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IDBI Bank – Vendor Finance Program

IDBI Vendor Finance Program

IDBI Bank – Vendor Finance Program

Industrial Development Bank of India or IDBI Bank is a worldwide bank equipped with advanced Information Technology in the field of management and operations. The bank offers customized solutions in banking and the financial management sector solutions to its clients. The Bank is planning opening branches across the world and has an overseas operational branch in Dubai. IDBI offers services through its global spread network by ways of ATMs and services in the domains of retail and corporate banking. IDBI is enabled to offer personalized banking and financial solutions to its various clients. As on March 31, 2016 the bank had a total Balance sheet size of Rs.3,74,372 crores and in totality business of Rs.4,81,613 crores.

Loan Overview

The importance of realising blocked funds at different points of the value chain is one of the main concerns of those parties involved in the business of manufacture and supply of a variety of goods, and services to the corporate world. Funds are necessitated by the manufacturers/suppliers at two important stages of the production i.e. at the manufacturing stage and at the post-manufacturing stage. “Vendor Finance” product offered by IDBI Bank is designed such that comprehensively all the links in the value chain can be sufficiently funded for proper implementation of the vendor related business. Vendor finance is a type of lending according to which a company lends money that is used by the borrower to purchase the products of the vendor or property. Vendor finance is typically available in the form of deferred loans, or subscribed shares subscribed by the concerned vendor. The vendor frequently acquires shares in the borrowing company.

Eligible Loan Applicants

The following types of applicants are eligible for financing under the IDBI vendor financing program:

  • All Vendors of large corporates.
  • All Original Equipment Manufacturers (OEMs) – An original equipment manufacturer (OEM) is defined as a company of which products are utilised as components in the product of another company.

The loan can be used to fund the manufacturing cycle – which is the entire cycle of processes involved from the start of order placing to the manufactured product being purchased by the end consumer. Funds can also be used to fund the receivable cycle particular with reference to accounts receivable.

Loan Facility

  • Overdraft / Cash Credit
  • Letter of Credit/Bill Discounting /Financing against Invoices.

Note: Letter of Credit is a letter that is issued by a bank to a different bank (particularly one in a different country) to serve as a guarantee for payments that is made to a specified person under certain precise conditions is a Letter of Credit. The process of bill discounting is a way for businesses to borrow money based on amounts due from customers. Financing against invoices is a method for businesses to engage in borrowing of money on the basis of due amounts from customers.

Interest Rate

The pricing of the loan is reflected by the Interest Rate linked to Base Rate of Bank and Rating. Base rate is the minimal rate determined by the Reserve Bank of India and below this banks are not permitted to issue customer loans. A bank loan rating conveys the degree of risk with reference to timely payment of the bank facility under consideration of being rated.

Collateral Security

  • In the case of working Capital it involves the hypothecation of all the current assets
  • In the case of Term Loan it involves a First or Specific Charge on created assets out of the Bank’s  finance or all fixed assets
  • In the case of Bill discounting it involves creation of the accepted Bill / invoice by the deputed officials of OEM or Corporate.

In addition, the loan requires the personal guarantees of the promoter directors.