A Memorandum of Understanding (MoU) was signed between SIDBI and IamSMEofIndia.
This was a historic event and marked the beginning of a new era of mutual support, cooperation and trust between IamSMEofIndia and SIDBI in helping the growth and progress of Modern Indian MSMEs.
Most of the MSMEs keep on investing in capital assets like dies, jigs, fixtures, testing equipment, machinery, generating sets, transformers, computers, office equipment and other miscellaneous fixed assets throughout the year. Since such needs often emerge suddenly, the units generally have no time to approach their regular bankers for term loan assistance; or sometimes the requirement of documentation and procedure to enhance existing credit limits are too rigorous and time consuming. MSMEs have to resort to unsecured loans or Loans against Property from the alternate private FIs at very high interest rates or from the personal sources at even higher interest rates or use their limited and precious Working Capital/ CC/ OD limits. These loans are costly and are also of shorter duration (1-2 years), which further results in liquidity tightness in these small units. By the end of every financial year, lot of working capital and reserves get fixed in these assets and thus cash position remains tight.
In order to provide a solution to the above and upon the request of IamSMEofIndia, SIDBI has approved a very special Collateral-free Equipment Finance scheme for our Members.
Under the scheme, SIDBI sanctions pre-approved limits (Line-of-credit) in the range of Rs10 lacs to 75 lacs INR to IamSMEofIndia members depending upon their financials and requirements, which could be used by such MSMEs for capital expenditure during the year. These limits can be intimated to such MSMEs in the form of sanction letters valid for, say 6 months or more, so that at the time equipment is to be purchased, the disbursement can be made immediately, say, within 24-48 hours.
MSME can use this limit to buy fixed assets as and when required. After six months, the amount used from this limit is converted to EMIs. If required, repayment can be staggered/ ballooned with gestation period. Credit Linked Capital Subsidy @ 15% shall be available wherever applicable. Proprietorship, Partnership, Pvt. Ltd and limited companies in Micro, Small & Medium Categories, which are in existence for minimum 3 years and in profits for 2 years, are eligible.
This limit shall be over and above the existing credit limits with existing bankers which can continue.This is an innovative scheme which has been specially introduced upon our request and greatly benefits our members in providing timely finance at sub-PLR rates (PLR minus 0.5%). At the time of writing this, PLR is 12.25%. Therefore, the rate under this scheme is 11.75%.
Working Capital limits shall thus not be diverted and healthy liquidity can be maintained.
The front desk operations are managed by IamSME of India. IamSME shall forward the complete file with its recommendation to the SIDBI after completion of application Forms, documents check, asset verification, due diligence, credit appraisal and CMS data.
We are proud to say that many MSMEs have availed this unique facility.
Their working capital is now not diverted to buy fixed assets.
More than Rs.50 crores have been disbursed and increasing every passing day.
The success can be gauged by the fact that there is not even a single NPA since the scheme started. That’s a perfect example of Public-Private Partnership.
No extra fee is charged by IamSMEofIndia from MSMEs to process and manage.