Working Capital Limit/Term Loan for SMEs

Target Group: Traders working individually, firms (Proprietorship/Partnership), companies dealing in any lawful trading activity or Business concerns/agencies providing service, retail traders, manufacturing units, transport operators, artisans, SSI and tiny units etc.

Purpose: Purchase of fixed assets and working capital requirements for existing/new Micro & Small Enterprises as defined by MSMED Act, 2006.

Eligibility: Registration/License as applicable under local laws.

Nature of Credit Facility:

  1. Cash Credit: To meet day-to-day working capital requirement
  2. Term Loan:
  • Acquiring/construction of premises, go-downs etc for running the business.
  • For repair, furnishing, renovating existing business premises and/ or purchase of furniture and fixtures.
  • For purchase of new machineries, equipments, business tools, computers, UPS etc.
  • Any other capital expenditures required for running the business

Quantum of Loan: No minimum or maximum limit

Margin: 


For loan up to Rs 25,000/-
NIL
For loan above Rs 25,000/- Fixed Assets 15% to 25% depending on purpose & quantum of loan
  Stock 25%
  Book debts 40%

Methodology for Assessment of Term Loan/Working Capital

A. Working Capital
SME Sector 20% of the Projected Annual Turnover (sales) as per Nayak Committee.
Traders 20% of Sales turn-over as per Nayak Committee
B. Term Loan 85% to 75% of the project cost

Scoring System

For Credit Limit Scoring Model
Up to 10.00 lakh Based on Simplified Scoring Model: Minimum Score 36 out of 60
Above Rs. 10.00 lakh & up to Rs. 25.00 lakh Based on Scoring Criteria comprising three Aspects: Personal – 30 marks, Business – 50 marks & Collateral – 20 marks. Minimum score 50% against each parameter & overall 60 out of 100.
Above Rs. 25.00 lakh Based on Credit Risk Assessment (CRA) comprising Financial Risk, Business Risk & Management Risk.

 Repayment: 

  • Term Loan: Maximum period of 84 months (including moratorium period maximum of 1 year) and repayable in Equated Monthly Installments.
  • Cash Credit/Working Capital limit is repayable on demand and such limit remains valid for two years subject to yearly review.

Review/ Renewal of Cash Credit: Working capital limit shall be renewed every two years. However, performance of the unit and conduct of the account will be reviewed annually by the Branch Manager for continuation of limit. It routing of sales proceeds into the cash credit account is less than 50% of the actual sales, Cash Credit account should be brought under repayment method.

Moratorium Period: Generally 6 months. However, it can be extended up to 1 year depending on the activity and will be decided on case to case basis.

Interest: Applicable as per prevailing rate of interest and is subject to change from time to time.

Interest: Applicable as per prevailing rate of interest and is subject to change from time to time.

Application of Interest: Bank will charge interest on monthly rest on daily reducing balance.

Security: 

Up to Rs. 10.00 lakh 1. Primary :Hypothecation of stocks /receivables/ assets acquired out of Bank finance
Above Rs. 10.00 lakh 1. Hypothecation of stocks & assets acquired/created out of Bank loan.
2. Collateral Security in shape of Mortgage of land & building/ other tangible security in the form of lien on deposits, NSCs, KVPs , LIP (Surrender value), third party guarantee etc.
Note: In case CGTMSE cover is obtained by the Bank, the borrowers classified under MSE category need not be asked for collateral security up to credit limit of Rs.50.00 lakh in case of RRBs

Insurance:

For loan up to Rs. 25,000/- Can be waived after obtaining an Insurance Waiver Letter.
For loan above Rs. 25,000/- Assets shall have to be insured up to the extent of Bank’s interest.

Periodicity of Obtaining Stock Statements

For loan up to Rs. 25/- lakh Once in a quarter
For loan above Rs. 25/- lakh Once in a month

Inspection

For loan up to Rs. 25/- lakh Once in a quarter
For loan above Rs. 25/- lakh Once in a month

Processing Fees (Applicable for Working Capital only)

For loan up to Rs. 25,000/- NIL
For loan above Rs. 25,000/- & up to Rs. 2.00 lakh Applicable as per prevailing rate at the time of sanction
For loan above Rs. 2.00 lakh Applicable as per prevailing rate at the time of sanction

Upfront fees (Applicable for Term Loan only)

For loan up to Rs. 2.00 lakh NIL
For loan above Rs. 2.00 lakh Applicable as per prevailing rate at the time of sanction