Sharik Sharik
The MSME sector forms almost 30 percent of the national GDP and ranks as the second-largest employment industry in India after agriculture. Nonetheless, to boost international competitiveness, MSMEs should be investing in intelligent production– automatization, digital solutions, energy-saving devices, and Industry 4.0 features.
What is good, however, is that the government and other individual investors have come up with technology-linked loan programs that are there, opening up some hope to restore this monetary disconnection among the MSMEs. Some DSAs can guide businesses on these elements. DSA’s full form is Direct Selling Agent, which can connect a borrower with the best lender available in the market.
In the current blog, we will find out how Indian MSMEs can avail funding to modernise the manufacturing units at their end and what schemes are available, and how to plan strategically to meet these schemes.
- Why MSMEs Need Loans For Smart Manufacturing?
The term smart manufacturing describes the process of efficiency, accuracy, and cost-localization of manufacturing, advantages of using data-driven, connected technology. This includes:
- Automated machinery
- Smart monitoring Implants based on IoT
- Inventory and logistics on the cloud
- Energy-saving production lines
In MSMEs, going digital through using smart systems is no longer a choice, but it is the only way to grow, to reach the level of exports, and become more profitable.
But, then the issue arises, how can this transition be financed? Technology-related loan schemes come in at that point.
- Credit Linked Capital Subsidy Scheme (CLCSS)
CLCSS by the Ministry of MSME is a flagship scheme that is aimed at retrofitting plant and machinery with state-of-the-art technology.
Key Features:
- Capital subsidy on qualifying investment (up to 15 lakh rupees) at a rate of 15 per cent.
- Covers over 750 validated technologies in other spheres
- It is specifically aimed at manufacturing and production-oriented MSMEs
- Provisional Removal of Federal Depreciation
Why It Matters:
Under this plan, the cost of modernisation has been reduced, and business entities can now purchase CNC machines, automated packaging units, or energy-efficient motors, and they can be subsidised.
MSMEs can be assisted in applying by the loan agents and financial advisors through SIDBI-connected or NABARD-linked banks, where proper documents and eligibility criteria will be fulfilled.
- SIDBI Make in India Soft Loan Fund
SIDBI has initiated the SMILE scheme to offer soft loans to the MSMEs engaged in manufacturing with a special focus on the first-generation entrepreneurs as well as the technology-based businesses.
Benefits:
- Loan limit: between 10 lakh and 25 crore
- Interest rates that are competitive and have long-term repayment terms
- Reduction in the amount borrowers pay in terms of collateral towards qualified projects
Best Use:
Best fit in case of MSMEs, who want to replace high capacity equipment, introduce robotics, or even completely digitalize the entire supply chain infrastructure.
SIDBI also provides project advisory services to the MSMEs to facilitate the project preparation of DPR (Detailed Project Report) and facilitate credit.
- MSME Technology Centre Systems Programme
Although it is not the loan scheme directly, TCSP, implemented by the Ministry of MSME, creates the possibility of access to advanced machinery, software, and training for the MSMEs through Technology Centres located all over India.
Its contribution to the field of education comes in allowing people to trade in a more efficient and time-saving manner.
To time share or space share with the Smart machinery (such as 3D printers, CAD/CAM systems, automation equipment, etc.) that MSMEs rent out time or space on these Smart Machinery.
Eliminates borrowings or purchasing of costly infrastructure
With the help of leased access and a microscale working capital loan, MSMEs can be more productive without taking immediate investment.
- Technology Upgradation Fund Scheme (Textile & Allied MSMEs)
In case of MSMEs engaged in the textile, jute, silk, or technical textile industry, the TUFS provides monetary support in taking up the newer machines.
What’s Covered:
- Reimbursement of interest (to 5 per cent)
- Subsidy of capital for eligible investments. Capital subsidy is the support given to the investment that is ultimately eligible.
Most textile MSMEs in Surat, Tirupur, and Panipat have effectively taken the TUFS to add automation in weaving, computerized dyeing plants, as well as intelligent stitching solutions.
Here, the owners of such mills or factories can take the help of the DSA partner app, and there, the agents can guide them to the right technology-based loan depending on the requirements of the business.
Qazi Qazi
Ethan Riley