SMILE stands for SIDBI Make in India for Enterprises. The scheme aims to augment the scope of the Make in India campaign and help MSMEs to be a part of such a campaign. The government has earmarked 25 sectors as a beneficiary of the scheme. Besides, SMILE intends to provide necessary financial support to entities in the MSME sector. In the write-up, we will look into various aspects of this scheme in detail.
Key Objectives of the SMILE Scheme
The frontline objective of this scheme is to support existing and imminent MSMEs through credit means. The GOI has released this program to serve the following objectives:
- Fostering Innovation
- IP assets protection
- Setting up a state of art manufacturing infrastructure for MSME
Target Sectors under the SMILE scheme
The SMILE scheme seeks to facilitate financial aid to the following earmarked sectors under the Make in India initiative.
- Automobiles and Automobile Components
- Aviation
- Constructions
- Bio-Technology and Chemicals
- Electrical Machinery and Electronic Systems
- It and BPM
- Defence Manufacturing
- Leather and Mining
- Food Processing
- Media & Entertainment
- Pharmaceuticals
- Oil & Gas
- Railways
- Renewable Energy
- Ports & Shipping
- Roads & Highways
- Textiles & Garments
- Space and Thermal Power
- Wellness Sectors
- Tourism & Hospitality
Who can access the SMILE scheme?
The following are eligible to access the SIDBI Make in India Loan for Enterprises.
- Entities falling under the MSME Act 2006[1].
- New enterprises belong to manufacturing & service sectors
- Existing entities are undertaking infrastructure augmentation, expansion, technology advancement, and other projects for business expansion.
- Loans extended under the SMILE scheme cannot be utilized for discharging preceding loan liabilities.
Loans extended under the SIDBI Make in India Loan For Enterprises (SMILE) cannot be used for repayment of earlier loans.
The scope of the SMILE sector is not limited to the above. Other sectors can also access this scheme, provided their proposal is on point.
Types of Assistance provided under the Scheme
The GOI facilitates a soft loan in the form of quasi-equity and term loans against relaxed terms to MSMEs to fulfil the required debt-equity ratio for setting up the company and for tapping growth-driven opportunities for existing MSMEs.
Terms of Assistance
Soft Loan – In the Nature of the Quasi Amount
The loan amount particulars under the SMILE are given below:
10 per cent of the project valuation is subject to the maximum of Rs 20 lacs, and 15 per cent of the project valuation is subject to a max. of Rs 30 lacs for entities promoted by ST, SC, Individual with disability and Women (controlling stake of at least 51%)
Upfront Fee
The eligible MSME sectors are supposed to submit 0.50% of the loan amount as a security/upfront charge under the SMILE scheme.
Rate of Interest
- For the first three years: 9.15 per cent to 9.35 per cent pa.
- From 4th year onwards: 11.70 per cent – 12.70 per cent per annum based on the PLR rating of the bank (rate is not necessarily fixed)
Repayment Period
The repayment timeline for the soft loans under the SMILE scheme is up to 10 years which includes a moratorium of 3 years as well.
Security
- Residual charge over the entire assets
- Personal guarantee of the Promoter(s)
Prepayment
No premium shall be imposed under the SMILE scheme.
Other Details
Upon expiration of 3 years from the date of issuance, the outstanding soft loans, together with any due amount thereon, shall be transformed into a secured term loan, and the complete loan amount shall carry an applicable interest rate in accordance with the internal rating of the borrower.
Term Loan – On Relatively Soft Terms
Amount
The loan amount details the SMILE scheme given below:
- Minimum fifty lacs rupees for new enterprises
- Minimum twenty lacs rupees for existing enterprises
Upfront Fee
The eligible MSME sectors are supposed to submit 0.50% of the loan amount as a security/upfront charge under the SMILE scheme.
Rate Of Interest
- For the first three years: 9.45 per cent to 9.95 per cent pa.
- From 4th year onwards: 11.70 per cent – 12.70 per cent per annum based on the PLR rating of the bank (rate is not necessarily fixed)
Term Loan
Particulars relating to the term loan under the SMILE scheme are given below:
- 75 per cent of project valuation upto Rs 100 lacs
- 2/3rd for the rest is exposed to contribution of the promotions and DER provisions.
Promoters’ Contribution
- At least 15 per cent of the project valuation up to Rs 100 lacs
- 20 per cent for the rest subject to DER provisions
Repayment Period
Up to 10 years (including three years moratorium)
Security Details
- A first charge over all the project’s assets
- Promoters’ guarantees
- Fixed asset protection at least 1.40 times (including the collateral security)
Prepayment
No premium shall be imposed for the SMILE scheme
Fiscal Incentives Details
- For the general category, 10 per cent of the project valuation subject to a max. of Twenty lacs rupees is granted as the loan amount.
- For the entities promoted by ST, SC, and PWD, i.e. Persons with Disabilities and women, 15 per cent of the project valuation, subject to the max. of thirty lacs rupees.
- The individual above must own a controlling stake (i.e. 51 per cent or higher)
Documents Required to Apply for SMILE scheme
The document required for the SMILE scheme is listed below:
- Proof of Identity: DL, Voter Id, Passport, Signature Identification from prevailing bankers of the partner, Proprietor, or Director
- Proof of residence: Latest phone bills, electricity bill, property tax receipt
- of Proprietor, partner of Director (in case of a company)
- Proof of business Address – As requested by the SIDBI’s KYC application form for entities
- AOA and MOA of the company and partnership deed in case of partnership firm
- Biodata of Guarantors/ promoters (in accordance with the enclosed format I)
- Net worth statement of guarantors and promoters along with latest IT returns (in accordance with enclosed format II)
- Rent agreement and NOV form respective pollution departments, if applicable.
- Udyog Aadhar Memorandum (UAM) registration
- Projected balance sheets of the subsequent
- two years if the working capital limits and for the timeline of the loan in terms of the term loan
- Xerox of lease deeds as well as title deeds of all the collateral-based properties
- Documents evidencing that applicant belongs to SC or ST Category
- Incorporation certificate to prove whether the company’s majority stakeholding is under the control of individuals belonging to the SC, ST and Woman category
- Company’s profit
- Balance sheet (last three years) of the Group Companies.
- Detailed Project Report
- Manufacturing process details
Application procedure for the SMILE scheme
The following section discusses the application procedure for the SMILE scheme.
Step 1: Visit the branch concerned to apply for a loan
Step 2: Submit the prescribed application form attached with mandatory documents.
Step 3: After details vetting, the authority concerned, i.e. SIDBI, shall scrutinize the application and accordingly transfer the requested loan amount to the beneficiary’s accounts.
Conclusion
Through the Make in India initiative, GOI aims to strengthen the domestic production capabilities, which cannot be possible without the contribution of the MSME sector. SMILE scheme launched under this initiative helps MSMEs to ensure interrupted and quality products through improved fiscal assistance.
Read our Article:Credit Schemes for Small Scale Companies in India
