SIDBI‘s Scheme for Asset-Backed Assistance for the Service Sector
SIDBI‘s Scheme for Asset-Backed Assistance for the Service Sector
To facilitate the flow of credit to the Service Sector Entities for meeting credit needs, the Small Industrial Development Bank of India (SIDBI) has recently launched a new scheme called Asset Light Scheme for Service Sector Entities. Under this scheme, financial assistance is provided to eligible service sectors, in the form of a Term Loan/ Revolving Term Loan / Line of Credit with lower collateral requirements for meeting the credit needs. In this article, we will look at the SIDBI‘s Scheme for asset-backed assistance for the service sector.
The objective of Scheme
The primary objective of the SIDBI‘s Scheme for asset-backed assistance for the service sector is to meet the credit needs of entities/projects creating fixed assets as part of the project/business or offering fixed assets as collateral.
Key Features of the Asset-Backed Scheme
The key feature of the SIDBI‘s SIDBI‘s Scheme for asset-backed assistance for the service sector is as follows:
- It is one of the quick delivery products of SIDBI; a loan under the scheme will sanction within 2 days.
- The entities primarily receive assistance in the form of Term Loan/ Revolving Term Loan / Line of Credit with a need-based sum, generally not less than INR 50 Lakhs.
- SIDBI provides up to 50 crores for registered MSME units and `35 crores for other eligible service sector projects.
- Under this scheme, enterprises will get funding for setting up new facilities.
- Simplified documentation is the feature of SIDBI’s Asset-Backed Scheme.
Eligible Enterprises for Asset-Backed Scheme
SIDBI offers term loans to New / Existing Service Sector Entities as defined by SIDBI:
Indicative profile of businesses
- Hotels
- Hospitals
- Logistic Companies etc.
Financial Assistance Offered
Financial Assistance Offered under the SIDBI‘s Scheme for asset-backed assistance for the service sector is as follows:
Project assistance:
SIDBI offers Financial Assistance for setting up new facilities or up gradation/expansion of existing facilities.
Along with CAPEX, assistance could also be provided for WC gap/ margin money for WC, intangibles, and any other bonafide business expenditure.
Exclusive equipment finance
Small Industrial Development Bank of India (SIDBI) also offers exclusive assistance for equipment
Nonproject assistance
Won CAPEX assistance for WC gap/ margin money for WC, intangibles, and any other bonafide business expenditure
Quantum of Assistance
The Quantum of Assistance under the SIDBI ‘s new Scheme is as follows:
- SIDBI is providing Rs. 50 lakh for eligible entities based on the needs under this scheme for Service Sector Entities.
- Maximum assistance is subject to caps not exceeding `50 crore for registered MSME units and `35 crore for other eligible service sector projects.
Rate of Interest
The interest rate for the loan under the scheme will be based on the credit rating and linked to Prime Lending Rate (PLR)
Repayment Period
SIDBI offers a repayment period of Upto 12 years including a moratorium for project-based assistance.
- For non-project assistance, SIDBI offers upto 5 years including a moratorium
- Repayment Period For exclusive equipment financing, generally 3-6 years including moratorium
- Repayment could be fixed installments or ballooned in line with the expected cash flow
- For seasonal industries/ businesses, repayment could be suitably structured
Security Details
The assistance shall be secured by assets acquired under the assistance and/ or other unencumbered assets of the borrower.
Other acceptable collateral securities, as may be stipulated.
Processing Fee
To avail of the loan under the scheme, the borrower needs to pay up Upto a 2 % processing fee.
Documentation for Asset-Backed Scheme
SIDBI offers a simple one-page application and a built-in checklist for this scheme. The Standard KYC checks and due diligence are also available for the Asset-Backed Scheme.
Asset-Backed Scheme Application Procedure
The eligible MSME needs to access the SIDBI’s online application page to apply to the scheme.
The online Registration Login page will display, by clicking on the Registration tab, a new user can register in SIDBI and avail of the loan.
The applicant entity needs to provide the details of Enterprise Name, Phone number, Email, and Proposed Total Loan Requirement.
On successful registration, the user name and password will be provided to the entity. After login into the portal, the applicant needs to fill in a simple one-page application and built-in checklist.
Asset Backed SchemeAfter the Standard KYC checks and due diligence, the loan amount will be credited to the applicant’s account within 48 hours
