Working Capital Term Loan Scheme

Working Capital Term Loan Scheme

Working Capital Term Loan Scheme

Working capital is a fundamental requirement of every business, without which its very functioning is at stake. A working capital term loan is accorded to extend long-term working capital credit facilities to entrepreneurs so as to assist them in addressing issues such as irregular cash flows, non-availability of cash reserves, etc. This article seeks to create awareness of the Tamil Nadu Working Capital term loan scheme in terms of how it caters to the eligible beneficiaries.

Objective of the Scheme

The Tamil Nadu Government sought the implementation of the Working Capital Term Loan Scheme to provide adequate funding to the units engaged in manufacturing and processing industrial units, thereby enabling them in meeting the working/additional working capital requirements.


The Tamil Nadu Industrial Investment Corporation (TIIC), which is an undertaking of the Tamil Nadu Government, have extended the scheme to the units assisted and non-assisted by the developmental body. Such units should have been operational for the previous two financial years and should have earned a cash profit during these years.

The units specified above do not qualify if they are not classed in the standard asset’s category of TIIC/Banks for the previous two years. Moreover, the net worth of these units should have a positive trajectory.

Quantum of Loans

Under the scheme, the eligible units could avail a loan of up to Rs. 150 lakhs in the initial period, while additional or enhanced working capital will be considered after a period of one year. Out of the entire contribution, the promoter is required to provide at least 25% of the working capital assessment.

Debt Equity Ratio

Debt equity ratio is a measure of the relative contribution of the creditors, shareholders or owners to the capital employed in the business. To be a part of this scheme, the overall Debt Equity Ratio of a unit should not be more than 2:1 (including working capital Term Loan Component).

Repayment of Loans

The principal period of repayment is affixed at 42 months, which includes a moratorium period of six months. The repayment must be made in equal monthly instalments.

Collateral Security

Collateral is a property or asset offered by the borrower as a security of his/her loan. The terms of collateral security vary in accordance with the units, which is specified below for your reference:

  • Existing assisted units – units classed under the standard category for the previous two financial years are required to render 100% of WCTL (residual value of existing primary land and building as well as collateral security in the form of land and building) as security.
  • Units not assisted by TIIC – Such units, which lack any funds to meet the working capital requirements, must provide a collateral security to the extent of 125% of WCTL.
  • Units assisted by TIIC – units assisted by TIIC, which holds working capital limits with any bank must provide a collateral security of 150% of WCTL.

Application Form

The applicant may obtain the application form for this purpose from the Head Office or Branch Office of TIIC. Upon completing the application, the same must be submitted to the office of TIIC.

Registration Fee

Applicants are required to remit a fee of Rs. 10,000 for loans which require the endorsement of the Branch Selection Committee (BSC) or Regional Level Sanction Committee (RLSC). If the loans must be considered by the EC or the Board at Head Office, a fee of Rs. 50,000 must be remitted.

Other Related Guides

How to Start a Business in India How to Start a Business in India Entrepreneurial aspirations among youngsters are rising along with the growing middle class in India. Technology has...
Export Quality Control and Inspection Act Export Quality Control and Inspection Act The Export Quality Control and Inspection Act were enacted in the year 1963 to improve the overseas trade o...
Commercial Paper in India Commercial Paper in India Commercial paper was first issued in the year 1990 in India as a short-term instrument. Commercial papers were introduced a...
Export under Rebate Export under Rebate According to Section 11B of the Central Excise Act, 1944, the term refund includes 'rebate' of duty excise on excisable goods tha...
Export Development Fund Export Development Fund An Export Development Fund (EDF) facility is a unique fund initiated by the Government of India under the Exim Bank Act and g...

Post by Sreeram Viswanath

IndiaFilings is India's largest online compliance services platform dedicated to helping people start and grow their business, at an affordable cost. We were started in 2014 with the mission of making it easier for Entrepreneurs to start their business. We have since helped start and operate tens of thousands of businesses by offering a range of business services. Our aim is to help the entrepreneur on the legal and regulatory requirements, and be a partner throughout the business lifecycle, offering support at every stage to ensure the business remains compliant and continually growing.