Financing Tips



Financial Assistance Schemes by MoFPI

 
Initiative by the ministry of food processing industries (MoFPI)
The MoFPI, as part of its mission, has started a scheme for technology upgradation, establishment and modernisation of food processing industries.

Under the scheme financial assistance of 25% of the cost of plant and machinery and technical civil works subject to Rs 50 lakh in general areas and 33% subject to Rs 75 lakh for difficult areas (NE region, J&K, HP, Uttarakhand, A&N Islands, Lakshadweep and ITDP (Integrated Tribal Development Programme) areas is provided for technology up-gradation, modernisation of food processing industries in sectors such fruit and vegetables, cereals, meat, poultry, oilseed products, rice milling, flour milling, pulse processing, flavors and colours, oleoresins, spices, coconut, mushrooms, hops etc. 

It is thus perceived that the Foodpro 2011, event which is themed on “Emerging Technologies” this year will address issues related to technological gaps and constraints and deliver appropriate technological interventions across value chain. The conference to be held alongside the expo will provide private entrepreneurs with technical information for value addition, product development, information on new technology, best practices, and an opportunity to get introduced to valued food industry knowledge and networks.




NABARD (warehousing) 2011-12 Scheme

 

Invitation to avail loan assistance for setting up warehousing infrastructure
under NABARD (warehousing) 2011-12 Scheme
National Bank for Agriculture and Rural Development (NABARD) invites request letters from private sector 
agencies for availing loan assistance from Banks / NABARD to create / expand warehousing infrastructure for 
foodgrains and for other agricultural commodities during the financial year [2011-12] under NABARD 
(warehousing) 2011-12 scheme. 
For more details, please visit our website http://www.nabard.org/tender&documents.asp . The request letter along 
with all necessary information mentioned in such details should reach us by 05 December 2011, 4 PM. NABARD 
reserves the right to reject any or all request letters and / or withdraw the NABARD (warehousing) 2011-12 
scheme without assigning any reason.


Credit Guarantee Fund Scheme for MICRO AND SMALL ENTERPRISES


There are an estimated 26 million micro and small enterprises (MSEs) in the country providing employment to an estimated 60 million persons. The MSE sector contributes about 45% of the manufacturing sector output and 40 % of the nation's exports. Of all the problems faced by the MSEs, non-availability of timely and adequate credit at reasonable interest rate is one of the most important. One of the major causes for low availability of bank finance to this sector is the high risk perception of the banks in lending to MSEs and consequent insistence on collaterals which are not easily available with these enterprises. The problem is more serious for micro enterprises requiring small loans and the first generation entrepreneurs.

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) was launched by the Government of India to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. The scheme was formally launched on August 30, 2000 and is operational with effect from 1st January 2000. The corpus of CGTMSE is being contributed by the Government and SIDBI in the ratio of 4:1 respectively and has contributed Rs.1906.55 crore to the corpus of the Trust up to March 31,2010. As announced in the Package for MSEs, the corpus is to be raised to Rs.2500 crore by the end of 11th Plan.

 Eligible Lending Institutions- The institutions, which are eligible under the scheme, are scheduled commercial banks (Public Sector Banks/Private Sector Banks/Foreign Banks) and select Regional Rural Banks (which have been classified under 'Sustainable Viable' category by NABARD). National Small Industries Corporation Ltd. (NSIC), North Eastern Development Finance Corporation Ltd. (NEDFi) and SIDBI have also been made eligible institutions. As on March 31, 2010, there were 112 eligible Lending Institutions registered as (MLIs) of the Trust, comprising of 27 Public Sector Banks, 16 Private Sector Banks, 61 Regional Rural Banks, 2 Foreign Bank and 6 other Institutions viz., NSIC, NEDFI, SIDBI and The Tamil Nadu Industrial Investment Corporation(TNIIC).

Eligible Credit Facility- The credit facilities which are eligible to be covered under the scheme are both term loans and working capital facility up to Rs.100 lakh per borrowing unit, extended without any collateral security or third party guarantee, to a new or existing micro and small enterprise. For those units covered under the guarantee scheme, which may become sick owing to factors beyond the control of management, rehabilitation assistance extended by the lender could also be covered under the guarantee scheme. It is noteworthy that if the credit facility exceeds Rs.50 lakh, it may still be covered under the scheme but the guarantee cover will be extended for credit assistance of Rs.50 lakh only. Another important requirement under the scheme is that the credit facility should be availed by the borrowing unit from a single lending institution. However, the unit already assisted by the State Level Institution/NSIC/NEDFi can be covered under the scheme for the credit facility availed from member bank, subject to fulfillment of other eligibility criteria. Any credit facility in respect of which risks are additionally covered under a scheme, operated by Government or other agencies, will not be eligible for coverage under the scheme.

Guarantee Cover- The guarantee cover available under the scheme is to the extent of 75 per cent of the sanctioned amount of the credit facility. The extent of guarantee cover is 80 per cent for (i) micro enterprises for loans up to Rs.5 lakh; (ii) MSEs operated and/or owned by women; and (iii) all loans in the North-East Region. In case of default, Trust settles the claim up to 75% (or 80% wherever applicable) of the amount in default of the credit facility extended by the lending institution. For this purpose the amount in default is reckoned as the principal amount outstanding in the account of the borrower, in respect of term loan, and amount of outstanding working capital facilities, including interest, as on the date of the account turning Non-Performing Asset (NPA).

Tenure of Guarantee- The Guarantee cover under the scheme is for the agreed tenure of the term loan/composite credit. In case of working capital, the guarantee cover is of 5 years or block of 5 years.

Fee for Guarantee- The fee payable to the Trust under the scheme is one-time guarantee fee of 1.5% and annual service fee of 0.75% on the credit facilities sanctioned. For loans up to Rs.5 lakh, the one-time guarantee fee and annual service fee is 1% and 0.5% respectively. Further, for loans in the North-East Region, the one-time guarantee fee is only 0.75%.

Website- Operations of CGTMSE are conducted through Internet. The website of CGTMSE has been hosted at www.cgtsi.org.in.

Scheme Awareness Programmes- CGTMSE has adopted multi-channel approach for creating awareness about its guarantee scheme amongst banks, MSE associations, entrepreneurs, etc. through print and electronic media, by conducting workshops/seminars, attending meetings convened at various district/state/national fora, etc. As on March 31,2010, 1080 workshops and seminars were conducted on Credit Guarantee Scheme. Also, CGTMSE participated in 19 exhibitions and attended 304 SLBC/meetings convened by RBI/other Government offices. Posters and mailers have been circulated to banks, industry associations, and other stakeholders for promoting the scheme and creating its greater awareness. With a view to imparting training to MLIs through their training colleges, multimedia CD-ROM containing operational modalities of the scheme, was distributed to the staff training centers/colleges of the MLIs. The Trust has recently launched an advertisement campaign in 194 newspapers across the country through DAVP, which has created considerable awareness about the scheme among the target audience.

Operational Highlights of CGTMSE- Operational Highlights of CGTMSE 10. As on March 31, 2010, 3,00,105 proposals from micro and small enterprises have been approved for guarantee cover for aggregate credit of Rs.11550.61 crore, extended by 85 MLIs in 35 States/UTs. A year-wise growth position is indicated in the table below:

Period Active MLIs Number of Proposals Approved Credit Amount Approved (Rs. in Lakh)FY 2000-01 9 951 606FY 2001-02 16 2296 2952FY 2002-03 22 4955 5867FY 2003-04 29 6603 11760FY 2004-05 32 9516 32677FY 2005-06 36 16284 46191FY 2006-07 40 27457 70453FY 2007-08* 47 30825 105584FY 2008-09* 57 53708 219940FY 2009-10* 85 151387 687511

Scheme of Micro Finance Programme- The Government has launched a Scheme of Micro Finance Programme in 2003-04.The Scheme has been tied up with the existing programme of SIDBI by way of contributing towards security deposits required from the MFIs/NGOs to get loan from SIDBI.The scheme is being operated in underserved States and underserved pockets/districts of other states.

The Government of India provide funds for Micro-Finnance Programme to SIDBI, which is called 'Portfolio Risk Fund'(PRF).At present SIDBI takes fixed deposit equal to 10% of the loan amount.The share of MFIs/NGOs is 2.5% of the loan amount (i.e. 25% of security deposit) and balance 7.5%(i.e. 7.5% of security deposite) is adjusted from the funds provided by the Government of India.

As on 31st March 2010, the Government has released an amount of Rs.80.00 crore towards 'Portfolio Risk Fund'(PRF).An amount of Rs .6.00 crore has been released during 2009-10. As on 31st march 2010,cumulative loan amount of Rs.1299.68 crore has been provided to MFIs/NGOs under the Scheme benefiting approximately 20.21 lakh persons. Of this,more than 80% are estimated to be women beneficiaries.

OFFICE OF DEVELOPMENT COMMISSIONER SCHEMES



 Office of Development Commissioner operates a number of schemes for the MSME sector. At a glance these are:-
1.      National Manufacturing Competitiveness Programme (NMCP) Schemes Under XI Plan - The Government has announced formulation of National Competitiveness Programme in 2005 with an objective to support the Small and Medium Enterprises (SMEs) in their endeavor to become competitive and adjust the competitive pressure caused by liberalization and moderation of tariff rates. Para 59 of the Budget Speech 2005 are as follow   read more...
2.      Micro & Small Enterprises Cluster Development Programme (MSE-CDP) - DC(MSME) launched MSE-CDP for holistic development of selected MSEs clusters through value chain and supply chain management on co-operative basis.   read more...
3.      Scheme for Capacity Building - Scheme for capacity building, strengthening of database and advocacy by industry/ enterprise associations, as envisaged in the promotional package for Micro and Small Enterprises (MSEs).   read more...

4.      Credit Linked Capital Subsidy Scheme for Technology Upgradation - The Scheme was launched in October, 2000 and revised w.e.f. 29.09.2005. The revised scheme aims at facilitating Technology Upgradation of Micro and Small Enterprises by providing 15% capital subsidy (12% prior to 2005) on institutional finance availed by them for induction of well established and improved technology in approved sub-sectors/products. The admissible capital subsidy under the revised scheme is calculated with reference to purchase price of Plant and Machinery. Maximum limit of eligible loan for calculation of subsidy under the revised scheme is also been raised Rs. 40 lakhs to Rs. 100 lakh w.e.f. 29-09.2005.   read more...

  1. Credit Guarantee Scheme - Collateral free loans upto a limit of Rs.50 lakhs - for individual MSEs.   read more...
6.      ISO 9000/ISO 14001 Certification Reimbursement Scheme - Incentive Scheme of Reimbursement of expenses for acquiring Quality Management System (QMS) ISO 9000 certification/environment management (EMS) ISO 14001 certification to the extent of 75% or Rs.75,000/- whichever is lower.
- For individual SISIs/Ancillary/tiny/SSSBE units   read more...
     7. MSME MDA - The scheme offers funding upto 75% in respect of to and fro air fare for     participation by MSME Entrepreneurs in overseas fairs/trade delegations. The scheme also provide                          for funding for producing publicity material (upto 25% of costs) Sector specific studies (upto Rs. 2 lakhs) and for contesting anti-dumping cases (50% upto Rs. 1 lakh) - for individual MSMEs & Associations.   read more...


Participation in the International Exhibitions/ Fairs - For registered Small & Micro manufacturing enterprises with DI/DIC. 




Financial Assistance for using Global Standards (GS1) in Barcoding - Recognized the importance of barcoding and avail financial assistance through Office of DC(MSME).   read more...


Purchase and Price Preference Policy - This is administered through the Single Point Registration Scheme of NSIC. Under this, 358 items are reserved for exclusive purchase from MSME by Central Government. Other facilities include tender documents free of cost, exemption from earnest money and security deposit and 15% price preference in Central Government purchases - for individual MSMEs 


8. Mini Tool Rooms - Assistance upto 90% or Rs.9.00 crores, whichever is less for setting up new Mini Tool Rooms. For upgradation of existing Tool Rooms, assistance is 75% or Rs.7.5 crores - for State Governments.   read more...


9.Assistance to Entrepreneurship Development Institutes - For strengthening training infrastructure in EDIs, assistance upto 50% or Rs. 50 lakhs whichever is less - for State Governments.   read more...


10. Scheme of Micro Finance Programme - Creating self employment opportunities is one way of attacking poverty and solving the problems of unemployment. There are over 24 crore people below the poverty line in the country.   read more...


11. Scheme of National Award - The Micro, Small &Medium Enterprises (MSMEs) in India have seen a vast development in the last five decades. The MSMEs have registered tremendous growth as also progress in terms of quality production, exports, innovation, product development and import substitution, very much beyond the expected objectives of setting up MSMEs by the planners of industrial production base in the country.   read more...

12. Scheme to Support 5 Selected University / Colleges to Run 1200 Entrepreneurship Clubs per Annum - A package for the promotion of Micro and Small Enterprises, based on the Circular No.2(6)/2006-MSME Policy dated the 7th November,2006 has been approved by the Cabinet Committee for Economic Affairs(C.C.E.A.).





Government Funding and Schemes



Business Financing
Business Financing

An entrepreneur requires a continuous flow of funds not only for setting up of his/ her business, but also for successful operation as well as regular upgradation/ modernisation of the industrial unit. To meet this requirement, the Government (both at the Central and State level) has been undertaking several steps like setting up of banks and financial institutions; formulating various policies and schemes, etc. All such measures are specifically focussed towards the promotion and development of small and medium enterprises.
The public sector banks are the major source of financial assistance to the industrial sector. They extend credit support to the firms in the form of loans, advances, discounting bills, project financing, term loans, export finance, etc. Some of the major examples of such banks are:-
  1. State Bank of India (SBI) provides a wide range of financial products and services that can cater to any business or market requirement. It deploys multiple channels to deliver integrated solutions for all financial challenges faced by the corporate universe. Its various funding schemes are:-
  2. The bank also provides financial assistance to agriculturists through a network of rural and semi-urban branches. These specialized branches have been set up in different parts of the country exclusively for the development of agriculture through credit deployment. Their schemes cover a wide range of agricultural activities like crop loan, finance to horticulture, farm mechanization schemes, land development schemes, minor irrigation projects, agricultural term loans, etc.
  3. Bank of Baroda offers various products and services that meet the specific requirements of business enterprises, particularly the small scale units. Various schemes relating to the provision of loans and advances by the bank include:-
  4. Andhra Bank has also devised a host of loan schemes to meet the financial requirements of an enterprise. These particularly cater to the corporate and agricultural sector. Some of its important funding options include:-
Small scale industries need credit support on a continuous basis for running the enterprise as well as for its diversification and modernisation. Recognising the need for a focused financial assistance to such industries, the Government of India, together with the State Governments, has formulated several policy packages including schemes and funds for their growth and development. Most of these programmes of the Central Government are implemented through two principal organisations:-
  1. Small Industries Development Organisation (SIDO) is an apex body for promotion and development of small scale industries in the country. Its major activities include:-
    • Advising the Government on formulation of policies and programmes for the small-scale industries.
    • Conducting periodical census/survey of the small scale industry and generating data/reports on various important parameters/indicators of growth and development of the sector.
    • Maintaining close liaison with other Central Ministries, Planning Commission, State Governments, Financial Institutions and other organisations concerned with the development of small-scale industries.
    • Facilitating linkage of small-scale industries as ancillaries to large and medium scale industries.
    • Developing human resource base through training and skill upgradation.
    For achieving its objectives, SIDO has devised a comprehensive range of schemes for providing credit facilities, technology support services and marketing assistance, etc. Some of the major schemes are:-
  2. National Small Industries Corporation Ltd (NSIC), has been established with the objective of promoting, aiding and fostering the growth of small scale industries in the country. It has been assisting small enterprises through a set of specially tailored schemes which facilitate marketing support, credit support, technology support and other support services.
  • Marketing support schemes :- sound marketing is critical for the growth and survival of small enterprises. NSIC acts as a facilitator to promote small industries products and has devised a number of schemes to support small enterprises in their marketing.
  • Credit support schemes:- NSIC facilitates credit requirements of small enterprises in several areas. These include:-
    • Equipment financing:- through schemes like 'Hire Purchase' and 'Term Loan' for the procurement of equipments.
    • Financing for procurement of raw material:- by facilitating bulk purchase of basic raw materials at competitive rates, import of scares raw materials,etc. NSIC also takes care of all the procedures, documentation and issue of letter of credit in case of imports.
    • Financing for marketing activities:- such as internal marketing, exports and bill discounting, etc.
    • Financing through syndication with banks:- by entering into strategic alliances with commercial banks so as to facilitate fund requirement of the small enterprises. It involves an arrangement of forwarding the loan applications of the interested small enterprises to the banks.
    • Performance and credit rating scheme for small industries:- so as to enable the small enterprises to ascertain the strengths and weaknesses of their existing operations and take corrective measures accordingly. NSIC is operating the scheme through agencies like ICRA, ONICRA, Duns & Bradstreet(D&B), CRISIL, FITCH, CARE and SMERA.
  • Technology support schemes:- NSIC offers small units various support services through its 'Technical Services Centres' and 'Extension Centres'. The services provided include advise on application of new techniques; material testing facilities through accredited laboratories; energy and environment services at selected centres; classroom and practical training for skill upgradation, etc.
At the State level, various State Financial Corporations (SFCs) have been set up by the respective State Governments for providing financial assistance to the industrial units. For this purpose, these institutions have brought out several funds and schemes, from time to time. There are 18 State Financial Corporations (SFCs) in the country. For example:-
  1. Kerala Financial Corporation (KFC), incorporated under the State Financial Corporations Act of 1951, is a trend setter in the field of industrial finance. It has been playing a major role in  the development and industrialisation of Kerala by extending financial assistance well-suited for the requirements of the entrepreneurs.   Its main objective is to extend term loan assistance for establishing new industrial units or to extend credit assistance for meeting expansion/diversification/modernisation costs of the existing units, in small scale or medium sectors. Some of its major schemes include:-
  2. Madhya Pradesh Financial Corporation is the premier institution in the State of Madhya Pradesh engaged in providing financial assistance to small and medium industries. This assistance has been extended in the form of a wide range of fund and non fund based services/ schemes. The fund based schemes are available for setting up of business ventures within the State, whereas, non fund based schemes are available throughout the country.
The fund based schemes include:-
  • Term Loan
  • Equipment Finance
  • Asset Credit
  • Short Term Loan
  • Working Capital
  • Loan Replenishment
  • Finance for Market Activities
  • Composite Loan
  • Credit Linked Capital Subsidy for SSI
The non-fund based schemes include:-
  • Public Issue Appraisal
  • Credit Syndication
  • Corporate Advisory Services


Banks Credit In Agricultural Sector

Nationalisation of banks was a major step for channelising credit to various sectors of economy of which agriculture is a major sector. A dynamic and growing agricultural sector needs adequate finance through banks to accelerate the overall growth. The government has directed the banks to double their flow of credit to agriculture sector in three years commencing from the year 2004-05. With the government’s keen interest and special budget allocation for agricultural in the 11th five-year plan, it is now in the hands of the farmer to reap the benefit of the schemes offered by the banks. Following is a list of offers of credit from some of the nationalised banks.

Allahabad Bank (www.allahabadbank.com)

  • Kisan Shakti Yojana Scheme
  • Farmers are free to utilise the loan at their own choice
  • No margin is required
  • 50% of the loan amount may be utilized for personal/domestic purposes including repayment of debt to money lenders

Andhra Bank (www.andhrabank.in)

  • Andhra Bank Kisan Green card
  • Coverage under Personal Accident Insurance Scheme (PAIS)

Bank Of Baroda (www.bankofbaroda.com)

  • Purchase of second hand tractors scheme for dry-land farming
  • Working capital needs to dealers/distributors/traders of agrl. Inputs/livestock inputs
  • Hiring agrl. machinery
  • Development of horticulture
  • Working capital for units engaged in dairy, piggery, poultry, sericulture etc.
  • Financing Scheduled Caste/Scheduled Tribes for purchase of farm implements, tools, pair of bullocks, creation of irrigation facilities.

Bank of India (www.bankofindia.com)

  • Star Bumiheen Kisan Cardfor share croppers, tenant farmers and oral lessees
  • Kisan Samadhan card – Kisan credit card for crop production and other related investments
  • BOI Shtabti Krishi Vikas Card – electronic card for anywhere anytime banking for farmers
  • Funding for contract farming in hybrid seed production, cotton industry, sugarcane industry etc.
  • Special schemes for SHGs and to empower women folk
  • Star Swarojkar Prashikshan Sansthan (SSPS), a new initiative to provide entrepreneurial training tofarmers
  • Crop loans : Upto Rs. 3 lakhs at the rate of 7% per annum
  • Collateral security: loans up to Rs. 50, 000, no collateral required, but for above Rs. 50, 000, RBI directives are followed.

Dena Bank (www.denabank.com)

  • Dena bank is most active in Gujarat, Maharashtra, Chhattisgarh and UT of Dadra and Nagar haveli.
  • Dena Kisan Gold Credit Card Scheme
  • Maximum credit limit up to Rs. 10 lakh
  • Provision of 10% towards domestic expenses including education of children
  • Longer repayment period up to 9 years
  • Loan is available for any type of investment in farm such as farm implements, tractors, sprinklers/drip irrigation systems, oil engine, electric pump sets, etc.
  • Short term crop loan up to Rs. 3 lakhs @ 7%
  • Disposal of loans within 15 days of application
  • No collateral up to Rs. 50, 000 for farm loans and up to Rs. 5 lakhs for setting up agri-clinic and agri-business units.

Indian Bank (www.indianbank.in)

  • Production Credit : Crop loans, Tie-up with sugar mills & Kisan Credit Card Scheme, Crop loans to tenant farmers, share croppers and oral lessees
  • Agricultural Investment Credit : Land development, minor irrigation, micro irrigation, farm mechanization, plantation and horticulture
  • Agricultural Structured Loans : Kisan Bike, Agri- Vendors Bike, Agri. Clinics and Agri Business Centres
  • Group Lending for Agricultural Development: Loan to joint liability groups / Self Help Groups
  • New Agricultural Avenues: Contract farming, Organic farming, rural godowns, cold storage, medicinal and aromatic plants, bio-fuel crops etc..

Oriental Bank of Commerce (www.obcindia.co.in)

  • Oriental green Card (OGC) Scheme
  • Composite Credit Scheme for Agricultural lending
  • Setting up of cold storages/godowns
  • Financing commission agents

Punjab National Bank (www.pnbindia.in)

  • PNB Kisan Sampuranrin Yojana
  • PNB Kisan Icha Purti Yojana
  • Growing potatoes/fruits against pledge of cold storage receipts
  • Self propelled Combine Harvestors
  • Development of Forestry nursery
  • Wasteland development
  • Mushroom/Prawn culture and mushroom spawn production
  • Purchase nad maintenance of milch animals
  • Dairy Vikas Card Scheme
  • Schemes for pisciculture, piggery, bee-keeping etc.

State Bank of Hyderabad (www.sbhyd.com)

  • Crop loans and Agrl. Gold loans
  • Marketing of agricultural produce
  • Cold storage/private warehouse
  • Minor irrigation & Dug well scheme / development of old well scheme
  • Land development finance
  • Purchase of tractor, power tiller and implements
  • Purchase of Agrl. Land/fallow/wastelands
  • Vehicle loans for farmers
  • Drip irrigation and sprinklers
  • Self Help Group
  • Agri Clinics and Agri Business Centres
  • Yuva Krishi Plus Scheme

State Bank of India (www.statebankofindia.com)

  • Crop loan Scheme (ACC)
  • Storing produce in their own premises and renewal of loans for next season
  • Kisan Credit Card Scheme
  • Land Development Schemes
  • Minor Irrigation Schemes
  • Purchase of combine Harvestor
  • Kisan Gold Card Scheme
  • Krishi Plus Scheme- for customized hiring of tractor to rural youth
  • Arthias Plus Schemefor Commission agents
  • Broiler Plus Scheme – Broiler farming
  • Lead Bank Scheme

Syndicate Bank (www.syndicatebank.com)

  • Syndicate Kisan Credit card (SKCC)
  • Solar Water Heater Scheme
  • Agri-clinics and Agri-business centres

Vijaya Bank (www.vijayabank.com)

  • Loans to Self Help groups
  • Vijaya Kisan Card
  • Vijaya Planters Card
  • KVIC Margin Money Scheme for Artisans and Village Industries

Links for other Banks
Twelve Tips for Getting Your Bank Loan                   


Finding the money needed to start a new business is almost always one of the most difficult obstacles new owners face. The most likely (and easiest) sources of capital are your families, friends and own savings. However, you should not overlook institutional sources as well. 

Without a previous track record in business, securing a bank loan may be difficult. Banks cite risk factors and increasing costs of servicing small accounts as the primary reasons for minimizing their exposure to small businesses. Still, it can be done. Here are the steps that you should take to improve your chances of getting that much-needed bank loan:

1. Keep in mind that to stay in business banks need to make loans. Do not be afraid to ask for one. That is what the loan officer wants you to do. To increase your chances of getting a loan, look for a bank that is familiar with your industry and who has done business with companies like yours. Seek out banks that are active in small business financing. Some banks lend on a conventional basis (lending money without government support), while some banks participate in government programs (in the form of government participations involving direct government funds or loan guarantees). However, be aware that banks often demand stiff collateral requirements for start-ups.

2. As an entrepreneur, make sure that you are thoroughly prepared when you go to your banker's office to request a loan. You need to show your bankers that a loan to you is a low-risk proposition. Have on hand a completed loan application, copies of cash flow and financial statement projections covering at least three years, and your cover letter.

3. Learn to anticipate every question that he or she has. Remember, the combination of information and preparation is the most powerful negotiating tool in the world. A confident and thoroughly prepared borrower is four times more likely to have his or her loan approved than a borrower who does not know the answer to some of the basic questions a banker asks. To show the extent of your preparedness, your business plan should also include answers to your banker's questions. These questions normally are:

4. Do not take an apologetic and negative attitude. Keep your negativity in check. Present yourself as an entrepreneur who can and will repay the loan. Boost your image by providing your loan officer with any promotional materials about your business, such as brochures, ads, articles, press releases, etc.

5. Dress in a professional manner for the interview. This is a business transaction, so treat it as such.

6. Do not stretch the truth in your loan application. Broad, unsubstantiated statements should be avoided. The lender can easily check many of the facts on your application. If you cannot support statements with solid data, then don't make them. Do your homework and spend time doing research to be able to support everything you say, including every single number in your projections. It is best to keep projections, assets lists and collateral statements on the conservative side.

7. Be sure all your documents are neat, legible and organized in a cohesive and attractive manner. Type all your loan documents. Handwritten documents look unprofessional. Don't forget to include a cover letter.

8. Do not push the loan officer for a decision. Doing so might result in a rejection. Your banker cannot make a decision until all your documentation is complete. To ensure a speedy decision, make sure that your application is complete.

9. Be confident. An attitude of confidence enhances your chance of getting the loan. Show that you can make a success out of the money that the bank will lend to you. Visualize in your mind the positive results of your bank application.

10. Keep trying one lender after another until you get your loan. To improve your position as you change bankers and banks, the best way is to ask for a referral from a successful entrepreneur. Before you decide to approach a bank directly, find an associate, friend or acquaintance that is in good standing with the bank to give you a good referral. Bankers tend to deal more favorably those who were referred to them by their best customers.

11. Failure to discuss risk in your application. You must remember one thing: there is no business without risk. If you do not discuss risk, the bankers will assume that you haven't thought about risk. Let's face it - try as we might, we cannot plan for everything, for every contingency, for every turn of events. Bankers would want to know if you have planned for the major risks and how you intend to manage it.
Then, there is also the risk of too much success. The demand for your products or service may exceed well beyond your expectations, and they would want to know how you intend to handle success.
12. Remember that the first loan is usually the hardest to get. Bankers prefer to lend money to borrowers who have borrowed at least once and have paid back at least one loan on time. They are not venture capitalists that make high-risk loans regardless of the profit prospects of your business. Bankers prefer to lend to low-risk, low profit ventures than to high risk businesses or those with no record of accomplishment.