Experience and Learning from SIDBI Funding process

Written and shared in email by Vicky Jain, CEO, Convergence Services

In one sentence: I would describe SIDBI funding as an alternate source of finance in the form of unsecured debt, which involves a lot of documentation and paper work  

About our Company and business model:

Convergence IT Services PVT LTd ( is a web development company started in 2008, currently doing business in following verticals:

  • Website & Web application development
  • Web hosting
  • Enterprise collaboration Platform (our product,
  • Website and Open source support / maintenance services (

We had asked for funding mainly for enhancing our product uKnowva, which is a competitor to products like yammer, podio, etc in terms of features and user base and taking it to the global market.

The complete story:

  • May 2014: It started with an email from NASSCOM for nominating our organization for the SIDBI funding. The application form was a 6 page form, which had requested a brief about the business, need for funding, past revenue figures and promoters information.

  • June 2014: We submitted the application.
  • July 2014: We got selected for the initial screening, where in the selected companies were supposed to send across a detailed note on the business model, revenue, need for funds, etc. This is where the  paperwork actually started. The application form was a 25 pages form and most of the things requested in it were very new to us as it was our first time.

  • September 2014: The paper work required was so much that we almost took a month to collate all the required documents and submit hard copes of the same to SIDBI office.

  • October 2014: SIDBI screened all the applications for about a month and finalized on a few out of which we were also selected. We were then directed to make a presentation about our plan to NASSCOM Regional Council on whose recommendation SIDBI finalizes loans for IT based companies. We made a presentation and all the members were pretty much convinced.

  • November 2014: We had to do a final presentation to the SIDBI board as well since they wanted to know in detail about our plan. We made the presentation and were successful in convincing the Board. This is where our application was given a final green signal
  • December 2014: A lot of paper work was done including giving all CA certified past financial records along with quotes and invoices of all the expenditure already done by our company towards the proposed business model. These were finally submitted to SIDBI central office @ BKC.

  • January 2015: In SIDBI, loan sanctioning is done by central office which is @ BKC and disbursement is done by local branch office which is @ Andheri in Mumbai and the same paperwork has to be again submitted to the local branch office too. I believe this is completely redundant and SIDBI should find a better alternative to this process.

  • February 2015: We finally received the funds. Hope we will repay it soon and achieve what we had planned for

How SIDBI funding is different from Angel/VC investment

  • It is a debt, so, it needs to be repaid back with interest.

  • The good part is you do not need any collateral like property, etc that will be mortgaged against this loan. It is totally unsecured.
  • The risk is a bit high on the company’s side.

  • Unlike getting Angel / VC funding, which usually is a full time exercise, getting SIDBI funding is a very defined process where in you can concentrate on your business as well as fulfill the SIDBI application process.

The Pros & Cons


  • No loss of control to VC / angel investors as equity is always with the owners.
  • The tenure of repayment is around 6 to 7 years. which is fair enough for a good business model to generate enough revenues.
  • There is no collateral needed. This is a normal case with many startups, they do not have anything to give to banks as a guarantee against the loan.
  • If you are able to repay the loan on time, SIDBI will fund many bigger projects of yours in future.
  • Once you are SIDBI funded, many banks that were earlier refraining from even giving an Overdraft facility, will start running behind you for taking their financial services 🙂


  • As it is a loan, it needs to be repaid back with interest.
  • It can have a very heavy impact on the growth if revenues do not start as per plan because EMI to SIDBI will start from day one.
  • It is a bit slow process as a lot of paperwork and documentation needs to be done.

Dos and Donts

  • Do Plan accurately: SIDBI needs record of every penny that you spend through their disbursed loan amount, every month you need to send out the invoices, salary slips, etc which are proofs of all the expenses done. So, you need to have a perfect plan as to how much amount you are going to spend in what area.

  • Do Contingency planning: SIDBI says whatever we had asked the money for, that amount should be spent in that direction only. So, if you plan to divert your HR related funds in sales & marketing, then you need to get into another long documentation cycle. But business is very dynamic, many such cases might come up, so please properly plan for such contingencies as well.
  • Do Proper financial analysis: Every penny needs to be returned back to SIDBI with interest, so you need to do a very thorough financial analysis about your revenue forecast, etc. else a lot can be at stake. I would strongly suggest that companies who are already having a revenue stream should only go for SIDBI funding. Companies looking for incubation or initial investment should not go for SIDBI as you yourself are not sure when your revenues will start, but the EMIs of SIDBI will start as per the plan.
  • Do Milestone based planning: SIDBI also provides funds in multiple chunks, where in suppose you are looking for around 10 million over a period of 1 year, then you can setup different milestones like launch of MVP, touching a revenue of 1 million, etc and ask for a chunk of the money once you reach the milestone. This way you have a clear path for yourself plus your risk is minimized and also the interest does not start from day 1.
  • Don’t ask for too much in start: Many people think that to get extra money from any source is always better. But, in this case, it is better to start slow as once you are able to repay what you have taken from SIDBI before time, then they will finance bigger amounts for you in future as well.

How good it is for budding organizations like ours

  • It is an alternate source of finance. It does take time, but if your planning and documentation is proper, you will surely see results at the end, which normally is not the case with a VC / Angel Investors, where many times entrepreneurs spend a lot of time after them and at the end receive a NO.

  • As I said earlier, It is not a full time exercise, so you can concentrate on business as well as do this in parallel.

  • As I said earlier, this is good only for companies that are already having a revenue stream or who are very much sure about a revenue stream starting by a given time as EMIs will definitely start as soon as the loan is disbursed.

  • Since this process involves a lot of paperwork and documentation many important things, which we miss before starting the company like having an insurance, having proper records about the IT returns, etc are completed during this process.

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  1. Dear Vicky,

    Excellent post….really enjoyed reading it and informative as well…

    It would be great if could you also elaborate on the type of documentation required to help us prepare

    Thanks very much


  2. Hi Raman,

    I do not remember the complete checklist, but a lot of documentation like IT returns, financial papers of company as well as directors, etc. You should have them ready. If SIDBI is funding you then a lot more will have to be prepared like project plan, etc. SIDBI team will let u know about it then…

    All the best!

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