Kerala Financial Corporation (KFC), Thiruvananthapuram-based premier Government Financial Institution, launched a special loan facility for the Micro, Small and Medium Enterprise (MSME) sector on Thursday to assist them in executing the work orders and also to discount their pending bills.
Under the scheme, 75 percent of the cost of work received from Government Departments/ Agencies/ PSUs will be provided as a loan. Repayment will be depending on the duration of work and expected receipt of funds from the work awarding authority. The rate of interest will be linked to the credit rating score of the MSME starting at 8 percent.
Considering the COVID-19 situation, the credit rating of the MSME will be based on the analysis of pre-COVID period balance sheets, an official release by the state government said. Once the work awarding authority has accepted the bill, MSMEs can immediately get up to 90 percent of the bill amount by discounting. For final bills, discounting can be done without security also.
Micro, Small and Medium Enterprises (MSMEs) play an important role in the economic growth of the country. However, they continue to face constraints in obtaining adequate finance particularly in terms of finding funds to execute the work orders and also to convert their bill receivables into liquid funds. KFC’s scheme will be appropriate to address such issues faced in the MSME sector during this pandemic period.
To become eligible for the scheme, the applicant should be MSME Udyam registered. GST registration and the latest audited balance sheet are also mandatory. However, GST registration will not apply to MSMEs exempt from registration. If the MSMEs are having an annual turnover up to Rs 200 lakh and they are paying income tax on a presumptive basis, then an audited balance sheet will not be insisted.
The loan will be sanctioned as a Line of Credit (LoC) for a five-year period where MSMEs can avail facilities like Guarantees, Work Execution loans, Bill Discounting, Government Promissory Note Discounting, Equipment Finance, etc. Maximum assistance will be Rs 20 crore for companies/ Registered Co-operative Societies and Rs 8 crore for others. However, the limit for guarantees and discounting of government promissory notes will be up to Rs 50 crore for all entities.
The validity of the LoC is for five years. Once the customers execute the loan agreement, they can avail all facilities throughout the five-year period without many formalities. The scheme will be reviewed with feedback from the MSMEs. KFC targets to disburse at least Rs 500 crore under this scheme in this financial year itself.