devikaa@nasscom.in

SIDBI NASSCOM Funding Initiative

Blog Post created by devikaa@nasscom.in on May 29, 2014

SIDBI and NASSCOM have come together to provide Indian Software companies assistance for financing their business. SIDBI will provide structured financing for the early stage enterprises, which are generating revenues. In the event that a company needs to achieve operational stability through mainstream debt financing, SIDBI would be the appropriate option to obtain structured financing by way of venture debt.

NASSCOM will provide the business and technical acumen to SIDBI's financial evaluation process.


Scheme Objective

  • To provide structured financing for startups and early stage enterprises mostly in sectors which traditionally do not involve physical assets like technology, biotech, asset light service sector businesses, web/ mobile based businesses, clean technologies, social ventures, etc. Innovative business models in other asset based sectors could also be considered selectively.
  • The financing instruments would have structural flexibility and features to enable maximum chances of the project stabilisation. The key objective is to help small enterprises achieve operational stability or hand hold to get mainstream bank financing or facilitate next angel/VC financing.

FAQs

1. How the process will work?  Who should the form be sent to?

•The processing and sanction process of the SIDBI‘s assistance shall be centralized at Mumbai.

•The process of accepting applications will be 2 step process

i.The interested companies shall submit brief information to SIDBI to enable SIDBI to check the prima facie eligibility of the proposal. The form can be downloaded here. This should be sent to

P V S Lakshminarayana
AGM, Equity & Risk Capital Vertical
SIDBI, Mumbai
Tel : 022 67531342 ; Cell +917738595255
lnarayan@sidbi.in

ii.Once SIDBI finds the company prima facie eligible, a detailed application form shall be issued to the company.
iii.The company shall submit the detailed form to SIDBI.
iv.NASSCOM will have the product/ business model analyzed by a panel which shall submit a brief report to SIDBI. If needed NASSCOM could also assign a mentor to the company for strategic hand holding.
v.SIDBI shall process the case at Mumbai.  Visit shall be carried out to the company's operations site.  
vi.After completion of the processing, the case shall be submitted to the sanctioning committee for sanction. The founders of the company shall be required to make a presentation to the sanctioning committee.
vii.After sanction of assistance, the proposal shall be forwarded to the branch for documentation and disbursement formalities.


2. What is the financial assistance companies can expect?
The amount of assistance could be Rs.20 lakh to Rs.1 crore. The assistance is given on the basis of the need and the scale of operations of the company.


3. Is this loan / equity?

The assistance is not by equity but by way of venture debt. The features of the assistance are as under :
•The assistance is structured as debt so that the assessment and delivery is simpler and transactions can be concluded relatively quickly. Further the assistance is structured in a friendly way to provide the best possible impact on the business.
•The  assistance  shall carry a fixed coupon rate and could have some kicker (1-2% equity, etc)
•The assistance shall be targeted towards companies where revenue has commenced, i.e. the product has customer acceptance.
•Assistance could be selectively considered to companies where there are past losses but where the trend is towards profitability which could be achieved in near future.
•Assistance could be for working capital, capex, marketing and other bona fide needs.
•Milestones shall be set for the company to draw the assistance in multiple tranches.
•The assistance helps companies to grow their businesses


4.Is Loan a good option for me?


•If the company has revenues and the founders are confident of the sustainability of the revenues and the business model, then debt in reasonable amounts could help the company growth by shoring up its working capital, enabling execution of new orders or for other critical business needs.
•However, debt should be taken in modest amounts which the founders are confident of servicing. While availing debt the mindset should not be that for availing equity.
•Debt does not dilute the founder's stake in the company.
•It also provides the companies to scale up their ventures before they go to the next equity investors.
•Availing debt from an Institution and establishing a good track record with it helps the company with future investors and banks.

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