Agri-Business Consortium (SFAC) has launched the Venture Capital Assistance Scheme in 2012. This scheme is considered as financial support in the form of an interest-free loan to qualifying projects in order to meet the shortfall in the capital requirement for the implementation of the project. The Farmers, Producer Groups, Partnership Firms, Proprietary Firms, Self Help Groups, Companies, Agripreneurs, and Agriculture graduates who are individual or in groups for setting up agribusiness projects are the person eligible to avail benefits under such scheme. An Agripreneur is defined as an entrepreneur whose main business is of agriculture or any other activities that are related to agriculture.
Following are the benefits availed under such scheme:
- The scheme will help in assisting agripreneurs in making investments in setting up agri-business projects through financial participation.
- It will also provide financial support for the preparation of bankable Detailed Project Reports through the Project Development Facility.
Pradhan Mantri Mudra Yojana
The Micro Units Development and Refinance Agency Ltd. (MUDRA) provides refinance support to Banks / MFIs for lending to micro units having loan requirement up to Rs. 10 lakh. It provides refinance to micro-business under the Scheme of Pradhan Mantri MUDRA Yojana. The Pradhan Mantri MUDRA Yojana was launched on 8th April 2015. The objective of this scheme is to extend the loan for a variety of purposes that are involved in income generation and employment creation. Under this scheme, the loans are extended to the Vendors, Traders, Shopkeepers and other Service Sector activities as a business loan. The scheme also extends the working capital loan through MUDRA cards. It also provides loans for the purpose of the transport vehicle and also equipment finance for micro-units.
The loans under MUDRA Scheme has been classified into three types, and they are as follows:
- Shishu - It covers the loans up to Rs. 50,000/-.
- Kishor - It covers the loans which are above Rs. 50,000/- and the limit is up to Rs. 5 lakh.
- Tarun - It covers the loans which are above Rs. 5 lakh and the limit is up to Rs. 10 lakh.
Generally, the loans amounting up to Rs.10 lakh are issued without any collaterals.
The Small Industries Development Bank of India (SIDBI) Make in India Loan For Enterprises (SMILE) was launched by Mr Arun Jaitley. The main intention of this Scheme is to take forward the Government of India’s ‘Make in India’ campaign and help Micro Small and Medium Enterprises (MSMEs) to take part in the campaign. The objective of this Scheme is to provide a soft loan that is in the nature of quasi-equity and term loan on relatively soft terms to MSMEs in order to meet the required debt-equity ratio for the establishment of an MSME. The scheme has also launched for pursuing opportunities for growth for the existing MSMEs.
The minimum loan for Equipment Finance is Rs. 10 lakh and Rs. 25 lakh in other cases. This scheme is expected to benefit approximately 13,000 enterprises, with employment for nearly 2 lakh persons. This scheme provides a longer repayment period of up to ten years and also includes a moratorium period of up to 36 months. The minimum Promoter contribution should be of 15% subject to maximum Debt equity ratio of 3:1. The eligibility criteria of this scheme is to cover new enterprises in the manufacturing, services sector, financing smaller enterprises within MSME and the Existing enterprises undertaking expansion.
Dairy Entrepreneurship Development Scheme
The National Bank is implementing the Dairy Entrepreneurship Development Scheme for Agriculture and Rural Development (NABARD). The department of Animal Husbandry, dairying and fisheries are implementing Dairy Entrepreneurship Development Scheme (DEDS) for generating self-employment opportunities in the dairy sector. It covers the activities such as enhancement of milk production, procurement, preservation, transportation, processing and marketing of milk by providing back-ended capital subsidy for bankable projects.
The objective of this Scheme is to promote setting up of a modern dairy farm for the production of clean milk, generate self-employment and provide infrastructure for the un-organized sector, upgrade the quality and traditional technology to handle milk on a commercial scale, encourage heifer calf rearing and thereby conserving good breeding stock and to bring structural changes in the unorganized sector so that the initial processing of milk can be taken up at the village level itself.
The eligible beneficiaries of such scheme are Farmers, individual entrepreneurs, NGOs, companies, groups of organized and unorganized sectors, etc. An individual can avail assistance for all the components under this scheme but only once for each component. More than one member of the same family can be assisted under this scheme if they set up separate units with separate infrastructure at different locations. However, the distance between the boundaries of two such farms should be at least 500 meters.
Hence, the Indian Government has come up with a startup government scheme in order to encourage startups in India. Startups should be aware of laws that are related to the incorporation, tax laws, labour legislation, environmental laws, securities laws, contract law, intellectual property laws and various other kinds of laws which are required to be followed.