Solution:

What is Seed Capital Assistance?

• One of the constraints faced by the entrepreneurs, especially first-generation or technical entrepreneurs is the lack of resources to meet the minimum promoter’s contribution.

• To help the entrepreneurs overcome the problem, IDBI has come up with a scheme that has gained popularity as the Seed Capital Schemes.

• If the project is coming up in a non-backward area, then the project would not be eligible for subsidy. Hence, the entire amount of the promoter’s contribution would be brought by the contributor himself.

• This would be reduced to the extent of the subsidy if the project is coming up in backward areas like (categories A, B, or C).

• The maximum amount which can be sanctioned is to the the extent of Rs. 5 lacs per project on the fulfillment of certain conditions.

Agencies for Operating the Scheme:

• The scheme is operated through the agency of notified SFCs and SFCs. Assistance under the scheme will also be given directly by IDBI in exceptional cases.

• Projects assisted by commercial banks are also eligible for seed capital assistance. However, the entrepreneurs will have to submit their applications through SFC/SIDC functioning in the region.

Eligibility Criteria:

• To be eligible for assistance the entrepreneurs should be technically or professionally qualified or possess relevant experience or skills either in industry, business, or trade.

The following categories of entrepreneurs are eligible for assistance under the scheme :

• 1. New generation entrepreneurs in the small-scale sector require seed capital of more than Rs. 4 lacs.

• 2. Small scale entrepreneurs who undertake expansion/diversification or modernization.

• 3. Entrepreneurs intending to graduate from the small scale to medium sector for the first time.

• 4. Entrepreneurs intending to set up a project in the medium sector for the first time.

• 5. Entrepreneurs already in the medium sector and intending to undertake diversification for achieving better viability.

• 6. Entrepreneurs seeking additional seed capital to meet project cost overruns caused by factors beyond their control.

• 7. Entrepreneurs intending to take over existing sick or closed units and projects constituted as public/private limited companies or partnership/ proprietary concerns are eligible for assistance.