The document discusses various sources of finance for small and medium scale industries in India. It outlines short, medium, and long term financing options and the types of financial assistance provided by institutions like SFCs, SIDBI, and commercial banks. Some key points include: short term finance is for less than 1 year for working capital; medium term is 1-5 years for capital expenditures; long term is over 5 years for fixed assets or expansions. Financial assistance includes term loans at concessional rates, refinancing support, and schemes to promote modernization and development of small/medium enterprises.

1. Financial Expansion In
Current Operations
Submitted By: Kajal

2. INTRODUCTION
Finance is a key input of production ,
distribution and development. It is therefore,
aptly described as the “lifeblood of industry
and is a pre-requisite for accelerating the
process of industrial development.

3. TYPES OF INDUSTRIAL FINANCE
Depending on the nature of the activity,
the entrepreneurs require three types of
finances
Short Term Finance
Medium Term Finance
Long Term Finance

4. Short Term Finance
Short term refers to the time period of less than
12 months-the current fiscal year. Short term
finance is usually required to meet variable,
seasonal or temporary working capital
requirements
Sources- Borrowing from banks is a very
important source of short term finance. Other
sources are Trade credit, instalment credit, and
customer advances.

5. Medium Term Finances
Medium term refers to the time period of more than 1
year and less than 5 years.
Medium term finance is usually for permanent
working capital, small expansions, replacements,
modifications etc.
Medium term finance can be raised by
 Issue of shares
 Issue of debentures
 Borrowings from banks and other financial
institutions
 Ploughing back of profit (by existing concerns)
 Public deposits

6. Long Term Finance
Long term refers to the time period of more than 5 years.
Long term finance is required for procuring fixed assets for
the establishments of a new business, for substantial
expansion of existing business, Modernisation etc.
Source of long term finance
 Issue of shares
 Issue of debentures
 Borrowings from banks and other financial institutions
 Ploughing back of profit (by existing concerns)
 Public deposits

7. MEANS OF FINANCE
Source Of Finance
Fixed Working Capital
State Govt. SFCs NSIC SSICs SIDCs Commercial
Banks
Industrial
Investment
Coop. Corpn
Coop Banks Indigenous
Bank Money Lender

8. The various sources from which a small industry can raise funds are
enumerated in its balance sheet sources are grouped under the following
table
Internal External
A. Paid up capital D. Borrowings
i. Ordinary shares
ii. Preference shares
iii. Deferred Shares
iv. Forfeited Shares
i. From Banks
ii. From term lending institutions like IDBI,
ICICI, IFCI, Industrial Development
Corporations, etc.
iii. From Govt. and Semi Govt. agencies and
iv. Others
B. Reserve Surplus
i. Capital Reserves
ii. Development rebate reserves
iii. others
E. Trade Dues and other Current Liabilties
i. Sundry Creditors, And
ii. Others
C. Provisions
i. Taxation
ii. Depreciation
F. Miscellaneous

9. Schemes Of Assistance
The following financial assistance is provided by
SFCs, SIDC and Commercial banks.
It includes financing –
 Of new project in small and medium size
category.
 For modernisation of small and medium size
industries.
 For rehabilitation of small and medium industries.
 Of import of capital Equipment.

10. In terms of currently prevailing guidelines the
following refinance assistance is extended.
Category Percentage of Refinance
 Small Scale Units
-SFCs and SIDCs
-Commercial Banks
 Medium Size Units
-SFCs and SIDCs
-Commercial Banks
 Foreign Currency Loan By SIDCs
85
60
75
60
100

11. Financial Assistance to Small Scale Units
Rupee loan to the small scale units are granted at concessional rate of interest.
Non Commitment charge is levied on loans up to ₹ 5 lakhs to units in the small
sector. Commitment charge at the rate of one percent is levied on all other
rupee loans after an initial grace period of 12 months from the date of sanction.
However units located in the category ‘A’ backward areas are totally exempted
from commitment charges on rupee loans, and the units located in the category
‘B’ and Category ‘C’ backward areas are eligible for 50% concession on the
commitment charges.
The small industrial undertakings are considered Favourably and Allowed
a debt equity ratio extending up to 2.5% . The promoter’s contribution norm
varies between 12.5% and 22.50%, depending on the location of the project and
status of the entrepreneurs.
Repayment Schedule is fixed by the primary lending institutions
after taking into consideration the profitability and debt-servicing capacity of
the assisted units. The maximum repayment period shall, however not exceed 10
years from the date of sanction.

12. The SFCs have accorded high priority to the development of small scale
industries and bulk of their sanctions have flown to this segment which is
priority Sector. More than 71.3 % of the assistance extended by SFCs
during 2000-2001 went to the SSI Sector
The evolution of bank policy framework towards the small scale industry sector is
as follows:
 Liberalised Scheme – Soon after its establishment by takeover of the Imperial
Bank of India, in July 1955, the state bank of India prepared a liberalised
Scheme for financing small scale industries.
 Entrepreneur Scheme- In 1967, a novel scheme known as ‘ Entrepreneur
Scheme for providing financial assistance to technically qualified
entrepreneurs was evolved.
 Financing of Artisans and Craftsmen: Initially, the State Bank was
concentrating its assistance mainly on the small scale industries in the
organised modern sector. In 1969,the bank introduced a special scheme of
financing artisans and craftsman in rural industrial projectsin coordination
with govt. to give liberal credit assistance upto ₹ 75000 to such artisans.

13.  Employment oriented lending: With emphasis shifting to the increasing employment
potential in the country, through formulation of employment-oriented lending schemes,
the bank, in 1971, started financing tiny economic activities like manufacture of
footwear, khadi, basket-making, etc. In 1972, introduction by the government of India
of the differential Interest rate scheme for financing the weaker section of society for
productive activities at a highly concessionary rate of interest of 4% per annum, gave a
fill up to the financing of cottage industries and rural artisans. In the process, a large
number of small units in the decentralized sector has been covered by the bank.
 Special Cells for Village Industries: With the Objective of promoting village industries
and providing financial assistance to a large no. of village artisans, the Bank setup, in
1977, a special village industries divisions in each of its local Head Office. This division
evolves schemes of financial assistance to village industries and assist in the
implementation of schemes and monitoring their progress.
 Technical Consultancy: With a large increase in the bank’s coverage of small units, the
need for providing technical and managerial guidance to small scale industries came
into sharp focus. In 1973, the Bank, therefore, decided to set up its own technical
consultancy cells in each of its local head offices to provide such assistance to the
borrowers. Suitable persons were selected from among the technically and
professionally qualified official of the Bank for this purpose. The Bank entered into an
agreement with a reputed business and industrial consultancy organisation to provide

14. intensive training to these officials in consultancy work for a period of 1 to 2 yrs. The
subjects covered include- financial analysis and appraisal, financial management,
production planning and control, inventory control, budgetary control and costing,
marketing, etc.
 Technical Counselling and Management Appreciation Programmes: Studies
conducted by the Bank on the cause of sickness in small-Scale industries revealed
the necessity for providing counselling and consultancy cells were further
strengthened by recruiting additional officials. The officials of the cells provide
consultancy and counselling assistance to entrepreneurs who need these. The Bank
has also published counselling booklets for use of small scale industrialists on
certain aspects of small Industry management, including maintenance of an
accounting system.
 Equity Support To Small Scale Units: A large no. of small scale units suffer mainly
because their initial investment by way of equity is low. Studies conducted by the
Banks also indicated that inadequate equity base was one of the major reasons for
sickness in the small scale industries. One of the measure for preventing sickness,
the Bank had, in 1975, recommended to the creation of a National equity fund to
provide equity support to the new small scale units.
 Entrepreneurial Development: In 1978, the Bank also launched the initial
programmes of entrepreneurial development in the country, with the object of
accelerating development in the backward areas.

15. Small Industries Development Bank Of
India
The Small Industries Development Bank Of India, as an all India principal
financial institutions, was setup under the SIDBI act, 1989and commenced
operations from April 1990. SIDBI was delinked from IDBI to provide greater
functional autonomy and operational flexibility in 2000.
SIDBI serves as a principal financial institutions for:
o Promotion
o Financing
o Development of industries in small scale sector , and
o Coordinating the functions of institutions engaged in similar activities.

16. SIDBI
Refinance
Bills Finance
Resource support to Institutions
Project Finance
Equity Finance
Promotional assistance
Development assistance

17. Financial Assistance to Medium Scale
units
The Medium scale Units are also eligible for concessional interest of 12.50% per
annum for units located in any industrially backward areas. However in respect
of units located in non backward areas, the applicable rate of interest shall be
14% per annum.
No Commitments will be levied on medium scale units located in the
category A backward areas. In respect of loans to units in the category ‘B’ and
category ‘C’ backward areas, the concessional commitment charge at the rate of
0.50 % per annum shall be levied after allowing the normal period of a grace of
six months from the date of sanction.
Other units located in the non backward areas shall pay
commitment charges at the rate of one per cent per annum. The maximum
repayment period doesn’t exceed 10 years from the date of sanction.

18. Assistance To Small And Medium Scale
Units For Modernisation
The primary objective of this scheme is to encourage industrial units overcome the backlog of
modernisation and to adopt improved and updated technology and methods of production and
prevent mechanical and technological obsolescence.
Modernisation may include replacement and renovation of plant and machinery or
acquisition of balancing equipment for fuller and more affective utilisation of installed capacity.
Units for modernisation assistance should have been in existence for a period of at least 5 years.
The modernisation programmes should mainly aim at:
 Upgradation of process, technology and products;
 Export orientation;
 Import substitution;
 Energy-Saving;
 Anti pollution measures:
 ConservationSubstitution of scarce raw materials
 Improvement in capacity utilisation within the existing capacity, through increase in the
productivity and de-bottlenecking.
 Improvement in material handling

19. Working Capital Management
Working Capital Management is important for small scale industries
owing to resource Crunch.
An Entrepreneur requires Finance, Long term or Short term.
Finance can be raised through internal and external sources.
Working Capital implies that part of the capital which is required run day
to day operations of an enterprise. It can be gross or net working Capital.
The quantum of working capital required will be influenced by the nature
of the enterprise.
Definition:-

20. Objectives of working Capital
 The management wants maximum productivity and profits in the employment
of capital. This is possible by striving to maintain a correct ratio between
working capital and fixed capital.
 To maintain a smooth and rapid flow of funds in order to enhance the
efficiency of working capital or profitability of the enterprise.
 If Cash receipts and cash outlay synchronise, there is no need to maintain a
cash reserve. In business, it would be a miracle to have such perfect
coincidence and coordination between receipts and payments.
Hence, an enterprise must have a sufficient cash reserve to meet all
normal and abnormal cash needs.

21. Composition of Working Capital
Following are the constituents part of the working capital:
Current Assets
Inventories
Raw materials
Finished goods
Others
Loans and advances and other debtor balances
Sundry Debtors and Trade Debtors
Other, including prepayments
Investments
Government Securities, semi govt. securities
Industrial securities and others
Cash and bank balances
Fixed deposits with banks
Other Bank Balances
Cash in Hand
Advance of Income tax (net of tax provision)

22. Current Liabilities: This includes borrowings for banks other than those against
own debentures and other than those against own debentures and other
mortgages.
The purpose of working capital is to achieve cash realisation which is precisely
explained below:
Cash And Bank
Short term Loan……………………………………………………………………………………………..
Investment ……………………………………………………………………………………………..
Sundry Debtors ……………………………………………………………………………………………..
Finished Goods ……………………………………………………………………………………………..
Work in progress ……………………………………………………………………………………………..
Raw Materials ……………………………………………………………………………………………..
Stocks ……………………………………………………………………………………………..

23. Factors Determining The Amount Of
Working Capital
The working capital requirements of small scale units vary from one unit to another
and from one type of unit to another type. Small scale units which are located in
rented premises and are engaged in processing works, need a larger amount of
Working Capital than other units. The other important factors determining the amount
of working capital are:
i. Size of small Scale unit
ii. Process of Production
iii. Proportion of raw material to total cost
iv. Terms of Purchase and sale
v. Turnover of inventories
vi. Importance of Labour
vii. Cash Requirements
viii. Seasonal Variations
ix. Banking Facilities
x. Growth and Expansion

24. Term Loans to Small Scale Industries
For Several reasons, the somewhat comprehensive criteria which are
applied to term loan applications from medium to and large scale
industries cannot be used in term loan proposals from small scale
industries. These industries find difficult to secure adequate finance
from institutional sources even for their working capital requirements
because of their own inherent limitations on the one hand and generally
high standards applied by the lending institutions to borrowers on the
other. By and Large small scale units have low capital to turnover ratio,
as a result of which the available Block capital security is inadequate in
relation to a given level of production; their markets are somewhat
narrow, the prospectus for business frequently uncertain, and their rate
of morality rather high. Banks therefore, find it difficult to assess their
creditworthiness. In these circumstances these industries deserve special
treatment.

25.  Difficulties in procuring Institutional finance
 Applications form
 Audited Accounts
 Personal Inspection

26. Suggestions Of Improving Facilities For
Institutional Finance
If institutional credit is to play a vital role in catering to the requirements of these industries,
measures will have to be taken to overcome the difficulties pointed out here. The nature of
adjustment in attitudes and other matters necessary on the part of the lending institutions on
the one hand and borrowing units on the other is indicated below:
A. Lending Institutions
Some suggestions, which may be useful for lending institutions catering to the needs of small
scale industries, are given below:
1. Lenders should take into account not only the value of the security offered but also the
character and technical ability of the borrower, the prospectus for the industry, the nature
and quality of goods and produced.
2. The acceptance of only a few commodities as security and that too, on a pledge basis , makes
it difficult for industries to become eligible for advances of lending institutions. Factory type
advances may be given.
3. One of the solutions is to utilize the services of the state Department of Industries and Small
Industries service Institutes which, under instructions from the Government of India, offer
assistance to credit institutions in the matter of technical appraisal of projects.
4. Lending Institutions may maintain the personal contacts with borrowings units through
periodical visits , etc.

27. 5. In order to solve the problem of the paucity of technically data required for
an appraisal of the credit worthiness of an Industrial Unit, It will be advisable
to make use of the available official data on small scale industries.
6. The interest charges should be reasonable and the period of repayment
should be determined with reference to the earning capacity of the a unit.
7. To enable financial institutions to liberalize their lending criteria, the govt. of
India has introduced the credit Guarantee Scheme, operated by the RBI,
which enables them to avail themselves for the guarantee facilities to cover
the part of their risk. Maximum amount of loss recoverable is ₹ 1 Lakh
8. The different agencies may supplement one another resources and share the
risk collectively by participating in the loans of other Banks.
9. Lending institutions should be practical and flexible in their attitude rather
than strictly legal, with the view of the borrowing units to overcome any
temporarily difficulties.

28. B. Small Scale Industries: There are joint directions in which small scale
industries may improve their method of operation, etc. and makes their
proposals acceptable to lending institutions. These are:
I. It may not be usually possible for small industry to furnish financial and other
data in thorough and detailed manner. In such cases, as much information is
available on the following aspects of the concern may be given to lending
institutions.
 Details of the nature of industry and its products
 Data regarding performance, estimated cost of production and selling price
 Estimates regarding market prospects, Capital Invested, proportion of
borrowed capital
 Purpose of the loan, result expected from the investment, etc.
II. Concerns should try to maintain audited accounts
III. The units must be able to produce acceptable evidence for verification of the
value of assets offered as security.
IV. Loans sanctioned should not be used for purposes other than those for which
they are advanced.

29. Case Study

30. - Founder and Managing
Director of Veeba
Viraj Bahl is the Founder & Managing Director of Veeba Food
Services Private Limited. Under the “Veeba” & “V-Nourish”
brand, the company is one of the fastest growing FMCG
companies in the country.
In a very short span of time under the
leadership of Viraj Bahl – Veeba Food Service has grown
exponentially.
After completing his Industrial Engineering from Singapore,
Viraj started his career at his family’s food business. From
which they later made a complete exit by selling their shares
to a German Food company. In 2013 he founded Veeba Food
Services Pvt. Ltd.

31. History & Marketing Strategies of
Veeba Brand
Veeba Foods is a famous company known for its unique sauce and condiments.
This company primarily manufactures and markets various kinds of dips,
emulsions, sauces, dressings, and syrups. The main focus of this company is to
satisfy the changing taste bud of the Indian people. The company gives more
emphasis to maintain the cleanliness and quality of its products. It wants to
introduce the general masses of India to taste different flavors from different
corners of the world.
Veeba is the most popular choice for several bakeries, small
restaurants, and food canteens. This company brings out authentic tastes from
all over the globe right into your house through its sauce and condiments. This
allows common Indian to taste various cultures from all over the world.

32. How IT All Started
 Veeba was launched in the year of 2013 by Viraj Bahl. This company was
founded in the capital city of India. The name of the company was given to
honor Mr. Bahl mother. Initially, this company was a B2B condiment and sauce
company that would supply various kinds of dips and sauces to its clients. The
company was able to gain success and experience the growth in volume
through the B2B route.
 In the year 2015, the company decided to enter the food retail market.
Presently, this company has shifted toward its B2C route as it is bringing the
company more profits and recognition. This company is presently focusing on
the big metro cities, where numbers of outlets are increasing day by day.

33. Launching
 After the launching of the company, it started to produce several products.
The clientele of this Sauce and Condiment Company include some of the
largest coffee Industry and quick service restaurant. Veeba provides food
supply items to some of the large players in our country such as Pizza Hut,
Domino’s Pizza, KFC, Dunkin Donuts, Starbucks, etc.
 After the company entered the retail market in the year 2016, it tried to
develop several products for marketing purposes. The motto of the company
changed and it focused on bringing the most authentic and finest taste
directly to the home of every Indian household. Every product would have to
pass the strict quality and taste check before entering the market.

34. How its going
Veeba Food service’s operating revenue range is 100cr - 500cr for the financial
year ending on 31st march 2021. Its EBITDA has increased by 89.64% over the
previous year.
Veeba Food services private limited has 8 directors- Viraj Bahl,
Jawahar Arora, Deepak Ishwardas, Ashit Ranjit Lilani, Rajiv Wahi, Arjun Anand,
Anoop Arora, Ridhima Bahl. The registered office is at 133, Saidullajab, Mehrauli
Badarpur Road, Delhi.
The company got a manufacturing facility in Rajasthan, has strong e-commerce
Presence for sales and continues to have double digit growth in the B2B business.
Shahrukh khan has promoted their newest product, V-Nourish, a venture into
the child nutrition industry. Veeba has launched a new health food drink brand
for kids- Provee. Provee aims to offer wholesome nutrition to the kids that
support an active mind, better immunity, and complete growth for growing
children.
Veeba has come a long way ahead with a few more miles to go.

35. Reasons Behind its great Success
Problem Solving Approach
Bringing new Flavour to Indian Table
Innovative Packaging Style
Efficient Distribution of all Products

36. How has Veeba Foods grown?
Viraj Bahl’s family managed Fun Foods till 2008 before it was
sold off to Dr. Oetker. Later, for five years, Viraj ventured into the
restaurant business but realized it wasn’t the right path. Hence,
as a budding entrepreneur now, he started Veeba in 2013.
With their first client being Domino’s after a lot of
persuasions,
Viraj has never looked back.

37. Veeba Campaigns
From the starting Veeba targeted the younger age group of Indian masses. The target
audience would generally fall under the age group of 25 to 40 years old.
Every campaign from the Veeba, target young women as 90 % of
Indian women knows how to cook delicious food. The company would also regularly
hold public seminars to share different recipes from company chefs and local
households. The recent campaign under the tagline of “Aaj Kya Khaoge?”. The
campaign was created to encourage and inspire young Indians to create something
new and exciting with the help of Veeba. Through this ad campaign, Veeba wants
to express that its sauce would allow any member of the family to create a wide
range of food. These types of campaigns made the company more popular among
the general mass of India.

38. Conclusion
Presently, Veeba has established itself as one of the leading company for
providing new and delightful sauces and condiments. This company was launched
itself with the B2B model but now it was able to enter every Indian household. It
new taste and health conscious product made it more popular among the general
masses of India.
Almost all products were liked by thousands of people, which
increased the popularity of the brand. With the increase in popularity, the trust
of the people also increased in the company. For maintain this trust, the
company strives to develop new sauces and condiments.