Section 20
शब्दकोश
The words bankers, accountants and officials use — explained in plain language with a small example. Every legal limit links to its official source.
199 terms
A buyer must pay a micro or small supplier within the agreed period, and never later than 45 days from accepting the goods or service.
Under sections 15 and 16 of the MSMED Act, 2006, late payment makes the buyer liable for compound interest with monthly rests at three times the RBI bank rate. If a factory accepts ₹4 lakh of castings from a micro unit on 1 June, it must pay by 16 July at the latest. The supplier can file a case on MSME Samadhaan.
See alsoMSME SamadhaanSection 43B(h) (MSE payment rule)Receivables (debtors)/schemes/msme-samadhaan-delayed-payments →/schemes/section-43bh-msme-payment →Source: MSMED Act, 2006 (India Code), sections 15 and 16
A central scheme giving 3% interest subvention on loans up to ₹2 crore for post-harvest and farm infrastructure.
Warehouses, cold stores, sorting units and similar projects qualify for up to 7 years; the government also pays the CGTMSE fee on loans up to ₹2 crore, and the promoter brings at least 10%. An FPO building a ₹1.5 crore warehouse pays 3% less interest each year. New sanctions may be on hold, so check status.
See alsoInterest subventionCGTMSENABARDAgriculture Infrastructure Fund (AIF) →Source: DA&FW: Agriculture Infrastructure Fund, revised scheme guidelines (Sep 2024)
The company’s rule book on shares, directors, meetings and decisions.
AOA covers how shares are transferred, how directors are appointed and how votes work. Two founders holding 50:50 can write a rule here for breaking a deadlock. It can be changed later by a special resolution.
See alsoMOA (memorandum of association)Private limited companyBuilding Business Services →
The government authority that promotes exports of agricultural and processed food products.
Exporters of fruits, vegetables, basmati, processed foods and similar items register with APEDA and get RCMC. It also funds infrastructure, quality and market development. A mango grower group can ship to the Gulf through an APEDA-registered packhouse.
See alsoRCMC (Registration-cum-Membership Certificate)Export promotion council (EPC)Import & Export →/schemes/apeda-financial-assistance-scheme →
B2B means selling to other businesses; B2C means selling directly to consumers.
B2B orders are bigger but come with credit periods; B2C sales are small but paid at once. A spice grinder supplying 500 kg to hotels is B2B; selling 100 g packets in a shop is B2C. Many units do both.
See alsoDistributorOnline marketplaceBusiness Encyclopedia →
A subsidy kept in a bank deposit and adjusted against your loan only after a lock-in period.
With a back-ended subsidy, you pay interest on the full loan until the subsidy is adjusted. Under PMEGP the margin money subsidy is held for a set period and then credited to the loan if the unit is running. Plan cash flow for full EMIs till then.
See alsoCredit-linked subsidyPMEGPPrime Minister's Employment Generation Programme (PMEGP) →
A snapshot on one date of what the business owns and what it owes.
Assets (machines, stock, cash, money due) must equal liabilities (loans, supplier dues) plus the owner’s capital. If a unit owns ₹25 lakh of assets and owes ₹15 lakh, the owner’s stake is ₹10 lakh. Lenders read it to judge strength.
See alsoProfit and loss accountCurrent ratioBanking & Finance →
A bank’s promise to pay a third party if you fail to meet a payment or contract.
Buyers and government departments ask for bank guarantees for tenders, advances or performance. A contractor may give a ₹2 lakh performance guarantee for a road job. The bank usually asks you to keep a margin deposit against it.
See alsoLetter of credit (LC)EMD (earnest money deposit)Banking & Finance →
The shipping line’s receipt for goods loaded on a ship, which also acts as the title to the goods.
Under an LC or documentary collection, the buyer gets the goods only by presenting the original B/L. Air shipments use an airway bill instead. Check names, ports and descriptions carefully before it is issued.
A full list of materials and quantities needed to make one unit of a product.
The BOM is the base of your costing. For one school bag: 0.8 m of fabric, two zips, foam, thread and a label, costing ₹140 together. Update it when supplier prices change.
The bill issued instead of a tax invoice when no GST is charged, such as by composition dealers.
Composition dealers and sellers of exempt goods issue a bill of supply with no tax shown. A composition grocery selling ₹2,000 of goods gives one. The buyer cannot claim ITC on it.
See alsoTax invoiceGST composition schemeBuilding Business Services →
Certification from the Bureau of Indian Standards that a product meets the Indian Standard, shown by the ISI mark.
For many products BIS is voluntary, but where a Quality Control Order applies it is compulsory. A maker of electric irons must hold a BIS licence before selling. Factory testing facilities are checked before grant.
The records of all sales, purchases, cash, bank and expenses that a business keeps.
Books include the cash book, bank book, sales and purchase registers, ledger and stock register. A small unit can keep them in simple accounting software. Clean books make loans, GST and tax filing much easier.
The name, look and promise by which buyers recognise and trust your product.
A brand lets you charge more than unbranded goods. Loose turmeric may sell at ₹180 a kilo while a trusted packed brand gets ₹260. Register the trademark early.
See alsoTrademarkMRP (maximum retail price)Business Encyclopedia →
The sales level at which income exactly covers all costs, with no profit and no loss.
Break-even sales = fixed costs ÷ contribution per unit. If a candle unit has fixed costs of ₹30,000 a month and earns ₹6 over raw material on each candle, it must sell 5,000 candles a month to break even. Every candle after that adds profit.
See alsoFixed costVariable costContribution marginBanking & Finance →Calculators →
How much of a plant’s full output it actually produces, as a percentage.
New units rarely run full in year one. A DPR may assume 60% in year one, 70% in year two and 80% after that. If an oil mill can crush 10 tonnes a day but crushes 6, utilisation is 60%.
See alsoBreak-even pointDPR (detailed project report)Building Business Services →
Spending on long-life assets such as machines, buildings or vehicles.
Capex is recorded as an asset and written off through depreciation. Buying a ₹4 lakh packing machine is capex; the electricity it uses is opex. Capital subsidies are usually calculated on eligible capex.
See alsoOperating expenditure (opex)Fixed capitalBanking & Finance →
A grant equal to a share of what you spend on machines, building or other fixed assets.
A 35% capital subsidy on ₹10 lakh of eligible assets is ₹3.5 lakh, subject to the scheme’s cap. Land is often excluded. The scheme rules decide which costs count.
See alsoSubsidyBack-ended subsidyCredit-linked subsidySchemes & Subsidies →
A running bank account that lets you withdraw up to a set limit and pay interest only on what you use.
CC is given against stock and receivables; OD is often given against a deposit, property or the business’s turnover. With a ₹5 lakh CC limit, if you use ₹2 lakh for 10 days you pay interest only on ₹2 lakh for 10 days. It is renewed every year.
See alsoWorking capitalDrawing powerNPA (non-performing asset)Banking & Finance →
The actual money coming into and going out of the business in a period.
Profit and cash are not the same: a sale on 60 days credit is profit today but cash only later. A trader who books ₹2 lakh profit but has ₹3 lakh stuck with buyers may still be unable to pay rent. Track cash weekly.
See alsoWorking capitalProfit and loss accountBanking & Finance →
A document that certifies the country where goods were made, needed to claim lower duty in trade agreements.
Preferential certificates under free trade agreements are issued online through the government’s common digital platform. A UAE buyer may pay lower import duty on Indian goods if the exporter gives a valid one. The goods must meet the agreement’s origin rules.
A government-backed trust that guarantees bank loans to micro and small enterprises so they need no collateral.
The Credit Guarantee Fund Trust for Micro and Small Enterprises covers loans up to ₹10 crore per borrower, usually 75% to 90% of the amount in default. Only the bank applies. If a ₹40 lakh loan is covered and goes bad, CGTMSE pays the bank most of the loss.
See alsoCollateral-free loanGuarantee feeCollateral securityCredit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) →Banking & Finance →Source: CGTMSE: extent of guarantee cover
A risk rank from 1 to 10 that TransUnion CIBIL gives to businesses with a loan history.
CMR-1 to 3 is low risk, CMR-4 to 6 medium and CMR-7 to 10 high risk. A new firm with no borrowing has no CMR, so the bank looks at the promoter’s personal score instead. Paying your cash credit interest on time improves it.
See alsoCredit score (CIBIL score)Banking & Finance →Source: SIDBI-TransUnion CIBIL MSME Pulse, Aug 2022 (CMR bands)
A price term where the seller pays for goods, sea freight and insurance up to the buyer’s port.
Under CIF the risk still passes to the buyer once goods are loaded, even though the seller pays freight. A ₹50 lakh FOB shipment might be quoted ₹53 lakh CIF Jebel Ali. Quote CIF only when you can get good freight rates.
A group of similar units in one area that the government helps with shared facilities such as testing labs or common machines.
Under the MSE Cluster Development Programme, units form a special purpose vehicle and get a grant for a common facility centre. Fifty brass units in one town can share a costly polishing plant. It suits products already made by many units nearby.
See alsoSFURTIODOP (One District One Product)/schemes/mse-cdp →
A set of past and projected financial tables that banks ask for before a loan.
CMA (credit monitoring arrangement) data shows sales, profit, stock, debtors and loans for past years and the next few years in a fixed bank format. A unit asking for a ₹40 lakh cash credit limit usually files it with its last audited accounts. Banks use it to size working capital.
See alsoDPR (detailed project report)Cash credit (CC) / Overdraft (OD) limitBanking & Finance →Building Business Services →
Extra security, such as land, a house or a deposit, given to the bank besides the asset bought with the loan.
Banks may sell collateral if the loan is not repaid. RBI bars banks from taking collateral for micro and small enterprise loans up to ₹20 lakh. For a ₹35 lakh loan the bank may ask for your house papers or cover the loan under CGTMSE instead.
See alsoPrimary securityCGTMSECollateral-free loanBanking & Finance →/schemes/rbi-collateral-free-mse-loans →Source: RBI Master Direction: Lending to MSME Sector (updated 9 Feb 2026)
A loan given without asking for land, house or other extra security.
Under the RBI MSME Master Direction, banks must not take collateral for loans up to ₹20 lakh to micro and small enterprises, and may go up to ₹25 lakh by internal policy for good borrowers. A potter seeking ₹6 lakh for a kiln should not be asked for land papers.
See alsoCollateral securityCGTMSEMUDRA loan (PMMY)/schemes/rbi-collateral-free-mse-loans →Banking & Finance →Source: RBI Master Direction: Lending to MSME Sector (updated 9 Feb 2026)
Having another factory make your product, to your specification and under your brand.
Contract manufacturing lets a brand start without its own plant. A new shampoo brand can order 5,000 bottles from a licensed maker and focus on sales. Check that the maker holds the needed licences, and protect your formula with a contract.
What each sale leaves after its variable cost, to pay fixed costs and then profit.
Contribution = selling price − variable cost. A ₹50 packet with ₹30 variable cost gives ₹20 contribution. It tells you how many units you must sell to cover rent and wages.
The number of days a seller allows the buyer before payment is due.
Longer credit wins orders but ties up your cash. A 30-day credit on ₹10 lakh monthly sales means about ₹10 lakh always stuck with buyers. For supplies to buyers from micro and small units, the law caps it at 45 days.
See alsoReceivables (debtors)45-day payment ruleBanking & Finance →Source: MSMED Act, 2006 (India Code), sections 15 and 16
A three-digit number from a credit bureau that shows how reliably a person has repaid loans.
TransUnion CIBIL, Equifax, Experian and CRIF High Mark are the credit bureaus. Banks check the promoter’s score before a business loan; a late credit-card bill or missed EMI pulls it down. Check your own report before you apply for a loan.
See alsoCIBIL MSME Rank (CMR)NPA (non-performing asset)EMI (equated monthly instalment)Banking & Finance →
A subsidy you get only if part of the project is funded by a bank loan.
Schemes such as PMEGP and PMFME pay the subsidy into your loan account, so you must take a term loan. If you fund a ₹12 lakh unit entirely from savings, you usually cannot claim it. The bank sends the claim for you.
See alsoCapital subsidyBack-ended subsidySchemes & Subsidies →
Current assets divided by current liabilities: a test of short-term safety.
A current ratio above 1 means you have more short-term assets than short-term dues. A shop with ₹8 lakh of stock, cash and receivables against ₹5 lakh owed has a ratio of 1.6. Banks check it before setting a cash credit limit.
A licensed agent who files customs documents and clears goods at ports and airports for importers and exporters.
Most small exporters use a broker rather than file themselves. Charges per shipment vary, so compare quotes. Give the broker correct HS codes and values, because errors fall on you.
See alsoShipping billImport & Export →
Post office export centres that help small sellers and artisans export parcels with simple paperwork.
The post office helps with online customs filing and booking. A weaver selling a ₹6,000 stole to a buyer in Canada can ship it from a nearby centre. It suits small e-commerce exports.
See alsoIEC (Importer Exporter Code)Online marketplace/schemes/ecommerce-exports-dak-ghar-niryat-kendra →
How many times the business’s yearly cash earnings cover its yearly loan instalments and interest.
DSCR = (net profit + depreciation + interest) ÷ (instalments + interest) for the year. If a unit earns ₹3 lakh this way and owes ₹2 lakh in the year, DSCR is 1.5. Banks look for an average comfortably above 1 in the DPR.
See alsoTerm loanEMI (equated monthly instalment)EBITDABanking & Finance →Building Business Services →
Borrowed money compared with the owner’s money in the business.
Debt-equity = total loans ÷ owner’s equity. A unit with ₹12 lakh of loans and ₹4 lakh of equity has a ratio of 3:1. A high ratio means more risk; lenders set their own comfort level.
See alsoEquity (owner’s capital)Debt service coverage ratio (DSCR)Banking & Finance →
The average number of days buyers take to pay you.
Debtor days = receivables ÷ yearly credit sales × 365. A unit with ₹6 lakh owed and ₹36 lakh yearly credit sales has about 61 debtor days. Watch this number every month.
See alsoReceivables (debtors)Working capital cycleBanking & Finance →
The yearly fall in the value of a machine or building, counted as a cost in your accounts.
Depreciation spreads the cost of an asset over its working life. A ₹5 lakh machine expected to last 10 years can be charged at ₹50,000 a year in a simple straight-line method. It lowers book profit but no cash leaves the business; tax rules set their own rates.
See alsoFixed capitalProfit and loss accountBanking & Finance →
A partner of an LLP who is responsible for its legal filings and compliance.
Every LLP must have at least two designated partners who are individuals, one resident in India. They need a DIN and sign the LLP’s filings. Missing filings lead to penalties on them.
See alsoLLP (limited liability partnership)DIN (Director Identification Number)Building Business Services →Source: LLP Act, 2008 (India Code), sections 6 and 7
The Directorate General of Foreign Trade, which runs India’s Foreign Trade Policy and issues IEC and export scheme benefits.
DGFT works under the Ministry of Commerce and has regional offices in many cities. Exporters use its portal for IEC, authorisations and certificates. Its Niryat Bandhu programme gives free guidance to new exporters.
See alsoIEC (Importer Exporter Code)RoDTEPForeign Trade Policy (FTP)Import & Export →
The district office of the state industries department that helps new units with schemes, approvals and guidance.
The DIC general manager’s office forwards PMEGP and state scheme applications to banks and sanctions some state incentives. A first-time founder can walk in with a project idea and ask which schemes fit. Services are free.
See alsoPMEGPODOP (One District One Product)Udyam registration/districts →States & districts →
A unique number MCA gives to every company director and LLP designated partner.
A DIN stays with the person for life, across all companies. First-time directors usually get it within the company incorporation form. Each year the director confirms KYC to keep it active.
See alsoDSC (digital signature certificate)Private limited companyDesignated partnerBuilding Business Services →
The actual release of sanctioned loan money, often paid directly to the supplier.
Sanction is approval; disbursement is money moving. For a ₹7 lakh machine loan, the bank may pay the machine maker directly against the invoice. Subsidy claims usually start only after disbursement.
A business that buys from a maker in bulk and supplies retailers in an area.
Distributors bring reach and collect from shops, for a margin. A biscuit brand may give a distributor 8% to cover 200 shops in a district. Agree on credit, returns and territory in writing.
See alsoB2B and B2CMRP (maximum retail price)Business Encyclopedia →
Government recognition as a startup under Startup India, which unlocks tax and procurement benefits.
Under the framework revised in Feb 2026, an entity qualifies within 10 years of incorporation (20 for deep tech) with turnover not above ₹200 crore in any year (₹300 crore for deep tech), if it works on innovation. Eligible forms include private limited company, registered partnership, LLP and some cooperatives. A two-year-old agri-tech LLP with ₹3 crore turnover can apply free online.
See alsoPrivate limited companyLLP (limited liability partnership)/schemes/startup-india-dpiit-recognition →Source: PIB, 5 Feb 2026: Government revises startup recognition framework
A full written plan of a project with costs, finance, sales, profit and loan repayment, used by banks and schemes.
A good DPR shows project cost, means of finance, capacity, sales and price assumptions, profit and loss for 5 to 7 years, cash flow, DSCR and break-even. A ₹25 lakh flour mill needs one for the bank and for PMEGP. Numbers must be realistic, because the bank will check them.
See alsoProject costMeans of financeDebt service coverage ratio (DSCR)Break-even pointBuilding Business Services →Banking & Finance →
The amount you may actually draw from a cash credit limit, worked out from current stock and receivables.
Drawing power = (stock + eligible receivables) minus the bank’s margin. If you hold ₹6 lakh of stock and the bank keeps a 25% margin, drawing power is ₹4.5 lakh, even if the sanctioned limit is ₹5 lakh. You file a monthly stock statement to keep it updated.
See alsoCash credit (CC) / Overdraft (OD) limitInventory (stock)Banking & Finance →
An electronic signature, usually on a USB token, used to sign online government filings.
MCA forms, some GST and income tax filings and e-tenders need a DSC. It is issued by licensed certifying authorities and is valid for one to three years. Keep the token safe; it is your legal signature.
See alsoDIN (Director Identification Number)ROC (Registrar of Companies)Building Business Services →
A refund of customs and central excise duties paid on imported or local inputs used in exported goods.
Most exporters claim the All Industry Rate notified by the Finance Ministry, claimed through the shipping bill. A garment exporter using imported buttons and zips gets part of that duty back. Rates are set per tariff item.
A GST invoice registered on the government invoice portal, which gives it a unique number and QR code.
E-invoicing is compulsory for businesses above a turnover limit set by CBIC; smaller firms may issue normal invoices. Once registered, the invoice details flow into GST returns automatically. Check the current limit on the GST portal before your turnover grows.
An online document needed to move goods worth more than ₹50,000 in one consignment.
Under Rule 138 of the CGST Rules, a registered person must generate an e-way bill before moving a consignment worth over ₹50,000. A trader sending ₹80,000 of utensils by truck to the next district generates it on the e-way bill portal and gives the number to the driver. Goods without it can be stopped and fined.
See alsoGST (Goods and Services Tax)Tax invoiceBuilding Business Services →Source: CBIC: CGST Rules, Rule 138 (e-way bill)
Earnings before interest, tax, depreciation and amortisation: the cash profit from operations.
EBITDA shows how much the business itself earns, before loan and tax decisions. A unit with ₹6 lakh net profit, ₹2 lakh interest, ₹1 lakh tax and ₹1.5 lakh depreciation has EBITDA of ₹10.5 lakh. Lenders use it to judge repayment capacity.
See alsoDebt service coverage ratio (DSCR)Net marginBanking & Finance →
Insurance from ECGC Ltd that protects exporters if a foreign buyer does not pay.
ECGC covers buyer default and political risks such as war or currency blocks. Its Small Exporters Policy is for exporters with expected yearly exports up to ₹5 crore (₹500 lakh). If a buyer in Europe defaults on a ₹10 lakh shipment, a covered exporter can claim most of the loss.
See alsoLetter of credit (LC)FOB (Free On Board)Import & Export →Source: ECGC: Small Exporters Policy
A short training course on running a business, required by some schemes before the loan is released.
PMEGP beneficiaries must complete EDP training, offered online or at training centres. It covers costing, accounts, marketing and bank rules. Finishing it early avoids delay in getting the first loan instalment.
See alsoPMEGPPrime Minister's Employment Generation Programme (PMEGP) →Business Basics A–Z →
A deposit bidders pay with a tender to show they are serious; it is returned if they lose.
If you win and back out, the EMD can be forfeited. A tender worth ₹20 lakh may ask for a ₹40,000 EMD. Registered MSEs and recognised startups are often exempt.
See alsoBank guaranteeGeM (Government e-Marketplace)Tender/schemes/public-procurement-policy-mse →
The fixed monthly payment that repays a loan with interest.
Each EMI has an interest part and a principal part; early EMIs are mostly interest. A ₹5 lakh loan at 10% a year over 5 years has an EMI of about ₹10,600. Missing EMIs hurts your credit score.
See alsoTerm loanDebt service coverage ratio (DSCR)NPA (non-performing asset)Banking & Finance →Calculators →
A scheme that lets exporters import machinery at zero customs duty in return for an export obligation.
Under FTP 2023 the exporter must export goods worth six times the duty saved within six years. If ₹10 lakh of duty is saved on a weaving machine, exports worth ₹60 lakh must follow. Missing the obligation means paying the duty with interest.
See alsoAdvance AuthorisationCapital expenditure (capex)/schemes/epcg →Source: DGFT: Foreign Trade Policy 2023, Chapter 5 (EPCG)
A retirement savings scheme run by EPFO, to which employer and employee both contribute each month.
EPF registration becomes compulsory once an establishment reaches the employee count set in the EPF law. A workshop that grows to that size must register and deposit contributions every month. Check the current rules on the EPFO site.
The owner’s own money in the business, plus profits kept in it.
Equity carries the first loss and has no fixed repayment. If you put ₹3 lakh of savings into a shop and leave ₹1 lakh of profit in it, your equity is ₹4 lakh. More equity makes banks more comfortable.
See alsoDebt-equity ratioMargin money (own contribution)Banking & Finance →
A health and social insurance scheme run by ESIC for workers, funded by employer and employee contributions.
ESI covers medical care, sickness pay and maternity benefit for workers below a wage limit in covered areas. A garment unit in a notified area that reaches the set employee count must register. Workers then get treatment at ESI hospitals.
An industry body backed by the government that helps exporters of a product group with RCMC, fairs and market information.
There are councils for engineering goods, textiles, leather, chemicals, handicrafts and more. A small brass exporter joins EPCH to show products at international fairs. Membership fees depend on export size.
See alsoRCMC (Registration-cum-Membership Certificate)APEDAImport & Export →
A licence from the state factories department for premises where manufacturing uses workers above legal limits.
The factories law sets safety, health and welfare rules, and the plan of the building may need approval first. A plastic moulding unit that crosses the worker limit must get this licence. Check your state’s current threshold and process.
See alsoPollution consent (CTE and CTO)Fire NOCStates & districts →
Using or selling the oldest stock first.
FIFO cuts waste in food, medicine and anything with an expiry date. A dairy shop puts new curd behind old curd on the shelf. It is also a method of valuing stock in accounts.
The financial year runs 1 April to 31 March; income tax used to call the following year the assessment year.
Accounts, GST and loan papers follow the April–March year. Income earned from April 2025 to March 2026 is FY 2025-26. The Income-tax Act, 2025, in force from 1 Apr 2026, uses the term "tax year", so check which term a form uses.
A no-objection certificate from the fire department that a building meets fire-safety rules.
Need depends on building height, area and use. A cold store, hotel or factory with stored fuel usually needs one. Extinguishers, exits and alarms are checked before it is issued.
Money spent on things that last many years, such as land, building and machines.
Fixed capital buys assets you use for years, not stock you sell. A flour mill that spends ₹12 lakh on a shed and ₹8 lakh on a chakki has ₹20 lakh of fixed capital. It is usually funded by your own money plus a term loan.
See alsoCapital expenditure (capex)Term loanProject costBanking & Finance →
A cost that stays the same whether you sell a little or a lot, like rent or salaries.
Fixed costs must be paid even in a slow month. A shop paying ₹15,000 rent and ₹20,000 salary has ₹35,000 of fixed cost every month. Keeping fixed costs low lowers your break-even point.
A price term where the seller pays all costs until goods are loaded on the ship; the buyer pays freight and insurance after that.
Export benefits such as RoDTEP are calculated on FOB value. If you quote rice at ₹50 lakh FOB Kandla, your price covers goods, packing, inland transport and port loading. Freight to Dubai is the buyer’s cost.
See alsoCIF (Cost, Insurance and Freight)IncotermsRoDTEPImport & Export →
The government’s policy setting rules and incentive schemes for exports and imports.
FTP 2023 has no fixed end date and is updated through DGFT notifications. It covers schemes such as RoDTEP, Advance Authorisation and EPCG. Check the latest notification before planning an export benefit.
See alsoDGFTRoDTEPEPCG (Export Promotion Capital Goods)/schemes/foreign-trade-policy-2023 →Import & Export →
A registered company or cooperative owned by farmers that buys inputs and sells produce together.
FPOs give small farmers bargaining power and access to schemes and credit. Three hundred onion growers can form an FPO, build a storage shed under AIF and sell in bulk. Many schemes treat FPOs as eligible applicants.
See alsoNABARDAgriculture Infrastructure Fund (AIF)Self-help group (SHG)Schemes & Subsidies →Banking & Finance →
A treaty between countries that cuts or removes import duties on each other’s goods.
India has agreements with the UAE, Australia, ASEAN, Japan, Korea, EFTA countries, the UK and others. Duty cuts depend on the product’s HS code. Check the agreement schedule before pricing an export.
The basic food-safety registration for food businesses with turnover up to ₹1.5 crore a year.
From 1 Apr 2026 FSSAI raised the registration band to turnover up to ₹1.5 crore (it was ₹12 lakh). A home bakery or tiffin service selling ₹30 lakh a year needs only registration, applied for online on FoSCoS. Some kinds of food business need a licence regardless of turnover, so check the eligibility list.
See alsoFSSAI state and central licenceHACCPBuilding Business Services →Source: FSSAI order of 13 Mar 2026: revised turnover thresholds for registration and licences from 1 Apr 2026
The food-safety licence needed above ₹1.5 crore turnover: state licence up to ₹50 crore, central licence above that.
Under the FSSAI order effective 1 Apr 2026, turnover above ₹1.5 crore and up to ₹50 crore needs a state licence and above ₹50 crore a central licence. Importers and some other kinds of business need a central licence whatever their size. A namkeen maker selling ₹3 crore a year needs a state licence.
See alsoFSSAI registrationBuilding Business Services →Source: FSSAI order of 13 Mar 2026: revised turnover thresholds for registration and licences from 1 Apr 2026
The government’s online marketplace where ministries, departments and PSUs buy goods and services.
A seller registers with PAN, lists products and gets orders or joins bids. A small furniture maker can sell office chairs to a district hospital through GeM. Udyam-registered MSEs and DPIIT startups get relaxations in many bids.
See alsoPublic Procurement Policy for MSEsEMD (earnest money deposit)L1 (lowest bidder)/schemes/gem-seller-onboarding →Source: GeM: Seller FAQs
Sales minus the direct cost of the goods sold, shown as a share of sales.
Gross margin shows how much your product itself earns before rent, salaries and interest. A dairy selling ₹1 lakh of paneer that cost ₹70,000 in milk and labour has ₹30,000 gross profit, a 30% gross margin.
The single indirect tax charged on most sales of goods and services in India.
GST is collected at each stage of sale, and each business deducts the GST it paid on purchases. A furniture maker who charges ₹18,000 GST on a sale and paid ₹10,000 GST on wood and hardware deposits only ₹8,000. Rates depend on the item’s HSN or SAC code.
See alsoGSTINInput tax credit (ITC)GST registration thresholdBuilding Business Services →
A simple GST option for small businesses that pay a low flat rate on turnover and file fewer returns.
Goods suppliers with turnover up to ₹1.5 crore in the previous year can opt in; a separate composition option at 6% covers service providers up to ₹50 lakh (from 1 Apr 2019). You cannot charge GST to buyers, cannot claim ITC and cannot sell to other states. A small kirana with ₹60 lakh of sales may find it simpler.
See alsoGST (Goods and Services Tax)Input tax credit (ITC)Bill of supplyBuilding Business Services →Source: PIB / GST Council, 10 Jan 2019: decisions of the 32nd GST Council meeting (thresholds and composition, from 1 Apr 2019)
The yearly turnover above which a business must register under GST.
From 1 Apr 2019 the GST Council set two limits for goods suppliers, ₹40 lakh or ₹20 lakh, each state choosing one; for service providers it stays ₹20 lakh (₹10 lakh in special category states). Inter-state sellers of goods and some others must register whatever their turnover; since 1 Oct 2023 a small goods seller selling online only within their own state can use a GST enrolment number on PAN instead. A tailor in Lucknow with ₹15 lakh of sales need not register unless one of those rules applies.
See alsoGST (Goods and Services Tax)GST composition schemeBuilding Business Services →Source: PIB / GST Council, 10 Jan 2019: decisions of the 32nd GST Council meeting (thresholds and composition, from 1 Apr 2019)
The 15-character GST registration number given to each registered business in each state.
The GSTIN starts with the two-digit state code, followed by the business’s PAN. A firm with units in Uttar Pradesh and Bihar holds two GSTINs. It must appear on every tax invoice you issue.
See alsoGST (Goods and Services Tax)PAN (Permanent Account Number)Building Business Services →
The GST return in which a registered business reports its sales invoices.
What you file in GSTR-1 shows up in your buyers’ statements and lets them claim ITC. A wholesaler who sells ₹6 lakh to shops in a month uploads those invoices here. Late or missing filings make your buyers unhappy.
See alsoGSTR-3BInput tax credit (ITC)Building Business Services →
The summary GST return in which you declare tax due, claim ITC and pay the balance.
GSTR-3B is where tax is actually paid. If sales tax is ₹40,000 and ITC is ₹31,000, you pay ₹9,000 with this return. Late filing attracts late fee and interest.
See alsoGSTR-1Input tax credit (ITC)Building Business Services →
The yearly fee charged for a credit guarantee such as CGTMSE cover.
CGTMSE’s annual guarantee fee starts at 0.37% a year at the lowest slab and rises with loan size. On a ₹10 lakh loan at 0.37%, the fee is ₹3,700 a year. Some banks pass it on to the borrower, so ask before signing.
See alsoCGTMSECredit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) →Source: CGTMSE: Annual Guarantee Fee
A person who promises to repay your loan if you do not.
A third-party guarantor puts their own credit at risk. If your uncle guarantees your ₹15 lakh loan and you default, the bank can recover from him. Loans covered under CGTMSE do not need a third-party guarantee.
A food-safety system that finds the points in a process where hazards can be controlled.
HACCP (Hazard Analysis and Critical Control Points) looks at steps such as cooking temperature or metal detection. A juice unit selling to supermarkets or abroad is often asked for HACCP certification. It builds on basic hygiene practice.
See alsoFSSAI state and central licenceQuality control (QC)Building Business Services →
The international number that identifies a type of goods, used for GST rates and customs.
HSN stands for Harmonized System of Nomenclature. Each product has a code, such as one chapter for tea and another for plastic articles, and the code decides its GST rate and export benefits. Using the wrong code can mean the wrong tax.
See alsoSAC codeGST (Goods and Services Tax)Building Business Services →Import & Export →
A charge on movable assets such as stock or vehicles, which stay with you while the bank holds the right over them.
You keep using the hypothecated asset, but cannot sell it freely until the loan is repaid. A tempo bought on loan carries "hypothecated to XYZ Bank" on its registration. The bank removes the note after the last instalment.
The 10-digit code from DGFT that every business needs to import or export, linked to its PAN.
You apply online on the DGFT portal, and the IEC is issued quickly; it must be updated every year even if nothing changes. A craftsperson shipping ₹2 lakh of goods to the UK needs it before customs clearance. Some small exports through couriers or post have simpler rules.
See alsoRCMC (Registration-cum-Membership Certificate)DGFTLUT (letter of undertaking)Building Business Services →Import & Export →Source: DGFT: Handbook of Procedures 2023, Chapter 2 (IEC, RCMC)
The three parts of GST: central and state GST on sales within a state, integrated GST on sales across states.
On a ₹10,000 sale at 18% inside Rajasthan, the bill shows ₹900 CGST and ₹900 SGST. The same sale to Gujarat shows ₹1,800 IGST. State incentive policies often refund part of the SGST you pay.
See alsoGST (Goods and Services Tax)SGST reimbursementBuilding Business Services →
The yearly form in which you report income and tax to the Income Tax Department.
Banks ask for the last two or three ITRs before a business loan. A proprietor who earned ₹6 lakh from a shop files an ITR even if little tax is due, because it proves income. The right ITR form depends on your type of income and business.
See alsoPAN (Permanent Account Number)TDS (tax deducted at source)Financial year and assessment yearBanking & Finance →
Standard international trade terms that say who pays for and bears risk at each step of a shipment.
Common terms include EXW, FOB, CFR, CIF and DAP. Writing "FOB Mundra (Incoterms 2020)" on a quote avoids disputes. A first-time exporter is safest starting with FOB or EXW.
See alsoFOB (Free On Board)CIF (Cost, Insurance and Freight)Import & Export →
The GST you paid on business purchases, which you can set off against the GST you owe on sales.
ITC is allowed only if your supplier has filed its return and the invoice shows in your GST portal statement. If you owe ₹30,000 GST on sales and have ₹22,000 of valid ITC, you pay ₹8,000 in cash. Businesses under the composition scheme cannot claim ITC.
See alsoGST (Goods and Services Tax)GSTR-3BGST composition schemeBuilding Business Services →
Government pays part of the interest on your loan, so your effective rate falls.
With 3% subvention on a loan at 9%, you effectively pay 6%. The scheme rule sets the cap on loan size and years. For example, AIF gives 3% a year on loans up to ₹2 crore for up to 7 years.
See alsoAgriculture Infrastructure Fund (AIF)Kisan Credit Card (KCC)SubsidySchemes & Subsidies →Agriculture Infrastructure Fund (AIF) →Source: DA&FW: Agriculture Infrastructure Fund, revised scheme guidelines (Sep 2024)
The yearly return a project earns over its whole life, allowing for when money comes in.
IRR is the interest rate at which the project’s future cash flows are worth exactly what you invest today. If a ₹20 lakh cold room has an IRR of 18% and your loan costs 11%, the project earns more than the loan costs. DPRs for larger loans often show it.
Raw material, half-made goods and finished goods the business holds.
Stock ties up cash until it is sold. A garment unit holding ₹4 lakh of fabric and ₹2 lakh of finished shirts has ₹6 lakh locked in inventory. Banks lend against stock through drawing power.
See alsoWorking capitalFIFO (first in, first out)Banking & Finance →
Getting cash today for an unpaid invoice by selling it to a financier at a small discount.
If a buyer owes you ₹5 lakh in 60 days, a financier may pay you about ₹4.9 lakh now and collect the full amount later. The discount is the cost. TReDS runs this for MSMEs on a regulated platform.
See alsoTReDSReceivables (debtors)Banking & Finance →/schemes/treds →
An international standard for quality management systems, certified by private certification bodies.
ISO 9001 shows that a unit follows written processes and fixes problems systematically. Large buyers and some tenders ask for it. Choose an accredited certification body and expect yearly audits.
See alsoQuality control (QC)ZED certificationBusiness Encyclopedia →
Processing goods that belong to someone else, for a fee, and returning them.
Many small units start with job work because they need no money for raw material. An embroidery unit may charge ₹25 a piece on fabric supplied by a garment exporter. GST has special rules for sending goods to and from a job worker.
See alsoContract manufacturingGST (Goods and Services Tax)Business Encyclopedia →
A bank credit limit for farmers to meet crop, allied and household farm needs.
The KCC limit is based on the crop’s scale of finance and the area farmed. The Government gives 2% interest subvention and a 3% prompt repayment incentive on eligible short-term loans. A farmer growing wheat on 2 acres draws seed and fertiliser money from the card and repays after harvest.
See alsoInterest subventionNABARD/schemes/kcc →Banking & Finance →Source: myScheme (Government of India): Kisan Credit Card
The Khadi and Village Industries Commission and the state boards that run PMEGP with DICs.
KVIC is the national nodal agency for PMEGP; state KVIBs handle applications in their areas. A rural applicant can choose KVIC, KVIB or DIC as the agency on the PMEGP portal. KVIC also supports khadi and village industries.
See alsoPMEGPDIC (District Industries Centre)Prime Minister's Employment Generation Programme (PMEGP) →Ministries →
The bidder who quotes the lowest price among technically qualified bids.
Government tenders usually go to L1. Under the MSE procurement policy, an MSE within a set margin of L1 may be offered part of the order if it matches the L1 price. Bid only at a price that still gives you profit.
See alsoTenderPublic Procurement Policy for MSEs/schemes/public-procurement-policy-mse →
The law on weights, measures and labels for packaged goods sold in India.
Packers of pre-packed goods must print the maker’s name and address, net quantity, MRP, date and consumer-care details, and may need packer registration. A spice brand selling 200 g packets must print these on every pack. Weighing scales used in trade must be verified and stamped.
See alsoMRP (maximum retail price)Building Business Services →
A bank’s promise to pay the seller once the seller presents documents that meet the agreed terms.
In an LC the buyer’s bank, not just the buyer, stands behind the payment. An exporter shipping ₹20 lakh of rice to Dubai under an LC gets paid when the bill of lading and invoice match the LC exactly. Small mismatches in documents can delay payment.
See alsoBank guaranteeECGC export credit insuranceFOB (Free On Board)Import & Export →
A partnership registered with MCA where each partner’s liability is limited to the agreed contribution.
An LLP needs at least two partners and at least two designated partners who are individuals, one of them resident in India (LLP Act, 2008, sections 6 and 7). If the LLP owes ₹20 lakh, partners do not lose personal property beyond their contribution, except for fraud. It files yearly returns with the Registrar.
See alsoPartnership firmDesignated partnerROC (Registrar of Companies)Building Business Services →Source: LLP Act, 2008 (India Code), sections 6 and 7
A yearly undertaking filed on the GST portal so an exporter can export without paying IGST.
Without an LUT you pay IGST on exports and claim a refund later, which blocks cash. A handicraft exporter shipping ₹10 lakh a month saves that cash by filing an LUT at the start of the year. It is free and filed online.
See alsoGST (Goods and Services Tax)IEC (Importer Exporter Code)Import & Export →Building Business Services →
The part of the project cost the borrower pays from own funds; the bank lends the rest.
If a bank asks for 10% margin on a ₹8 lakh project, you bring ₹80,000 and the bank lends ₹7.2 lakh. Under PMEGP the subsidy is also called margin money subsidy, but it is separate from your own contribution.
See alsoPromoterMeans of financePMEGPBanking & Finance →Prime Minister's Employment Generation Programme (PMEGP) →
The table that shows where each rupee of the project cost will come from.
Means of finance lists your own contribution, the bank loan, any subsidy and any other money, and must add up to the project cost. For a ₹10 lakh project: own money ₹1 lakh, bank term loan ₹6 lakh, cash credit ₹3 lakh. Banks check that it balances before sanction.
See alsoProject costMargin money (own contribution)Term loanBanking & Finance →
An MSME with investment up to ₹125 crore and turnover up to ₹500 crore, above the small limits.
Medium enterprises get some MSME benefits, but the 45-day payment protection and the public procurement set-aside apply only to micro and small units. A food processor with ₹60 crore of plant is medium.
See alsoMSME (micro, small and medium enterprise)Building Business Services →Source: Ministry of MSME circular, 24 Oct 2025: revised MSME limits under S.O. 1364(E) of 21 Mar 2025 in force from 1 Apr 2025
The smallest MSME class: investment up to ₹2.5 crore and turnover up to ₹10 crore.
Most first-time units are micro. A ₹15 lakh spice-grinding unit selling ₹40 lakh a year is a micro enterprise. Micro units get the most benefits, such as collateral-free loans and priority-sector status.
See alsoMSME (micro, small and medium enterprise)Small enterpriseBuilding Business Services →Source: Ministry of MSME circular, 24 Oct 2025: revised MSME limits under S.O. 1364(E) of 21 Mar 2025 in force from 1 Apr 2025
Small loans, often to women in groups, for low-income households without collateral.
Microfinance loans are small, repaid weekly or monthly, and the group members support one another. A woman may take ₹40,000 to buy a sewing machine and repay in weekly instalments. Rates are higher than bank loans.
See alsoNBFC (non-banking financial company)Self-help group (SHG)Banking & Finance →
The company’s founding document that states its name, registered state, objects and capital.
The MOA sets the outer limit of what the company may do. A company formed to make bakery products should list that, and any related trade, in its objects. It is filed with the incorporation form.
See alsoAOA (articles of association)Private limited companyBuilding Business Services →
A starting period during which you need not repay the loan principal.
A moratorium gives the unit time to start earning. A dairy that gets a 6-month moratorium on a ₹9 lakh loan begins instalments only from month 7; interest may still be charged or added during the break. The DPR should match the moratorium to the start-up time.
See alsoTerm loanEMI (equated monthly instalment)Banking & Finance →
A charge on land or a building given to a lender as security for a loan.
In an equitable mortgage you deposit the title deeds of your property with the bank. If you take a ₹30 lakh loan by mortgaging a shop, the bank can sell that shop if the loan turns bad. The papers come back after full repayment.
The highest price, including all taxes, at which a packaged product may be sold to a consumer.
MRP must be printed on pre-packed goods. Set it to leave room for retailer and distributor margins: if your cost is ₹60, a ₹100 MRP might give the shop ₹15 and the distributor ₹8. Selling above MRP is an offence.
See alsoLegal metrology (packaged goods)DistributorBusiness Encyclopedia →
The state council that settles delayed-payment disputes between buyers and micro or small suppliers.
Each state has at least one MSEFC under the MSMED Act. It can order the buyer to pay the dues with the interest the Act sets. A buyer who challenges its award in court must first deposit 75% of the amount.
See alsoMSME Samadhaan45-day payment rule/schemes/msme-samadhaan-delayed-payments →Source: MSMED Act, 2006 (India Code), sections 15 and 16
A business classed as micro, small or medium by its investment in plant and machinery and its turnover.
Since 1 Apr 2025 (notification S.O. 1364(E) of 21 Mar 2025): micro is investment up to ₹2.5 crore and turnover up to ₹10 crore; small is up to ₹25 crore and ₹100 crore; medium is up to ₹125 crore and ₹500 crore. Both limits must be met. A unit with ₹1 crore of machines and ₹8 crore turnover is micro.
See alsoMicro enterpriseUdyam registrationTurnoverBuilding Business Services →Schemes & Subsidies →Source: Ministry of MSME circular, 24 Oct 2025: revised MSME limits under S.O. 1364(E) of 21 Mar 2025 in force from 1 Apr 2025
The Ministry of MSME portal where micro and small suppliers file complaints about delayed payments.
A case filed on Samadhaan goes to the state Micro and Small Enterprises Facilitation Council, which first tries conciliation and then arbitration. A unit owed ₹6 lakh for 5 months can file online with invoices and its Udyam certificate. There is no fee to file.
See also45-day payment ruleMSEFC (Facilitation Council)/schemes/msme-samadhaan-delayed-payments →Source: MSME Samadhaan portal, Ministry of MSME
Loans up to ₹20 lakh for small non-farm businesses under the Pradhan Mantri MUDRA Yojana.
MUDRA itself does not lend; banks, RRBs, small finance banks, NBFCs and MFIs give the loan. A salon owner can take a ₹3 lakh Kishor loan for chairs and stock. Interest is set by each lender.
See alsoMUDRA tiers: Shishu, Kishor, Tarun, Tarun PlusCollateral-free loanPradhan Mantri MUDRA Yojana (PMMY) – Shishu, Kishor, Tarun, Tarun Plus →Banking & Finance →Source: PIB backgrounder, 29 Oct 2024: PMMY limit raised to Rs 20 lakh (Tarun Plus)
The four MUDRA loan sizes, from up to ₹50,000 to ₹20 lakh.
Shishu is up to ₹50,000; Kishor is above ₹50,000 up to ₹5 lakh; Tarun is above ₹5 lakh up to ₹10 lakh; Tarun Plus is above ₹10 lakh up to ₹20 lakh for those who have repaid an earlier Tarun loan. A tea stall needing ₹40,000 fits Shishu.
See alsoMUDRA loan (PMMY)Pradhan Mantri MUDRA Yojana (PMMY) – Shishu, Kishor, Tarun, Tarun Plus →Source: PIB backgrounder, 29 Oct 2024: PMMY limit raised to Rs 20 lakh (Tarun Plus)
The National Bank for Agriculture and Rural Development, which refinances banks for farm and rural lending.
NABARD does not usually lend to individual farmers; it funds banks, RRBs and cooperatives that do. It also backs FPOs and rural enterprises through funds such as AgriSURE. Some capital subsidies for dairy or agri-units pass through NABARD to your bank.
An RBI-registered company that lends money but is not a bank.
NBFCs often lend faster and with fewer papers than banks, usually at higher interest. A transporter may buy a used truck with a ₹12 lakh NBFC loan. Check that the lender is on RBI’s list before paying any fee.
See alsoMicrofinance (MFI)MUDRA loan (PMMY)Banking & Finance →
The profit left after every cost, interest and tax, shown as a share of sales.
Net margin = net profit ÷ sales. If a bakery sells ₹20 lakh in a year and keeps ₹1.6 lakh after all costs and tax, its net margin is 8%. Compare it with similar businesses, not with gross margin.
See alsoGross marginProfit and loss accountBanking & Finance →
Credit-linked, back-ended subsidy from the National Horticulture Board for commercial horticulture and cold chain.
NHB supports open-field and protected cultivation, mushroom units, post-harvest and cold storage projects through a term loan. Rates and caps changed in Aug 2026, so read the current scheme page. A grower setting up a polyhouse applies through the bank that gives the loan.
See alsoBack-ended subsidyCredit-linked subsidyNHB Capital Investment Subsidy – Commercial Horticulture & Cold Storage (Scheme 1 and Cold Storage Scheme) →Source: NHB Operational Guidelines, January 2025
A loan on which interest or instalment has stayed unpaid for more than 90 days.
Under RBI norms a term loan becomes an NPA when interest or instalment is overdue beyond 90 days; a cash credit account becomes one when it stays out of order for 90 days. Once your ₹6 lakh loan is NPA, your credit record shows it and new loans become very hard.
See alsoSMA (special mention account)EMI (equated monthly instalment)Credit score (CIBIL score)Banking & Finance →Source: RBI Master Circular: Prudential norms on Income Recognition, Asset Classification and Provisioning (1 Apr 2022)
A government programme that picks a signature product for each district and backs it with branding, finance and market links.
DPIIT’s ODOP covers 1,244 products across 773 districts, and some states run their own ODOP schemes with extra subsidy. If your district’s product is moong dal or brassware, units making it may get priority under schemes such as PMFME. Check your district’s product on the ODOP list.
See alsoPMFMEDIC (District Industries Centre)/schemes/odop-dpiit →/districts →Source: PIB, Jul 2026: DPIIT's ODOP initiative covers 1,244 products across 773 districts
A government-backed open network that lets small sellers be found by buyers on many shopping apps at once.
A seller joins through one seller app and its products can appear on several buyer apps. A local sweet shop can take orders from different apps without listing on each. Commissions and terms are set by the seller app you choose.
See alsoOnline marketplaceB2B and B2CBusiness Encyclopedia →
A company with a single member, giving one founder limited liability.
Under section 3 of the Companies Act, 2013, one person can form an OPC; its memorandum must name a nominee who takes over if the member dies. A solo software developer can use it to keep personal assets apart from business debts. It has more filings than a proprietorship.
See alsoPrivate limited companySole proprietorshipBuilding Business Services →Source: MCA: Companies Act, 2013 (section 3, formation of company)
A website or app where many sellers list products and the platform brings buyers, for a commission.
Marketplaces give reach but take commission, shipping and return costs. A ₹500 kurta may leave the seller only ₹300 after fees. Selling online usually needs GST registration.
See alsoONDC (Open Network for Digital Commerce)TCS (tax collected at source)Third-party logistics (3PL)Business Encyclopedia →
The regular cost of running the business, such as rent, wages, power and raw material.
Opex is charged in full in the year it is spent. A ₹12,000 monthly electricity bill and ₹40,000 of wages are opex. Cutting opex raises profit directly.
See alsoCapital expenditure (capex)Fixed costBanking & Finance →
A short-term bank loan to buy material and make goods for a confirmed export order.
It is repaid from the export proceeds or converted into post-shipment credit. A rice exporter with a ₹40 lakh order may get packing credit to buy paddy. Government interest support for exporters may apply, so ask your bank.
See alsoLetter of credit (LC)Interest subventionImport & Export →Banking & Finance →
The 10-character income tax number for a person, firm or company.
PAN is needed to open a bank account, register under GST, take a loan and file tax returns. A proprietor uses personal PAN; a partnership, LLP or company gets its own. GSTIN is built from the PAN.
See alsoTAN (Tax Deduction Account Number)GSTINIncome tax return (ITR)Where do I start? →
The written agreement among partners on capital, profit share, duties and exit.
A clear deed avoids fights later. If one partner brings ₹6 lakh and another ₹4 lakh, the deed can set profit at 60:40 and say what happens if one leaves. It is signed on stamp paper as per state stamp law.
A business owned by two or more partners under the Indian Partnership Act, 1932.
Partners share profit as the deed says and are each personally liable for all the firm’s debts. Two brothers running a hardware shop can form a partnership with a simple deed. Registering the firm with the state Registrar of Firms is optional but helps in court cases.
See alsoPartnership deedLLP (limited liability partnership)Building Business Services →
A legal right that stops others making or selling your new invention for a set number of years.
An invention must be new, inventive and useful to be patented. A farmer who designs a new low-cost seed drill can file a patent before showing it publicly. Startups and MSMEs pay lower official fees.
Money the business owes its suppliers for goods or services already received.
Supplier credit is a cheap source of working capital. If your yarn supplier gives 30 days to pay for ₹2 lakh of yarn, you have ₹2 lakh of payables. Paying micro and small suppliers late can cost you interest and tax deductions.
See alsoReceivables (debtors)Working capitalBanking & Finance →
How long it takes for a project’s earnings to repay the money put into it.
Payback = investment ÷ yearly cash earnings. A ₹6 lakh e-rickshaw fleet that brings ₹2 lakh of cash a year pays back in 3 years. Shorter payback means less risk.
See alsoReturn on investment (ROI)Internal rate of return (IRR)Banking & Finance →
Small working-capital loans for street vendors, rising in steps as they repay on time.
The first loan is up to ₹15,000, the second up to ₹25,000 and the third up to ₹50,000, with a 7% a year interest subsidy. A vegetable seller with a vending certificate from the municipality can apply. Timely repayment unlocks the next loan.
See alsoMicrofinance (MFI)Working capital/schemes/pm-svanidhi →Source: myScheme (Government of India): PM SVANidhi
A central scheme for traditional artisans and craftspeople with training, toolkit support and low-cost loans.
Carpenters, potters, tailors, blacksmiths and other listed trades can register through common service centres. A potter can get skill training, a toolkit incentive and a collateral-free loan in two tranches. See the scheme page for current amounts.
See alsoCollateral-free loanEDP (entrepreneurship development training)/schemes/pm-vishwakarma →
The Prime Minister’s Employment Generation Programme: a subsidy of 15% to 35% on bank loans for new micro units.
Projects up to ₹50 lakh in manufacturing and ₹20 lakh in services qualify. General category applicants get 15% (urban) or 25% (rural); special categories get 25% or 35%, with own contribution of 10% (general) or 5% (special). A rural woman setting up a ₹10 lakh dal mill could get ₹3.5 lakh subsidy.
See alsoMargin money (own contribution)Back-ended subsidyKVIC and KVIBEDP (entrepreneurship development training)Prime Minister's Employment Generation Programme (PMEGP) →Source: PIB, 30 May 2022: PMEGP continued 2021-22 to 2025-26 (project caps, subsidy rates)
A scheme for micro food-processing units: 35% credit-linked capital subsidy, up to ₹10 lakh per unit.
Under the PM Formalisation of Micro food processing Enterprises guidelines, the owner brings at least 10% and the rest is a bank loan. A papad unit with ₹20 lakh of eligible cost could get ₹7 lakh. The scheme’s current window may have ended, so check status before applying.
See alsoCredit-linked subsidyODOP (One District One Product)FSSAI registrationPM Formalisation of Micro Food Processing Enterprises (PM FME) →Source: MoFPI: PM FME Scheme Guidelines
Consent from the state pollution control board to establish (CTE) and then to operate (CTO) a unit.
Units are grouped as red, orange, green or white by pollution risk; white units are usually exempt. A dyeing unit needs CTE before building and CTO before starting production. Apply through the state single-window portal.
A state incentive that lowers the electricity rate or waives electricity duty for eligible units.
Power is a big cost for cold stores, rice mills and foundries. A cold store using ₹1.5 lakh of power a month can save a good share through a per-unit rebate. Check your state policy for the rate and years.
See alsoSubsidyStates & districts →
A simple income tax option where a small business declares a fixed share of turnover as profit.
Under presumptive taxation you need not keep detailed books, as long as you declare at least the set percentage of turnover as income. A small trader with turnover inside the limit may use it to save accountant cost. The limits and rates are in the Income-tax law; check the current figures.
See alsoIncome tax return (ITR)Books of accountsBanking & Finance →
The asset bought or created with the loan, which the bank holds as security.
For a machine loan, the machine is the primary security; for cash credit, the stock and receivables are. A ₹4 lakh loan for a flour chakki is secured first by the chakki itself.
RBI rules that make banks lend a set share of their credit to farming, MSMEs and other priority groups.
Because of PSL targets, banks actively look for MSME and farm borrowers. A loan to a micro enterprise counts toward the bank’s micro-enterprise sub-target. This is why Udyam registration helps your loan file.
See alsoMSME (micro, small and medium enterprise)Kisan Credit Card (KCC)/schemes/rbi-psl-micro-enterprises →Banking & Finance →Source: RBI Master Directions: Priority Sector Lending, 2025
A company registered with MCA, owned by shareholders, with liability limited to their shares.
Under section 3 of the Companies Act, 2013, two or more persons can form a private company. It can raise equity from investors and is the usual form for startups seeking funding. A founder who puts ₹10 lakh into shares risks only that ₹10 lakh if the company fails, unless they gave a personal guarantee.
See alsoOne Person Company (OPC)MOA (memorandum of association)AOA (articles of association)DIN (Director Identification Number)Building Business Services →Source: MCA: Companies Act, 2013 (section 3, formation of company)
A one-time charge the lender takes for handling a loan application.
Processing fee adds to the true cost of the loan. A 1% fee on ₹10 lakh is ₹10,000, plus GST. Ask for all charges in writing and compare lenders.
The statement that shows a year’s income, costs and the resulting profit or loss.
The P&L starts with sales, takes away material, wages, rent, interest, depreciation and tax, and ends with net profit. A unit with ₹40 lakh sales and ₹37 lakh total cost shows ₹3 lakh profit. Banks ask for the last two or three years.
A preliminary bill sent before supply, showing price and terms, often used to take an advance or open an LC.
A proforma is not a tax invoice and does not create a GST liability. An exporter sends one for ₹15 lakh of carpets so the buyer can arrange payment. The final tax invoice follows at dispatch.
The total money needed to start a project: building, machines, other assets and starting working capital.
Project cost is the figure banks and subsidy schemes work from. A tailoring unit with ₹3 lakh of machines, ₹1 lakh of fit-out and ₹1 lakh of working capital has a project cost of ₹5 lakh. Many schemes leave out land or cap the working-capital share, so read the scheme rule.
See alsoMeans of financeDPR (detailed project report)Margin money (own contribution)Banking & Finance →Building Business Services →
The person or people who start the business and bring the owner’s money.
Banks and schemes call the founder the promoter and check the promoter’s credit score, experience and own contribution. A wife and husband starting a dal mill together are both promoters. Promoters often sign a personal guarantee.
See alsoMargin money (own contribution)Equity (owner’s capital)Where do I start? →
A rule that central ministries and PSUs must aim to buy at least 25% of their yearly purchases from micro and small enterprises.
Within the 25% goal, 4% is earmarked for units owned by SC/ST entrepreneurs. MSEs also get free tender documents and EMD exemption. A small cable maker can win part of a PSU order by matching the lowest price.
See alsoGeM (Government e-Marketplace)EMD (earnest money deposit)/schemes/public-procurement-policy-mse →Source: MSME Sambandh: Public Procurement Policy for MSEs
A buyer’s written order that states items, quantity, price, delivery and payment terms.
A PO protects both sides if there is a dispute. A school ordering 300 uniforms at ₹450 each should send a PO with the delivery date. Some banks lend against confirmed POs.
See alsoProforma invoiceCredit periodBusiness Encyclopedia →
A government order that makes a BIS standard compulsory for a product, for local makers and importers alike.
Once a QCO is in force, the product cannot be made, sold or imported without the BIS mark. Toys, helmets and many steel and chemical items are covered. Check the list before you invest in a product line.
See alsoBIS certificationIndustries →
Checking raw material, process and finished goods so products meet the promised standard.
Simple QC steps such as weighing samples, checking moisture or testing seals prevent returns. A rice mill that checks broken-grain percentage on each batch can grade and price correctly. Keep a record of each check.
The basic inputs that a unit turns into finished products.
Reliable raw material at a steady price decides whether a unit survives. A tomato-sauce unit near a mandi buys cheaper in season and stores pulp for the rest of the year. Keep at least two suppliers for key items.
See alsoBill of materials (BOM)Inventory (stock)Business Encyclopedia →
A certificate from an export promotion council or commodity board needed to claim many export benefits.
You get the RCMC from the council for your main product, such as APEDA for processed foods or EPCH for handicrafts. A spice exporter applies to the Spices Board. It also gives access to trade fairs and buyer leads.
See alsoExport promotion council (EPC)IEC (Importer Exporter Code)Import & Export →Source: DGFT: Handbook of Procedures 2023, Chapter 2 (IEC, RCMC)
Money your buyers owe you for goods or services already supplied.
Receivables are sales not yet collected. If you supplied ₹5 lakh of cartons to a factory on 45 days credit, that ₹5 lakh is a receivable until paid. Large receivables squeeze working capital; TReDS and the 45-day rule help MSEs collect.
See alsoDebtor daysTReDS45-day payment ruleBanking & Finance →
Yearly profit as a percentage of the money invested.
ROI = yearly net profit ÷ investment × 100. If ₹10 lakh in a poultry farm earns ₹2.5 lakh a year, ROI is 25%. Compare it with what the same money would earn in a bank deposit.
See alsoPayback periodInternal rate of return (IRR)Banking & Finance →
A GST rule under which the buyer, not the seller, pays the tax on certain supplies.
Some services, such as goods transport by a transport agency in many cases, fall under reverse charge. If you hire a truck through an agency, you may have to pay GST on that freight yourself and then claim it as ITC. Check the notified list.
See alsoGST (Goods and Services Tax)Input tax credit (ITC)Building Business Services →
The MCA office that registers companies and LLPs and receives their yearly filings.
Each state has an ROC. Companies file annual accounts and returns with it every year; late filing carries a fee for each day of delay. A company that stops filing can be struck off.
See alsoPrivate limited companyLLP (limited liability partnership)Building Business Services →
A scheme that refunds hidden central, state and local taxes in exported goods as a percentage of FOB value.
Remission of Duties and Taxes on Export Products pays at rates notified for each 8-digit HS code, as transferable e-scrips usable for basic customs duty. On ₹20 lakh FOB at a 1% rate, the exporter gets ₹20,000 of scrip. Export proceeds must be realised in time or the benefit is recovered.
See alsoDuty drawbackFOB (Free On Board)HSN code/schemes/rodtep →Import & Export →Source: DGFT: Foreign Trade Policy 2023, Chapter 4 (duty exemption and remission, RoDTEP)
The code that identifies a type of service under GST.
SAC (Services Accounting Code) does for services what HSN does for goods. A repair shop, a consultant and a transporter each use a different SAC on their invoices. It decides the GST rate.
The bank’s letter approving your loan and listing its amount, rate, security and conditions.
Read every condition before you sign; it binds you. A sanction letter for ₹12 lakh may require insurance of the machine and a stock statement every month. Subsidy schemes often need a copy of it.
See alsoDisbursementProcessing feeBanking & Finance →Building Business Services →
An income tax rule that lets a buyer deduct a payment to a micro or small supplier only when it is paid within the legal time limit.
Section 43B(h) of the Income-tax Act, 1961 links the buyer’s tax deduction to paying micro and small enterprises within the MSMED Act limit (agreed period, at most 45 days). If a buyer owes a small supplier ₹3 lakh at year end beyond that limit, it can deduct the expense only in the year it actually pays. Check the matching section in the Income-tax Act, 2025, in force from 1 Apr 2026.
See also45-day payment ruleMSME SamadhaanPayables (creditors)/schemes/section-43bh-msme-payment →Source: Income Tax Department: Section 43B
A small group, usually of women, that saves together and borrows from banks as a group.
SHGs build a savings and repayment record that banks lend against, often under the rural livelihood mission. A village SHG can take a bank loan to start a papad unit together. Many schemes, such as PMFME, accept SHGs as applicants.
See alsoMicrofinance (MFI)FPO (farmer producer organisation)Banking & Finance →
A Ministry of MSME scheme that funds clusters of traditional artisans with common facilities and marketing.
SFURTI (Scheme of Fund for Regeneration of Traditional Industries) works through an implementing agency for a cluster of artisans. Weavers in a village can get a common dyeing unit and design support. Individuals do not apply alone.
A state incentive that refunds part of the state GST a new unit pays, for a set number of years.
Many state industrial policies return a share of net SGST paid in cash, often capped at a share of the investment. A unit paying ₹5 lakh SGST a year under a 75% reimbursement rule could get back ₹3.75 lakh. Each state sets its own rate, cap and years.
See alsoIGST, CGST and SGSTSubsidyStates & districts →Schemes & Subsidies →
The main customs document an exporter files to clear goods for export.
It is filed electronically on the customs system, usually by a customs broker, with invoice, packing list and HS code. Export benefits such as drawback and RoDTEP are claimed through it. Wrong details can block those benefits.
See alsoBill of lading (B/L)Customs broker (CHA)Duty drawbackImport & Export →
A state registration for shops, offices and other commercial places under the state Shops and Establishments Act.
The law sets working hours, holidays and conditions for employees. A new mobile repair shop registers with the state labour department, often online. Banks may ask for it as proof of the business address.
See alsoTrade licenceSole proprietorshipStates & districts →Where do I start? →
The Small Industries Development Bank of India, the main national lender and refinancer for MSMEs.
SIDBI mostly refinances banks, NBFCs and MFIs, and also lends directly to some MSMEs. It set up CGTMSE and MUDRA and runs the Udyamimitra portal. A unit can apply for a direct SIDBI loan online.
See alsoMUDRA loan (PMMY)CGTMSEUdyamimitra and JanSamarth portalsBanking & Finance →
An online portal where a business applies for many state or central approvals in one place.
Each state runs its own single-window portal, and the National Single Window System links central approvals. A new food unit can apply for pollution consent, factory licence and incentives on one portal and track them. It saves visits to many offices.
See alsoPollution consent (CTE and CTO)DIC (District Industries Centre)States & districts →/schemes/national-single-window-system →
An early-warning tag banks put on a loan whose payment is overdue but not yet an NPA.
Banks sort overdue loans into SMA-0, SMA-1 and SMA-2 by how many days the payment is late, before the 90-day NPA mark. If your EMI is 45 days late, the account is flagged SMA-1. Clearing dues quickly keeps your record clean.
See alsoNPA (non-performing asset)Banking & Finance →Source: RBI Master Circular: Prudential norms on Income Recognition, Asset Classification and Provisioning (1 Apr 2022)
An MSME with investment up to ₹25 crore and turnover up to ₹100 crore, above the micro limits.
If either investment or turnover crosses the micro limit, the unit moves up to small. A plastics unit with ₹4 crore of machines and ₹30 crore turnover is small. Small units are still covered by the delayed-payment protection of the MSMED Act.
See alsoMSME (micro, small and medium enterprise)Medium enterpriseBuilding Business Services →Source: Ministry of MSME circular, 24 Oct 2025: revised MSME limits under S.O. 1364(E) of 21 Mar 2025 in force from 1 Apr 2025
A bank licensed by RBI mainly to serve small businesses, farmers and low-income customers.
Small finance banks take deposits and give loans like other banks, with a focus on small borrowers. A kirana owner may get a ₹2 lakh MUDRA loan from one. Deposits are covered by deposit insurance like other banks.
See alsoNBFC (non-banking financial company)MUDRA loan (PMMY)Banking & Finance →
A business owned and run by one person, with no separate legal identity from the owner.
It is the simplest form: no registration law of its own, just Udyam, GST and local licences as needed. The owner is personally liable for all debts, so a ₹5 lakh unpaid supplier bill can be recovered from personal savings. Most small shops start this way.
See alsoPartnership firmLLP (limited liability partnership)Udyam registrationBuilding Business Services →Where do I start? →
A state incentive that waives or refunds stamp duty on buying or leasing land for a new unit.
On a ₹50 lakh plot, stamp duty can be several lakh rupees, so the waiver matters. State policies often give full waiver in backward areas and partial elsewhere. Apply before you register the deed if the policy needs it.
Bank loans of ₹10 lakh to ₹1 crore for SC/ST and women entrepreneurs starting a new unit; the scheme is being revised.
The loan is composite (term loan plus working capital) and repayable over up to 7 years with a moratorium of up to 18 months. The original scheme ended on 31 Mar 2025 and a revised version is expected, so check before applying. Under it, a woman starting a ₹40 lakh bakery had to bring at least 10% of the project cost.
See alsoTerm loanMargin money (own contribution)Stand-Up India →Source: Stand-Up Mitra (SIDBI): Stand-Up India scheme features
Money or a concession the government gives to lower the cost of starting or running a business.
Subsidies come as capital subsidy on assets, interest subvention on loans, tax refunds such as SGST reimbursement, or cheaper power and land. Most are paid after you invest, through the bank or the state department. Never pay an agent to "guarantee" a subsidy.
See alsoCapital subsidyInterest subventionSGST reimbursementSchemes & Subsidies →/schemes/check →
The 10-character number a business needs before it deducts or collects tax at source.
If you pay rent, contractors or salaries above the limits where TDS applies, you must get a TAN and quote it in TDS returns. A firm paying ₹40,000 a month office rent may need one. PAN and TAN are different numbers.
See alsoTDS (tax deducted at source)PAN (Permanent Account Number)Where do I start? →
An audit of a business’s accounts by a chartered accountant, required by income tax law above certain turnover limits.
The tax audit report is filed with the return and checks that books and tax figures are correct. A trader whose turnover crosses the limit set in the Income-tax law must get one. Ask your CA for the current limit, which depends on how much of your business is in cash.
See alsoIncome tax return (ITR)Books of accountsBanking & Finance →
The GST bill a registered seller issues, showing the tax charged so the buyer can claim credit.
A tax invoice shows both GSTINs, invoice number and date, HSN or SAC, value, rate and tax amount. If you buy ₹50,000 of packaging and the supplier gives only a plain slip, you lose the ITC. Always ask for a proper tax invoice.
See alsoBill of supplyGSTINProforma invoiceBuilding Business Services →
Tax that a seller collects from the buyer on certain sales and deposits with the government.
TCS applies to notified goods and to e-commerce operators under GST, who collect a small share on sales made through them. If you sell ₹2 lakh of goods on an online marketplace, the operator collects TCS and you can claim it in your returns.
Income tax that the payer cuts from certain payments and deposits with the government on the receiver’s behalf.
TDS applies to payments such as salary, rent, contract work and professional fees above set limits, at rates set in the Income-tax law. If a company pays you ₹1 lakh for a job and cuts TDS, you receive less now but the tax shows in your Form 26AS and counts toward your tax. Check the current rate and limit for each payment type.
See alsoTAN (Tax Deduction Account Number)TCS (tax collected at source)Income tax return (ITR)Banking & Finance →
A formal invitation from a buyer, often a government body, for sealed price offers to supply goods or services.
Read eligibility, specifications, delivery time and penalty clauses before bidding. A panchayat tender for 500 solar lights may require past supply proof. Most central tenders now run online on GeM or the e-procurement portal.
See alsoEMD (earnest money deposit)L1 (lowest bidder)GeM (Government e-Marketplace)/schemes/gem-seller-onboarding →
A loan for buying long-life assets, repaid in fixed instalments over several years.
Term loans fund machines, buildings and vehicles. A ₹10 lakh term loan for a cold room might be repaid over 6 years after a 6-month moratorium. The asset bought is usually the primary security.
See alsoEMI (equated monthly instalment)MoratoriumFixed capitalBanking & Finance →
A company that stores, packs and ships goods for other businesses.
Using a 3PL avoids building your own warehouse and delivery team. An online seller of handmade soaps can keep stock with a 3PL that ships each order for a per-order fee. Compare per-order cost with doing it yourself.
Permission from the municipality or panchayat to run a particular trade at a place.
Rules and fees differ by city. A restaurant or a hardware store in a town usually needs one from the local body and renews it yearly. Some trades, such as those involving hazards, need extra approvals.
See alsoShop and establishment registrationStates & districts →
A registered brand name, logo or sign that only you may use for your goods or services.
You apply to the Trade Marks Registry (IP India) in the right class of goods; registration must be renewed from time to time. If you sell pickles as "Nani’s Kitchen", registering the name stops a rival using it. Search the register before printing packaging.
An RBI-regulated online platform where MSMEs sell invoices on big buyers to financiers for early payment.
The Trade Receivables Discounting System lets several financiers bid on your accepted invoice, without recourse to you. Central public sector enterprises must settle MSME invoices through TReDS. A supplier owed ₹8 lakh by a PSU can get paid within days instead of months.
See alsoInvoice discounting45-day payment ruleReceivables (debtors)/schemes/treds →Banking & Finance →Source: PIB, 10 Jul 2026: TReDS mandated for settlement of MSME invoices by CPSEs
Total sales of a business in a year, before taking away any costs.
Turnover decides many legal categories: MSME class, GST registration, FSSAI licence type. A shop selling ₹45 lakh of goods in a year has ₹45 lakh turnover even if its profit is only ₹4 lakh.
See alsoGST registration thresholdMSME (micro, small and medium enterprise)Banking & Finance →
The free online registration that gives a business its MSME identity and Udyam number.
Udyam uses Aadhaar of the owner and the PAN and GST data of the business; there is no fee and no need for an agent. A tailoring shop registers in minutes on udyamregistration.gov.in and gets a certificate. Banks, schemes and TReDS ask for it.
See alsoMSME (micro, small and medium enterprise)PAN (Permanent Account Number)Building Business Services →
Government-run online portals to apply for MSME and scheme-linked loans with many banks.
Udyamimitra is run by SIDBI; JanSamarth links several credit-linked government schemes on one site. A first-time founder can apply for a MUDRA loan online and track it. No agent is needed.
See alsoMUDRA loan (PMMY)PMEGPSchemes & Subsidies →Banking & Finance →
A cost that rises and falls with how much you make or sell, like raw material.
Variable cost is paid per unit. If each packet of namkeen needs ₹22 of besan, oil and packing, making 1,000 packets costs ₹22,000 in variable cost. Bulk buying can lower it.
The money a business needs to run day to day: stock, credit to buyers, wages and bills.
Working capital is current assets (cash, stock, money owed to you) minus current liabilities (money you owe suppliers). A pickle unit that keeps ₹2 lakh of jars and spices and waits 30 days for ₹3 lakh from shops needs about ₹5 lakh of working capital, less what its suppliers let it owe. Banks usually fund this through a cash credit limit.
See alsoCash credit (CC) / Overdraft (OD) limitWorking capital cycleDrawing powerBanking & Finance →
The number of days between paying for raw material and collecting cash from buyers.
Cycle = stock days + debtor days − creditor days. If material sits 20 days, buyers pay in 40 days and suppliers give 15 days, the cycle is 45 days. A shorter cycle needs less bank money.
A Ministry of MSME certification for quality and environment practices: Zero Defect, Zero Effect.
ZED has Bronze, Silver and Gold levels, and the Ministry subsidises the cost for MSMEs. A small auto-parts maker can start with Bronze to show buyers it follows basic quality systems. Some loan and guarantee benefits favour ZED-certified units.
See alsoISO 9001MSME (micro, small and medium enterprise)/schemes/msme-champions-zed →
