Project Finance – Ratio Analysis

Posted by on Feb 6, 2011 in Business, EPM World, Project Finance, Loans | 0 comments

I have in my earlier postings covered the topic of Bank Loan Appraisal process.  I have compiled here certain important financial tools being used in appraising the admissibility of loan.  The tools used in the appraisal process for start-up projects, for existing organizations, for Term Loan and for Working Capital are not all the same.  There are some additional tools not covered herein.

Project Finance Assessment Tools

blog.epmworld.in

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MSE, SSI – Who?

Posted by on Jan 28, 2011 in EPM World, Government Schemes, Self-employment | 1 comment

I have posted several of my writings besides compilation of policy provisions related to MSE, SSI sectors.  The one important thing in the context is the definition of MSE, SSI as per Government of India.  This definition applies in extending all the benefits to respective ventures.

mse ssi


Manufacturing sector
Micro enterprises does not exceed Rs. 25 lakh
Small enterprises More than Rs. 25 lakh but does not exceed Rs. 5 crore
Medium enterprises More than Rs. 5 crore but does not exceed Rs. 10 crore
Service sector
Micro enterprises does not exceed Rs. 10 lakh
Small enterprises More than Rs. 10 lakh but does not exceed Rs. 2 crore
Medium enterprises More than Rs. 2 crore but does not exceed Rs. 5 crore
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Business Loan appraisal

Posted by on Jan 21, 2011 in Business, EPM World, Project Finance, Loans | 2 comments

The common requirement for an entrepreneur is availing loan / financial support from Government or Banks.  Mostly the government support is extended in the form of capital subsidy, interest subsidy, marketing support, technology support, skill development, credit guarantee and more as could be seen from http://www.dcmsme.gov.in/schemes/sidoscheme.htm.

However, all the financial support is routed through banks.  Term loans for CAPEX are released in the name of machinery & equipment suppliers while the Working capital is made available in the form of OCC.   The sanction could be through fund based or non-fund based or mixed.

Every prospective borrower of loan would get a common question as to whether bank will sanction loan for the project.  Even the regulating authority of respective government schemes would not be able to confirm about the prospects of loan sanction.

I have attempted to draw important points evaluated by banks in the sanction of loan.  Mind these are not exclusive.  If you feel you have answers for most of the things, you will sure get loan from the Bank.  After all, Banks are always keen to lend money where they find business i.e. confidence and assurance that the borrower will not default in loan repayment.  Hence, it is the duty of borrower to satisfy the business requirement of banks so that he become eligible to draw deserved financial support.  Once a healthy relation is formed with a banker, we can always be sure about drawing further support in the name of extended Term Loan or extended Working Capital or any other mode.

epmworld Loan appraisal

Loan sanction is a cumbersome process.  Depending upon the availability and submission of various data by the borrower, it would take a minimum of 4 weeks time for a new loan application for a start-up project.

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Business loans without collateral

Posted by on Jan 20, 2011 in EPM World, Government Schemes, Project Finance, Loans | 90 comments

Business loans can be availed even without any collateral security under CGSME and PMEGP. I have compiled a list of loans available, eligibility to avail the loans and other important details in that regard.

(click on the image for a better view)

Govt. of India support to MSE sector

Small Industry Loans without Collateral

 

Loans without collateral security
Compiled by http://www.blog.epmworld.in Credit Guarantee Scheme for Micro and Small Enterprises (CGSME) Prime Minister Employment Generation Programme
Eligible borrowers New and existing Micro Entrepreneurs engaged in manufacturing or service activity excluding Retail Trade. Any individual above 18 years of age.
For existing units banks can sanction loans under CGTMSE towards term loan or renewal of working capital facilities. For more info pl. visit the website http://www.pmegp.in
Eligible businesses Any manufacturing or Service unit not in the negative list. Any industry not covered in the negative list.
Credit / Financial assistance INR 100 lakhs INR 25.00 lakhs for manufacturing sector.
Fund and non-fund based.Non fund based could be Letter of credit or BG. INR 10.00 lakhs for service sector.
Co-financing Borrower can avail joint financing by two institutions like SIDBI, NSIC, Any Member Lending Institution (Banks)subject to the credit sealing. NA
Loan tenure 7 years 3 to 7 years
Compiled by http://www.blog.epmworld.in
Annual service fee 0.75% of sanctioned credit facilities. Consult Bank
Annual service fee exemption at the bank’s discretion. To women entrepreneurs, MSE loans up to 10.00 lakhs and eligible borrowers in North Eastern Region and J&K in excess of 0.25%. Consult Bank
Guarantee fee 1% of sanctioned credit facilities. One time payment. Consult Bank
Borrower’s contribution As suggested by the bank.Generally the debt:equity ratio would be at 3:1 i.e. borrower should be able to bring in 1/4 of loan amount. General category at 10%.
SC/ST/OBC/Minorities/Women/Ex-servicemen, Physically handicapped, NER, Hill and Border area at 5%.
Subsidy As applicable to respective industry from 5% to 50%. General category (i) 25% for Rural area and (ii) 15%% for Urban area.
SC/ST/OBC/Minorities/Women/Ex-servicemen, Physically handicapped, NER, Hill and Border area. (i) 35% for Rural area and (ii) 25% for Urban area.
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Prime Minister Employment Generation Program

Posted by on Jan 7, 2011 in EPM World, Government Schemes | 34 comments

The following are the details of financial assistance available under PMEGP.

Industry Eligible loan Promoters equity Subsidy Loan given by Security
Manufacturing INR 25.00 lakhs General Category:

10%

Special (including SC / ST /
OBC /Minorities/Women, Exservicemen,
Physically
handicapped, NER, Hill and
Border areas etc:

5%

General Category

Urban : 15%

Rural: 25%

Special (including SC / ST /
OBC /Minorities/Women, Exservicemen,
Physically
handicapped, NER, Hill and
Border areas etc.

Urban : 25%

Rural: 35%

Any Public Sector Bank or Private Scheduled Bank at their discretion based on the project viability. Nil up to INR 5.00 lakhs

Covered under CGF above INR 5.00 lakh and up to INR 1.00 crore.

Under CGF no security required up to INR 1.00 crore.

Banks at time might demand depending upon the merits and demerits of the project.

Service INR 10.00 lakhs

Required enclosures along with application:

  1. Project report of the activity
  2. Attested copy of OBC / ST / Minority / PHC / Ex-servicemen certificate.
  3. Attested copy of the educational qualification, experience, training certificate if any.
  4. Attested copy of EDP training [for a minimum period of 2 weeks] certificate, if any.
  5. Affidavit in bond paper costing Rs. 15/-
  6. Consent letter from Bank, if available.
  7. No objection from Gram Panchayat, if applicable

The procedure:

  • All the loan applications received under PMEGP scheme will be  placed before the District Level Task Force Committee [DTFC] under the Chairmanship of the Deputy Commissioner of the concerned District from time to time.
  • The DTFC is conducts personal interview of the applicants and recommends the deserving cases on the basis of the viability of the project to the concerned banks.
  • The recommended cases will be sponsored to the concerned banks for consideration of finance under the captioned scheme.
  • The bank will sanction 90% of the project cost in case of General category and 95% of the project cost in case of Special category of beneficiary / institution and recommend their cases to the KVIB for arranging 2 weeks duration compulsory EDP training.
  • KVIB will arrange EDP training. Once the beneficiary undergone EDP training, the bank will disburse full amount suitably for setting up of project.
  • Once the 1st installment of bank finance is released, the bank will submit margin money claim in the prescribed proforma [which is 25% of the project cost in case of General category and 35% of the project cost in case of Special category] to the designated Nodal Banks.
  • Once the margin money is released in favor of the loanee, it should be kept in the term deposit receipt of 3 years at branch level in the name of the beneficiary / institution. During this period, no interest will be paid on the TDR and no interest will be charged on loan to the corresponding amount of the TDR.
  • The margin money component [back ended subsidy] will be credited to the borrowers loan account after 3 years on the basis of 100% Physical Verification Report of the said unit.
  • 100% Physical Verification of the actual establishment and working status of the units, setup under PMEGP will be done by KVIC.

May also check for Credit Guarantee Fund scheme details in the other posting.

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