In order to provide financial assistance to all types of industrial enterprises (proprietary and partnership firms as well as companies) most of the states of India have set up SFCs.

The primary objective of these corporations is to accelerate the pace of industrial development in their respective states. SFCs provide finance in the form of long-term loans or through subscription of debentures, offer guarantee to loans raised from other sources and take up underwriting of public issues of shares and debentures made by companies.

However, they cannot directly subscribe to the shares issued by the companies. The SFC (Amendment) Act, 2000 has provided greater flexibility to SFCs to cope with the changing economic and financial environment of the country.