SIDBI Launches Startup Assistance Scheme
It will support the startups financially and provide them relief
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While the government is tracking the Covid-19 cases in the country and is planning to increase the lockdown across the country, startups across the country are facing cash flow issues leading to layoffs and cost-cutting. Small Industries Development Bank of India (SIDBI) has introduced a financial assistance scheme called COVID-19 Startup Assistance Scheme (CSAS) to ease the liquidity issues faced by the startups across the country. Industry sees this step as an interim arrangement by the government-backed financial institution for startups. This is due to the Covid-19 crisis which is expected to stay for another 50-60 days, as per the industry.
Under CSAS, startups can take a loan of upto Rs 2 crore with 36 months of tenure including the 12 months moratorium. The criteria specified by the development bank is that the startups which have positive unit economics are eligible to apply for the loan. The loan shall be provided at an interest rate of 10.5% per annum wherein the founder should have invested some capital in the startup. However, as per reports, Indian Private Equity and Venture Capital Association (IVCA) has requested the bank to ease the criteria so that more startups can apply for the loan during the crisis prevailing in the country. The association fetched out the request as a larger number of startups shall not come under the purview of the scheme, reports informed.
As per reports, the startup ecosystem is trying to push the government to provide financial relief to the startups in the ecosystem. Ashish Fafadia, Partner, Blume Ventures said," The scheme is a proactive measure by the SIDBI leadership and will be helpful for startups."
He added, "To make sure that the scheme truly benefits the startup ecosystem, there are certain terms that the industry is requesting SIDBI to modify / remove. If those conditions continue to exist, there will be a large number of startups that may be pushed out from leveraging this scheme."
In the last few days, various startups including Acko, Bounce, MakeMyTrip and few others have laid off employees and taken pay cuts to deal with the current situation. Experts confirm that startups among others are being hit drastically by the crisis. However, the industry will hit the bottom but will soon sour high after the crisis ends.