Bank Credit Facilitation Scheme – Types of Loans, How to Apply for Bank Credit Facility

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What is a Bank Credit Facilitation Scheme?


To help the Ministry of Micro, Small and Medium-sized industries (MSMEs), The National Small Industries Corporation (NSIC) has signed a Memorandum of Understanding with a number of banks in India. This agreement is known as Bank Credit Facilitation Scheme. It provides credit support to various MSMEs, which they require from various Private and National Banks.

National Small Industries Corporation (NSIC) is an ISO 9001-2015 certified Government of India Enterprise. The primary objective of NSIC is to foster the growth of MSMEs by providing support services encompassing Marketing, Technological assistance, Finance and other services. They provide enhanced Government Connectivity services.

What are MSMEs?


The Ministry of Micro, Small and Medium-sized based Enterprises is defined by the number of employees appointed at their firm. These business enterprises are limited in size but outnumber large business enterprises by a huge margin. The MSME sector in India is the second largest, with China being the first. This sector entails more than 6.33 crore business units. From this, 90% of them are Micro Enterprises. This sector employs more than 12 crore Indians across the country.

MSMEs are said to contribute abundantly to India’s growing economy. They have taken over various sectors such as healthcare, telecommunications and electronics. To cater to the growth of MSMEs, financial institutions have come up with several Business Loan Schemes to ensure that these enterprises never fall short of funds. MSMEs are said to be the backbone of the Indian Economy.

How Much Credit Support can MSMEs Receive Under This Scheme?


Depending on the need of the enterprise, the scheme will offer credit support. The bank already fixes the Term Loan limits. For units requiring Working Capital, the loan is limited up to 5 crores. The requirement of the loan is assessed on the basis of 25% of the projected turnover of the next year. Consequently, for limits above 5 crores, the Maximum Permissible Bank Finance method is used to determine the working capital requirement.

Advantages of Applying to the Bank Credit Facilitation Scheme


  • It ensures assistance to MSMEs through the process of filing and documentation for loan schemes
  • It assists MSMEs to get the best interest rates on their products
  • It helps MSMEs to cover their financial needs from the bank
  • It facilitates easy credit availability for all MSMEs

Key Features of Bank Credit Facilitation Scheme


  • This scheme facilitates both fund-based and non-fund-based support from the banks
  • The fund-based loan supports Term Loans (Short term, Medium Term and Long Term) and Working Capital Loans
  • The Interest Rate and the Security requirements differ from bank to bank
  • Term loans can be availed for the acquisition of fixed assets
  • Working Capital Loan works towards the capital needs of MSMEs

Types of Loans Provided by the Bank Credit Facilitation Scheme


MSMEs can opt for the following types of loans with the aid of NSIC:

  • Term Loans: Short Term, Medium Term, and Long-Term Loans can be availed for the acquisition of fixed assets. Fixed assets include Land, Plant, Machinery, etc. These loans can be useful towards setting up new units for expansion, renovating existing units and can be used to diversify the business or organization.
  • Working Capital Limits: This loan is taken to finance a company’s operational expenses. MSMEs can use this to manage short-term needs to assist the cash flow of the company. This loan can help in the form of open cash credits, overdraft against book debts and bill discounting facility
  • Non-Fund Based Support: In this scheme, the lending bank does not commit to any physical outflow of funds. They provide facilities such as Letter of Credit and Bank Guarantees. They allow MSMEs to acquire monetary aid when the company opens a credit account from which they can withdraw cash.

Eligibility to Apply for the Bank Credit Facilitation Scheme


Any Micro, Small or Medium business enterprise is eligible to apply for the Credit Facilitation Scheme.

Manufacturing Enterprise Service Enterprise
Micro-Enterprise The original value of an investment in plant and machinery is up to Rs.25 lakhs. The original value of an investment in equipment is up to Rs.10 lakhs.
Small Enterprise The original value of an investment in plant and machinery is Rs.25-500 lakhs. The original value of an investment in equipment is Rs.10-200 lakhs.
Medium Enterprise The original value of an investment in plant and machinery is Rs.500-1000 lakhs. The original value of an investment in equipment is Rs.200-500 lakhs.

 

Documents Required to Apply for the Bank Credit Facilitation Scheme


  • Identity Proof such as Voter ID, Aadhaar Card, Driver’s License, PAN card must be delivered.
  • Proof of Residence such as a passport or even electricity or telephone bills is mandatory.
  • Proof of Business Address must be given.
  • Asset and Liability Statement of promoters, guarantors, directors, along with most recent records of income tax returns
  • A copy of the Rent Agreement or Certification of Lease, if the premise of enterprise has been acquired of rent or lease.
  • A copy of the SSI Registration Certificate and a memorandum of the entrepreneur
  • A complete profile of your business enterprise should be provided. This includes the nature of the business activity, the Address of the establishment, the names and addresses of promoters, and the company’s shareholding pattern.
  • A Balance Sheet with statements of IT/ST returns of the last two years must be provided
  • A projected Balance Sheet for the next two years
  • A duly filled application form in the prescribed format
  • A copy of the Credit Monitoring Agreement (CMA) in the prescribed format
  • Record of existing bank accounts
  • A project report towards Term Loan requirements
  • Estimates, Quotations, Sanctioned Building Plan etc.
  • Deeds of Partnership, trust, rules and bye-laws, memorandums, articles of association and Certificate of Incorporation have to be delivered.
  • A certificate of Clearance from the Pollution Control Board and a sanction from the Electricity Board along with certificates from other sanctuary authorities
  • Monthly records of data and sales of the current financial year, the value of stock in process, finished goods, debtors, creditors etc., must be duly submitted.

How to Apply for Bank Facilitation Scheme in 4 Easy Steps


 Step 1: Visit the official NSIC website

Step 2: Download the application form on the website

Step 3: Fill out the application form by providing the necessary details

Step 4: Submit the completed form along with respective documents

Application website: https://www.nsic.co.in/Schemes/Credit-Facilitation-Through-Bank.aspx

Repayment: 5 to 7 years (11 years in exceptional cases)

MSME enterprises play a major role in the GDP growth of the economy. The scheme’s ultimate objective is to boost the Indian economy by aiding MSMEs. The scheme assures help at reasonable and affordable rates. Procuring loans has been made easy through the Bank Facilitation Scheme, even when MSMEs do not possess the documents required to apply for conventional business loans.

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