How Government Initiatives And Positive Investor Outlook Is Making Small Businesses Funding-Ready The year 2020 witnessed an increase in the emergence of entrepreneurs from tier II and III cities
By Akash Gehani •
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India is home to 55,000-plus startups from multiple verticals, and hosts about 37 unicorns, featuring among the top five countries with the highest number of unicorns. The impact of the pandemic on the Indian startup ecosystem has been critical and multi-fold, thus creating a record of bringing in 11 startups to the unicorn club, as against the previous years: 9 in 2019 and 8 in 2018. The year 2020 also witnessed a total of $8.4 billion worth funding raised by Indian startups, at a time where sectors such as edtech, healthtech, enterprise/software and fintech, etc., were booming.
The year 2020 witnessed an increase in the emergence of entrepreneurs from tier II and III cities. While migration to hometowns during the pandemic could have been one of the contributing factors, investors and accelerators had begun to expand their services to more markets to help nurture upcoming businesses. Several startups from tier II and III towns are now up on investors' hotlist amid the lockdown.
The pandemic has further strengthened the Internet ecosystem, with online businesses such as reselling, education, cloud kitchens, home cleaning, bookkeeping and the likes having come up on demand. The government, through the Aatmanirbhar Bharat initiative is working to uplift startups and MSMEs to help boost the economy.
Following are some of the government initiatives that will help MSMEs build their business:
Credit support schemes
Government has approved the establishment of The government has also approved the establishment of a INR 50,000-crore fund of funds for selecting MSMEs with high growth with a strong track record and assisting them in listing exchanges. Also, it was recently announced that the majority of start-ups will be eligible under Aatmanirbhar Bharat Abhiyan credit support schemes for additional liquidity and funding to MSMEs.
MSME classification
The definition of an MSME has been revised by the government to include more small businesses in the purview of the category. This will not only give businesses access to benefits but also help them avail exemptions that can greatly impact business operations. These benefits include an exemption from GST registration for businesses that have an annual turnover of less than INR 40 lakh; and the expansion of the ISO reimbursement scheme for MSMEs.
Udhyog Aadhar memorandum
The benefit of registering in this scheme is ease in availing credit, loans, and subsidies from the government. Registration can be done both ways in the online mode or the offline mode. Benefits include exemption from excise and direct taxes, easy loans with low-interest rates, loans with credit guarantee, government subsidies and more. Registered businesses are also eligible to receive financial aid for participation in various foreign expos. These are ideal places to network and showcase products.
Zero defect, zero effect
This model necessitates that goods manufactured for export have to adhere to a certain fixed quality management standards and technology tools to ensure that there is no rejection and waste of production. Registration under this scheme will help MSMEs recognize and adopt the quality standards needed along with new technology.
Incubation
This scheme helps innovators with the implementation of new designs, ideas or products. Under this, 75-80 per cent of the project cost can be financed by the government. This scheme promotes new ideas, designs, products, etc.
Credit-linked capital subsidy scheme
This scheme aims to replace old and obsolete technology with new and upgraded ones for businesses. The capital subsidy is given to the business to upgrade and have better means to do their business. MSMEs can directly approach banks for to avail these subsidies.
Women entrepreneurship
Aimed at supporting women who wish to start their own business, the government provides capital, counselling, training and delivery techniques to these women so that they manage their business and expand it. This scheme comprises initiatives such as Cent Kalyani scheme and Mudra Yojana that offers multiple benefits to get more women into the business ecosystem.
Atal Incubation Centres
The government of India has set up the Atal Innovation Mission (AIM) at NITI Aayog with overarching purpose of promoting a culture of innovation and entrepreneurship in India. Currently, there are 59 Atal Incubation Centres (AIC) in the country. They have been built to provide to end-to-end support for MSMEs, in terms of providing resources and guiding them through their inception journey. AIM will provide a grant-in-aid of up to INR 10 crore for a maximum period of five years to cover the capital and operational expenditures to establish the AIC.
With the support of several government initiatives and programs from VCs and incubators, businesses can expect the financial backup they need to grow online.
