Steps in Setting up of a Small Business Enterprise:
- Selection of a Project: In order to set up a small-scale industry, a suitable project has to be decided upon. This involves the following;
- Selection of a product or service.
- Selection of location.
- Project feasibility study.
- Business plan preparation.
- Preparing the project profile.
- Decide on the constitution: To start the industry, the promoter has to decide on the constitution of the unit & its organizational structure. There are four major alternatives;
- Sole proprietorship.
- Corporation public / limited company.
The constitution of the unit has to be decided at the initial stages of the project & the necessary formalities should be completed by the time the application for provisional registration certificate is made.
Registration: Small-scale & ancillary unit with investment in plant & machinery upto Rs 1 crore should seek registration with the Directorate of Industries of the concerned State government. Entreprenuer desirous of stating a small-scale industry has to initially obtain a provisional registration certificate. A provisional registration certificate. A provisional registration certificate is the initial registration for starting a SSI. It enables the entrepreneur to initiate necessary steps in order to bring the unit into existence. The entrepreneur should apply & obtain the provisional registeration certificate after selection of the project & the setting of location of the unit.
Once the unit goes into production, the provisional registration certificate has to be converted into a permanent registeration certificate. An SSI unit is issued permanent registration certificate when it goes into commercial production.
Obtain Clearance from department as applicable: A number of clearances are required from different authorities depending on the type of industry & location of the unit.
Agricultural land conversion.
Urban land ceiling clearance.
Building plan approval.
Pollution Control Board (PCB) clearance.
Sales tax registration.
Central Excise registration.
Bureau of Indian Standard (BIS) certificate.
Other licences & approvals as per the type of the SSI unit.
Arrange of land/shed: A suitable industrial site or a ready industrial shed is required to start an industry. The promoters should consider taking an industrial site & constructing as per their requirement. Alternatively, they can also consider taking a ready industrial shed on rental or ownership basis.
Arrange for plant & machinery: The plant & machinery required for the project could be purchased from manufacturers or dealers. Plant & machinery could also be taken from National Small Industries Corporation on hire purchase scheme which is operated by the government. In a Hire purchase scheme of NSIC, the required plant & machinery will be the asset of NSIC & they will lease it to the promoters of the industrial unit. As per the scheme, once the lease installment is paid, the asset will become the property of the industrial unit. The Hire purchase scheme requires Ernest money deposit to be brought in by the promoters of the unit.
Arrange for Infrastructure: The main infrastructure facilities required for the SSI unit are land or shed for the project, power connection, water supply & telephone facility. At the District level, Single Window agencies have been set up to provide clearance for various infrastructure & other facilities for the tiny & small-scale industries.
The main task of single window agencies is to review the position regarding the problems faced by entrepreneurs & existing SSI within the district & to do such other work as may help promotion of industries.
Prepare the Project Report: The entire project planning is summarized in a written document called project report. It serves as the base for feasibility studies & actual execution of the project. The report is useful to the entrepreneur for planning & implementing the project.
It is also essential for obtaining finance & other clearance for the project. The project report gives a detailed insight of the project & also indicates the Techno-Economic viability of the project.
Apply & Obtain Finance: Small scale units can obtain finance for their project under two categories. They are;
Working Capital loan.
Term loan: The term loans are generally taken tor the purchase of fixed assets. They can be availed from Commercial Banks & State Financial Corporation.
The extent of loan depends on the project cost & the entrepreneurs background. The repayment is generally spread over a period of 5 to 8 years.
Working Capital Loan: Working capital is required for raw material purchase, & meeting the day to day expenses. The commercial banks provide working capital loans. The security for such loans are hypothecation of material, book debts & bills raised for sales.
Implement the Project & obtain final Clearance: After obtaining the various licenses, clearance & infrastructure facilities the entrepreneur has to take the actual step for implementation.
The following major activities have to be undertaken for implementation.
Order for machinery.
Arrange for raw material
Erection & commissioning.
Obtain final clearance.
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