Unit II Entrepreneurial Development

Entrepreneurship development is the process of improving the skills and knowledge of

entrepreneurs through various training and classroom programs. The whole point of
entrepreneurship development is to increase the number of entrepreneurs.

Basically, entrepreneurship development is basically the process of improving the skill set as
well as the knowledge of the entrepreneurs. This can be done through various methods such
as classroom sessions or training programmes specially designed to increase the
entrepreneurial acumen.

Process of Entrepreneurship Development

(i) Clear View of the Objective of the Program

Before you get into training the prospective entrepreneurs, it is very important to have a clear
objective and plan in mind about what the program is going to encompass.

Without a proper plan and direction, the training would not yield the desired results. This
would lead to a loss of time, money, effort and most of all, valuable potential.

(ii) Selecting the Potential Targets

It is important to select the potential targets who are willing to enhance their skills and who
can be identified as the people who have some amount of business acumen. These can be
further divided into two categories- the educated target audience and the uneducated target
audience.

Educated audience refers to the target people who have a decent educational background and
want to be entrepreneurs. These people have the motivation to put their education to use by
starting a venture and working for themselves.

Uneducated audience refers to the people who are not as privileged as others in terms of
education about the market and have the potential to become entrepreneurs. These people are
constantly looking for alternative ways to earn money and support their families. Therefore
they are highly motivated and, given the right training and direction, can prove to be
exceptional entrepreneurs.

(iii) Identifying Local Talents and Markets

The process of entrepreneurship development program can be seen as most effective and
efficient when it is applied in the local markets and on the local entrepreneurs who know
about it. These people understand and absorb the knowledge way more quickly and can apply
it in the current scenario because of which the results of the program can be seen more
quickly and effectively.

(iv) Choosing the Right Location

In India unfortunately, these programs can only be launched where support institutions and
resources are available, but ideally, these programmes should be planned and launched in the
areas where most people are interested and willing to take advantages of these programmes
so that this opportunity can be used most effectively and there is no loss of resources.
(v) Tying up with Institutions

A lot of times these programmes involve tying up with various institutions like universities,
NGO and some private institutions. This is done to give a real-world experience to assist the
program and give the people some idea of the situations in the real world.

(vi) Develop the Entrepreneurship Program as Needed

People and their skill sets are different and develop over time. Thus, it is very important to
keep developing the programs to suit the needs of the people enrolled in it. Moreover, the
focus must be on harnessing their strengths and working to minimize their weaknesses.

(vii) Analyze the Result for Future Development

This is a very important and final step in the process of entrepreneurship development. After
the program has run its course, it is very important to analyze the effectiveness of the
program. This is necessary to ensure that in future more effective programs can be developed.
For this one has to minimize the shortcomings of the existing program.

Entrepreneurship Development, Concept and Significance

Entrepreneurship Development is defined as a process of enhancing the skillset and

knowledge of entrepreneurs regarding the development, management and organization of a
business venture while keeping in mind the risks associated with it. This is carried out
through training programs and sessions which are aimed at accentuating entrepreneurial
acumen. Pursuing this field as a career, you will be working towards facilitating skill
development amongst budding entrepreneurs and assisting them to tackle their struggles with
building their businesses.

Entrepreneurship is the process of turning a concept into a developed product. You might
dream of becoming an entrepreneur or getting a job in the corporate sector. Understanding
the significance, it has can help you decide your career path. In this article, we explore what
entrepreneurship means, the different types, the importance of entrepreneurship, the types and
features of entrepreneurs.

Significance

 To provide information on numerous initiatives undertaken by the different

governments (federal, state, or regional governmental organisations), as well as
various taxes imposed on businesses.

 To foster entrepreneurial traits and behaviours in the next generation of young people
with the aid of appropriate instruction and professional guidance.

 To encourage entrepreneurship and the expansion of small enterprises to create jobs

and opportunities for self-employment.

 To look for and pinpoint the top business possibilities and concepts, both present and
future.

 Develop and implement a variety of programmes to promote entrepreneurship in rural

communities and small towns.

 Encouraging and assisting diverse people in starting their startups and new
enterprises. Consequently, contributes to the economy
  To achieve risk reduction for the nation’s young.

ED Programmes (EDP)

Entrepreneurship Development Programmes (EDP)

As the term itself denotes, EDP is a programme meant to develop entrepreneurial abilities
among the people. In other words, it refers to inculcation, development, and polishing of
entrepreneurial skills into a person needed to establish and successfully run his / her
enterprise. Thus, the concept of entrepreneurship development programme involves
equipping a person with the required skills and knowledge needed for starting and running
the enterprise.

Need for EDPs

That, entrepreneurs possess certain competencies or traits. These competencies or traits are
the underlying characteristics of the entrepreneurs which result in superior performance and
which distinguish successful entrepreneurs from the unsuccessful ones.

Then, the important question arises is: where do these traits come from? Or, whether these
traits are in born in the entrepreneurs or can be induced and developed? In other words,
whether the entrepreneurs are born or made? Behavioural scientists have tried to seek
answers to these questions.

A well-known behavioural scientist David C. McClelland (1961) at Harvard University made

an interesting investigation-cum-experiment into why certain societies displayed great
creative powers at particular periods of their history? What was the cause of these creative
bursts of energy? He found that ‘the need for achievement (n’ ach factor)’ was the answer to
this question. It was the need for achievement that motivates people to work hard. According
to him, money- making was incidental. It was only a measure of achievement, not its
motivation.

In order to answer the next question whether this need for achievement could be induced, he
conducted a five-year experimental study in Kakinada, i.e. one of the prosperous districts of
Andhra Pradesh in India in collaboration with Small Industries Extension and Training
Institute (SIET), Hyderabad.

This experiment is popularly known as ‘Kakinada Experiment’. Under this experiment,

young persons were selected and put through a three-month training programme and
motivated to see fresh goals.

One of the significant conclusions of the experiment was that the traditional beliefs did not
seem to inhibit an entrepreneur and that the suitable training can provide the necessary
motivation to the entrepreneurs (McClelland & Winter 1969). The achievement motivation
had a positive impact on the performance of entrepreneurs.

In fact, the ‘Kakinada Experiment’ could be treated as a precursor to the present day EDP
inputs on behavioural aspects. In a sense, ‘Kakinada Experiment’ is considered as the seed
for the Entrepreneurship Development Programmes (EDPs) in India.

The fact remains that it was the ‘Kakinada Experiment’ that made people appreciate the need
for and importance of the entrepreneurial training, now popularly known as ‘EDPs’, to induce
motivation and competence among the young prospective entrepreneurs.
Based on this, it was the Gujarat Industrial Investment Corporation (GIIC) which, for the first
time, started a three-month training programmes on entrepreneurship development.
Impressed by the results of GIIC’s this training programme, the Government of India
embarked, in 1971, on a massive programme on entrepreneurship development. Since then,
there is no looking back in this front. By now, there are some 686 all-India and State level
institutions engaged in conducting EDPs in hundreds imparting training to the candidates in
thousands.

Till now, 12 State Governments have established state-level Centre for Entrepreneurship
Development (CED) or Institute of Entrepreneurship Development (lED) to develop
entrepreneurship by conducting EDPs. Today, the EDP in India has proliferated to such a
magnitude that it has emerged as a national movement. It is worth mentioning that India
operates the oldest and largest programmes for entrepreneurship development in any
developing country.

The impact of India’s EDP movement is borne by the fact that the Indian model of
entrepreneurship development is being adopted by some of the developing countries of Asia
and Africa. Programmes similar to India’s EDPs are conducted in other countries also, for
example, ‘Junior Achievement Programme’ based on the principle of ‘catch them young’ in
USA and ‘Young Enterprises’ in the U. K.

Objectives of EDP

The major objectives of the Entrepreneurship Development Programmes (EDPs) are to:

(i) Develop and strengthen the entrepreneurial quality, i.e. motivation or need for
achievement.

(ii)Analyse environmental set up relating to small industry and small business.

(iii) Select the product.

(iv) Formulate proposal for the product.

(v) Understand the process and procedure involved in setting up a small enterprise.

(vi)Know the sources of help and support available for starting a small scale industry.

(vii) Acquire the necessary managerial skills required to run a small-scale industry.

(viii) Know the pros and cons in becoming an entrepreneur.

(ix) Appreciate the needed entrepreneurial discipline.

(x) Enable to communicate clearly and effectively.

(xi) Develop a broad vision about the business.

(xii) Make him subscribe to the industrial democracy.

(xiii) Develop passion for integrity and honesty.

(xiv) Make him learn compliance with law.

Problems of Entrepreneurship Development Programmes (EDPs)

Problems of entrepreneurship development programmes (EDPs) are:

1. No Policy at the National Level

Though Government of India is fully aware about the importance of entrepreneurial

development, yet we do not have a national policy on entrepreneurship. It is expected that the
government will formulate and enforce a policy aimed at promoting balanced regional
development of various areas through promotion of entrepreneurship.

2. Problems at the Pre training Phase

Various problems faced in this phase are — identification of business opportunities, finding
& locating target group, selection of trainee & trainers etc.

3. Over Estimation of Trainees

Under EDPs it is assumed that the trainees have aptitude for self employment and training
will motivate and enable the trainees in the successful setting up and managing of their
enterprises. These agencies thus overestimate the aptitude and capabilities of the educated
youth. Thus on one hand the EDPs do not impart sufficient training and on the other financial
institutions are not prepared to finance these risky enterprises set up by the not so competent
entrepreneurs.

4. Duration of EDPs

An attempt is made during the conduct of EDPs to prepare prospective entrepreneurs

thoroughly for the various problems they will be encountering during the setting up and
running of their enterprises. Duration of most of these EDPs varies between 4 to 6 weeks,
which is too short a period to instill basic managerial skills in the entrepreneurs. Thus the
very objective to develop and strengthen entrepreneurial qualities and motivation is defeated.

5. Non-Availability of Infrastructural Facilities

No prior planning is done for the conduct of EDPs. EDPs conducted in rural and backward
areas lack infrastructural facilities like proper class room suitable guest speakers, boarding
and lodging etc.

6. Improper Methodology

The course contents are not standardized and most of the agencies engaged in EDPs are
themselves not fully clear about what they are supposed to do for the attainment of pre-
determined goals. This puts a question mark on the utility of these programmes.

7. Mode of Selection

There is no uniform procedure adopted by various agencies for the identification of

prospective entrepreneurs. Organizations conducting EDPs prefer those persons who have
some project ideas of their own and thus this opportunity is not provided to all the interested
candidates.

8. Non-Availability of Competent Faculty

Firstly there is problem of non-availability of competent teachers and even when they are
available, they are not prepared to take classes in small towns and backward areas. This
naturally creates problems for the agencies conducting EDP.

9. Poor Response of Financial Institutions

Entrepreneurs are not able to offer collateral security for the grant of loans. Banks are not
prepared to play with the public money and hence they impose various conditions for the
grant of loans. Those entrepreneurs who fail to comply with the conditions are not able to get
loan and hence their dream of setting up their own enterprises is shattered. Helpful attitude of
lending institutions will go a long way in stimulating entrepreneurial climate.

Institutions Supporting Small Business enterprise: Central Level, State Level, Other
agencies, Industry associations

Central Level

SSI BOARD

Government of India constituted the Small-Scale Industries Board in 1954 to advice on the
programmes and policies for the development of small-scale sector. This board is also known
as the Central Small Industries Board. The SSIB consists of 50 members including the
representatives of the Central and State Governments, the Reserve Bank of India, the State
Bank of India, State Financial Corporations and non-officials.

Measures include:

(i) Bank credit to artisans, village and cottage industries would be treated as composite term
loan for equipment or working capital or both. But the maximum limit of the credit with a
repayment period or 7 to 10 years or more has been fixed at Rs. 25000 only.

(ii) The rate of interest for all term loans has been brought down to 16 per cent.

(iii) Application forms for credit have been simplified.

(iv) Reserve Bank of India has instructed banks to bifurcate the credit accounts to show
separately the dues of the SSI units and those remaining unpaid for over four months.

KVIC

Khadi and Village Industries Commission was established in 1953 with the primary objective
of developing khadi and village industries and improving rural employment opportunities. Its
wide range of activities include training of artisans, extension of assistance for procurement
of raw materials, marketing of finished products and arrangement for manufacturing and
distribution of improved tools, equipment’s and machinery to producers on concessional
terms.

KVIC provides assistance to Khadi and Village Industries which require low capital
investment and ideally suited for manufacturing utility goods by using locally available
resources. There are many specified village industries such as processing of cereals and
pulses, leather, matches, gur and khandsari, non-edible oils and soaps, bee-keeping, village
pottery, carpentry and blacksmithy etc.
KVIC’s policies and programmes are executed through State Khadi and Village Industries
Boards registered under the Societies Registration Act, 1960 and Industrial Cooperative
Societies registered under State Cooperative Societies Act. Activities involving pioneering
type of work such as developing new industries in hilly, backward and inaccessible areas are
undertaken by KVIC directly.

SIDO (Small Industries Development Organisation)

Small Industries Development Organisation (SIDO) is the apex level organisation set up for
policymaking, coordinating and monitoring agency for the development of small-scale
industries. It maintains a close liaison with government, financial institutions and other
agencies which are involved in the promotion and development of small-scale industrial
units.

Function:

(i) Securing items reserved for production by small-scale industries;

(ii) Assessing the requirements of indigenous and imported raw materials and components for
the small-scale sector and also arranging their supply;

(iii) Collecting data on consumer items which are imported ones and encourage the setting up
of new industrial units by providing them coordinated assistance.

(iv) Preparing model schemes, project reports and other technical literature for prospective
entrepreneurs;

(v) Rendering support for the development of ancillaries.

(vi) Encouraging small units to actively participate in the Government Stores Purchase
Programme.

NSIC National Small Industries Corporation Ltd

NISC was set up in 1955 as a public undertaking. It is engaged in promoting and developing
small- scale industries in the country. For this purpose, it has special schemes to meet the
needs of technocrats, physically handicapped, scheduled castes and scheduled tribe
entrepreneurs.

The main functions of NSIC are as follow:

(i) Supplying machinery on hire purchase basis;

(ii) Procuring Government orders for small-scale units;

(iii) Developing small-scale units as ancillaries to large industries;

(iv) Arranging the marketing of products of small-scale units and promoting exports;

(v) Importing and distributing scarce raw materials, components and parts among actual users
in the small-scale sector;

(vi) Developing prototype of machinery and equipment for transfer of technology and know
how for commercial production;
(vii) Undertaking the construction of industrial estates;

(viii) Providing training in selected trades and technologies through prototype development
and training centers;

(ix) Developing and upgrading technology particularly for projects based on wastes; and

(x) Cooperating with the developing countries in setting up small-scale projects on turnkey
basis.

NSTEDB (National Science & Technology Entrepreneurship Development Board)

Established in 1982 by GOI, is an institutional mechanism to help promote knowledge driven

and technology-intensive enterprises.

Major objectives are:

 Promote and develop high-end entrepreneurship for S&T.

 Manpower as well as self-employment by utilizing S&T infrastructure and by using

S&T methods.

 Facilitate and conduct various informational services relating to promotion of

entrepreneurship.

 Network agencies of support system, academic institutions and R&D organizations to

foster self-employment.

 Using S&T with special focus on backward areas.

 Act as a policy advisory body with regard to entrepreneurship

NPC (National Productivity Council)

 Autonomous institution functioning under the overall supervision of the Ministry of

Industry, GOI

 Primary objective is to act as a catalyst in enhancing the productivity of all sectors of

the economy,

 including industry and agriculture

 Administered by a tripartite Governing Council (GC) which has equal representation

from the government, industry and trade unions

 Active in the field of consultancy and training and has a number of specialized
divisions to provide tailormade solutions to agriculture and industry. These divisions,
manned by trained consultants, deal with issues related to industrial engineering, plant
engineering, energy management, HRD, informal sector, agriculture and so on

 NPC is a member of the Asian Productivity Organization (APO), Tokyo, an umbrella

body of all productivity councils in Asian region.

 To channelise expertise of NPC to small-scale and informal sector, SIDBI has tied-up
with NPC for enhancing technology in small units
NISIET

It was set up in 1956. It runs courses in business management for entrepreneurs and
employees of small-scale industries.

Its main functions are as follows:

(a) Providing training to persons engaged in small business.

(b) Undertaking research programmes in connection with development of small-scale

industries.

(c) Entering into technical assistance agreements with international or other organisations for
provision of services for the development of small-scale industries.

NIESBUD (National Institute for Entrepreneurship and small Business Development)

NIESBUD is an autonomous body under the administrative control of the Office of the
DC(SSI).

NIESBUD established in 1983 by the Ministry of Industry, GOI, as an apex body for
coordinating and overseeing the activities of various institutions/agencies engaged in
Entrepreneurship Development particularly in the area of small industry and business.

The policy, direction and guidance to the institute is provided by its Governing Council
whose chairman is the Minister of SSI. Besides conducting national and international training
programs, the institute undertakes research studies, consultancy assignments, development of
training aids, etc.

IIE

With an aim to undertake training, research and consultancy activities in small and micro
enterprises focusing on entrepreneurship development, the Indian Institute of
Entrepreneurship (IIE) was established in the year 1993 in Guwahati by the erstwhile
Ministry of Industry (now the Ministry of Micro, Small and Medium Enterprises),
Government of India as an autonomous national institute.

The institute began operating from April 1994 with the North East Council (NEC),
Governments of Assam, Arunachal Pradesh and Nagaland and SIDBI as its other
stakeholders.

The policy direction and guidance to the institute is provided by its Board of Management
whose Chairman is the Secretary to Government of India, Ministry of Skill development. The
Governing Council of the institute is headed by Chairman, NEC and the Executive
Committee is headed by the Secretary, Ministry of MSD, Government of India.

Objectives

 To organize and conduct training for entrepreneurship development.

 To evolve strategies & methodologies for different target groups & locations &
conduct field tests.

 To identify training needs and offer training programmers to Government and non-
Government organizations engaged in promoting and supporting entrepreneurship.
  To document and disseminate information needed for policy formulation and
implementation related to self-employment.

 To identify, design and conduct training programmes for existing entrepreneurs.

 To prepare and publish literature related to entrepreneurship and industrial

development.

 To organize seminars, workshops and confer conferences for providing a forum for
interaction and exchange of views by various agencies and entrepreneurs.

 To conduct research for generating knowledge to accelerate the process of

entrepreneurship development.

 To act as a catalyst for development of self-employment/entrepreneurship,

industry/business

 To evolve, design and help in the utilization of various media for creating
entrepreneurship.

EDI

The Entrepreneurship Development Institute of India (EDI), an autonomous body and not-
for-profit institution, set up in 1983, is sponsored by apex financial institutions, namely the
IDBI Bank Ltd, IFCI Ltd. ICICI Ltd and State Bank of India (SBI). The EDI has been
selected as a member of the Economic and Social Commission for Asia and the Pacific
(ESCAP) network of Centres of Excellence for HRD Research and Training. EDI’S mission
is to become a catalyst in facilitating emergence of competent first generation entrepreneurs
and transition of existing SMEs into growth-oriented enterprises through entrepreneurship
education, training, research & institution building. EDI has been spearheading
entrepreneurship movement throughout the nation with a belief that entrepreneurs need not
necessarily be born, but can be developed through well-conceived and well-directed
activities. In consonance with this belief, EDI aims at:

 Creating a multiplier effect on opportunities for self-employment.

 Augmenting the supply of competent entrepreneurs through training.

 Augmenting the supply of entrepreneur trainer-motivators.

 Participating in institution building efforts.

 Inculcating the spirit of ‘Entrepreneurship’ in youth.

 Promoting micro enterprises at rural level.

 Developing and disseminating new knowledge and insights in entrepreneurial theory

and practice through research

 Facilitating corporate excellence through creating intrapreneurs (entrepreneurial

managers).

 Improving managerial capabilities of small-scale industries.

  Sensitizing the support system to facilitate potential and existing entrepreneurs
establish and manage their enterprises.

 Collaborating with similar organisations in India and other developing countries to

accomplish the above objectives.

State Level

DIs

At the State level, the Commissioner/ Director of Industries implements policies for the
promotion and development of small-scale, cottage, medium and large scale industries. The
Central policies for the SSI sector serve as guidelines but each State evolves its own policy
and package of incentives. The Commissioner/ Director of Industries in all the States/UTs,
oversee the activities of field offices, that is, the District Industries Centers (DICs) at the
district level.

DICs

In order to extend promotion of small-scale and cottage industries beyond big cities and state
capitals to district headquarters, DIC program was initiated in May, 1978, as a centrally
sponsored scheme. DIC was established with the aim of generating greater employment
opportunities especially in rural and backward areas in the country. At present DICs operate
under respective Sate budgetary provisions.

DICs extend services of the following nature:

(I) Economic investigation of local resources.

(ii) Supply of machinery and equipment.

(iii) Provision of raw materials.

(iv) Arrangement of credit facilities

(v) Marketing

(vi) Quality inputs

(vii) Consultancy

SFCs

Main objectives are to finance and promote small and medium enterprises in their respective
states for achieving balanced regional growth, catalyze investment, generate employment and
widen ownership base of industry. Financial assistance is provided by way of term loans,
direct subscription to equity/debentures, guarantees, discounting of bills of exchange and
seed capital assistance. SFCs operate a number of schemes of refinance of IDBI and SIDBI
and also extend equity type assistance. SFCs have tailor-made schemes for artisans and
special target groups such as SC/ST, women, ex-servicemen, physically challenged and also
provide financial assistance for small road transport operators, hotels, tourism-related
activities, hospitals and so on. Under Single Window Scheme of SIDBI, SFCs have also been
extending working capital along with term loans to mitigate the difficulties faced by SSIs in
obtaining working capital limits on time.
SIDCs/SIICs

Set up under the Companies Act, 1956, as wholly owned undertakings of the State
governments, act as catalysts in respective states. SIDC helps in developing land providing
developed plots together with facilities like roads, power, water supply, drainage and other
amenities. They also extend assistance to small-scale sector by way of term loans,
subscription to equity and promotional services. 11 out of 28 SIDCs in the country also
function as SFCs and are termed as Twin-function IDCs.

SSIDCs

Established under Companies Act, 1956, as State government undertaking, caters to small,
tiny and village industries in respective states. Being operationally flexible undertakes the
activities like:

(i) Procure and distribution of scarce raw materials.

(ii) Supply of machinery to SSI units on hire-purchase basis.

(iii) Product marketing assistance.

(iv) Construction of industrial estates, allied infrastructure facilities and their maintenance.

(v) Extending seed capital assistance on behalf of State government.

(vi) Providing management assistance to production units

Others

 Industry Association

 Non-Governmental Organizations

 R & D Laboratories

Role of Financial Institutions

Financial institutions include banks, credit unions, asset management firms, building
societies, and stock brokerages, among others. These institutions are responsible for
distributing financial resources in a planned way to the potential users.

There are a number of institutions that collect and provide funds for the necessary sector or
individual. On the other hand, there are several institutions that act as the middleman and join
the deficit and surplus units. Investing money on behalf of the client is another of the variety
of functions of financial institutions.

Role of Financial Institutions

The primary functions of financial institutions of this nature are as follows:

 Accepting Deposits

 Providing Commercial Loans

 Providing Real Estate Loans

  Providing Mortgage Loans

 Issuing Share Certificates

Arrangement of finances
Funding is an essential aspect of any business/company. Entrepreneurs require funds to grow
their businesses/companies. An entrepreneur’s primary responsibility is arranging funds for
the business. A well-funded business grows fast, while a poorly funded business faces
financial challenges. The types of funding entrepreneurs can take for their businesses are
listed below.

Equity Funding

Equity funding means the company owner relinquishes a part of their ownership in exchange
for the funds. It also includes borrowing from friends and family and may extend to Initial
Public Offering (IPO). The business owner has to give up a stake in their company, thus
resulting in the sale of a portion of a company’s equity in return for capital. Equity investors
usually prefer to be involved in the company’s decision-making process.

Preference Share Capital

Preference share capital is a kind of equity funding where the investor receives a fixed return
known as a dividend. Companies issue preference shares to raise capital. It often mandates a
fixed dividend to be given to shareholders yearly for each preferred stock. Shareholders
usually redeem the preference shares after the lapse of the agreed time and receive bulk
payment. The Companies Act 2013 provides that all preference shares should be redeemed
within 20 years. However, these shareholders do not have a voting right in the company.

Debentures

A debenture is an instrument executed by a company acknowledging indebtedness to some

entity or person to secure funds. They provide long-term funding for a company in the form
of debt. A company can issue debentures to raise funds when permitted by its Articles of
Association (AOA). Usually, the debentures of a company are unsecured. However, they pay
an interest rate and are repayable or redeemable on a fixed date.

Business Loans

Companies can always approach a bank or financial institution to obtain a loan. Loans from
banks are a conventional funding option for companies and businesses. Various banks offer
business/corporate loans for different business needs, such as equipment loans, term loans,
working capital loans, asset-backed loans for research and development, etc. The interest rate
and the loan terms may also vary from one bank to another. Some banks might require
collateral for a loan, while some loan schemes may not require collateral.

Government Grants

The Government of India launched the ‘Startup India’ programme, which provides grants to
startups. This programme offers grants like income tax exemption, self-certification under
labour and environmental laws and an 80% rebate in filing patent applications. The
government launched the ‘Startup India Seed Fund Scheme’ last year, which gives funding
support to early-stage startups. The government also started the ‘MUDRA’ loan scheme,
providing collateral-free loans for micro, small and medium enterprises. Apart from that, the
government provides many subsidies and grants to companies in the technological areas and
industries in rural areas.

External Commercial Borrowing

External Commercial Borrowing (ECB) is a debt or loan from a foreign entity. ECB could be
commercial loans, buyers’ credit, suppliers’ credit, or other forms of funding provided by a
supplier, foreign financial institution, or investor. In India, companies can raise funding
through ECBs for various applications, including new projects, import of capital goods,
modernisation of existing projects, etc. In India, ECBs are approved under the approval or
automatic route, similar to Foreign Direct Investment (FDI).

What Is an Angel Investor?

An angel investor provides initial seed money for startup businesses, usually in exchange for
ownership equity in the company.The angel investor may be involved in a series of projects
on a purely professional basis or may be found among an entrepreneur's family and friends.
The investor's involvement may be a one-time infusion of seed money or an ongoing
injection of cash to get a product to market.

Angel investors aren't usually in the loan business. They're putting money into an idea they
like, with the expectation of a reward only if and when the business takes off.

Angel investors are relatively wealthy individuals who are looking for a higher rate of return
than can be found in more traditional investment opportunities. They search for startups with
intriguing ideas and invest their own money to help develop them further.

The Securities and Exchange Commission (SEC) defines an accredited investor as an

individual who has a net worth of $1 million or more in assets or has earned $200,000 in
income for the previous two years, or a couple with a combined income of $300,000.
Applicants must also demonstrate an understanding of sophisticated investment proposals.

What Is Venture Capital (VC)?

Venture capital (VC) is a form of private equity and a type of financing that investors provide
to startup companies and small businesses that are believed to have long-term growth
potential. Venture capital generally comes from well-off investors, investment banks, and any
other financial institutions. Venture capital doesn't always have to be money. In fact, it often
comes as technical or managerial expertise. VC is typically allocated to small companies with
exceptional growth potential or to those that grow quickly and appear poised to continue to
expand.
DIFFERENCE BETWEEN ANGEL INVESTORS AND VENTURE CAPITALISTS