SME Contractor Loan from Bank of India

Star SME Contractor Loan or Credit Line is a scheme to finance the working capital requirement of civil contractors, mining contractors, engineering contractors, transport contractors, etc. The scheme is operated by

Bank of India. Bank of India is a nationalised bank having 4963 branches in India spread over all states/ union territories.

Eligibility Criteria

To be eligible for the SME Contractor Loan, the applicant must be a contractor like civil construction contractor, mining contractor, engineering contractor, transport contractor or any other type of contractor. The business can be established as a proprietorship firm or

partnership firm or private limited company, a company would be preferred. In addition, the contractor must have been engaged in the same business line for atleast three years and must have audited financial statements.

Amount of Loan

A working capital loan of Rs.10 lakhs to Rs.500 lakhs can be sanctioned under the SME contractor scheme. The loan will be a line of credit by way of fund based working capital limit, bank guarantee or letter of credit. Typically, 30% of the last two year average turnover is sanctioned as loan. Of the total working capital loan sanctioned, two thirds will be a fund based facility and one third will be a non-fund based facility such as bank guarantee or letter of credit.

Margin Requirement

There is a minimum margin requirement of 20% for fund based facility. Though the limit will be treated as an unsecured loan, contractors will have receivables which should be charged to the Bank and a margin of 20% maintained. A 15% cash margin must be maintained for non-fund based facility.

Interest & Processing Charges

The rate of interest charged for the SME contractor loan will be as per the prevailing interest rate and risk rating of the applicant. MSME applicants falling under the definition of MSME will be exempt from commitment charges. Further, assets charged to the bank under the loan should be covered with insurance for risks including fire, civil commotions and riots. The policy should also be renewed from time to time.

Collateral Requirement

Collateral is a requirement for obtaining SME contractor loan and throughout the loan period, a collateral cover of 1.5 must be maintained. Also, the first charge of the unencumbered assets of the company, both current and fixed must be charged to the bank.

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Frequently Asked Questions

Common questions about SME Contractor Loan from Bank of India.

The SME Contractor Loan is a scheme offered by Bank of India to finance the working capital requirements of various types of contractors, such as civil contractors, mining contractors, engineering contractors, and transport contractors.

To be eligible for the SME Contractor Loan, the applicant must be a contractor engaged in civil construction, mining, engineering, transport, or any other type of contracting business. The business should be established as a proprietorship firm, partnership firm, or private limited company, with a preference for companies. Additionally, the contractor must have been operating in the same business line for at least three years and have audited financial statements.

Under the SME Contractor Loan scheme, a working capital loan ranging from Rs. 10 lakhs to Rs. 500 lakhs can be sanctioned. The loan will be provided as a line of credit by way of fund-based working capital limit, bank guarantee, or letter of credit.

Typically, the loan amount sanctioned under the SME Contractor Loan scheme is 30% of the last two years' average turnover of the contractor's business. Out of the total working capital loan sanctioned, two-thirds will be a fund-based facility, and one-third will be a non-fund-based facility, such as a bank guarantee or letter of credit.

There is a minimum margin requirement of 20% for the fund-based facility under the SME Contractor Loan scheme. Additionally, a 15% cash margin must be maintained for the non-fund-based facility.

The rate of interest charged for the SME Contractor Loan will be based on the prevailing interest rate and the risk rating of the applicant. MSME applicants falling under the definition of MSME will be exempt from commitment charges.

Yes, collateral is a requirement for obtaining the SME Contractor Loan, and a collateral cover of 1.5 must be maintained throughout the loan period. The first charge of the unencumbered assets of the company, both current and fixed, must also be charged to the bank.

The assets charged to the bank under the SME Contractor Loan should be covered with insurance for risks including fire, civil commotions, and riots. The insurance policy should also be renewed from time to time.

No, the eligibility criteria for the SME Contractor Loan require that the contractor must have been engaged in the same business line for at least three years and must have audited financial statements.

Yes, the SME Contractor Loan is a scheme offered by Bank of India, which is a nationalized bank with 4,963 branches spread across all states and union territories in India.