Latest Credit Facilitation Scheme MSMEs Must Know

In 2020, the MSME sector employed over 110 million individuals in India single-handedly. In addition to providing employment, the sector also contributed 48% to exports and 30% to GDP, as per a report on Livemint. Hence, you can already see why the government leaves no stones unturned to boost the sector's growth and strengthen its infrastructure.  To facilitate objectives of this sort, the government has launched multiple business loan schemes over the years, of which is the Bank Credit Facilitation Scheme. Find out more about this credit scheme from the section below.

Bank Credit Facilitation Scheme – In A Nutshell

It is essentially an agreement or a memorandum of understanding between two parties – the National Small Industries Corporation (NSIC) and several private and national banks in India.  Such an agreement is drawn to help small and medium enterprises meet their credit requirements and access business loans from both private and national banks. Under this scheme, MSMEs can receive required assistance with a loan application, documentation, and other formalities.  Note that every registered and government-recognised business, be it a small, medium or micro enterprise, is eligible for this facilitation scheme. However, they must have a KYC compliant account to avail a loan under this scheme. 

Types Of Loans Under Bank Credit Facilitation Scheme

You can apply for any of these business loans under this scheme – 
  • Working Capital Limit

The loans under this category can take the form of overdraft facility against book debt, bill discounting services, and open cash credits. 
  • Non-fund-based Limit

This type of loan category includes guarantees like foreign bank guarantees, letter of credits, and credit letter. To benefit from this credit facility, entities need to open a credit account that allows account holders to withdraw cash within a pre-set credit limit. 
  • Term Loans

You can apply for long-term, mid-term, or short-term loans based on your requirement and repayment capability. Generally, enterprises apply for this loan to purchase equipment or meet other large-scale expenses essential to set up an enterprise or its expansion. 

Salient Features Of Bank Credit Facilitation Scheme

Check out the most noteworthy features of this credit facilitation scheme –
  • Integrates both private and public sector banks to provide MSMEs access to credit. 
  • Helps enterprises secure lower interest rates under the Ministry's Performance and credit rating scheme. 
  • The loans obtained under this scheme usually come with a repayment tenure, ranging from 5 to 7 years. In some exceptional cases, the same can stretch up to 11 years. 
  • Under this scheme, the National Small Industries Corporation helps MSMEs to complete and submit the same. 
  • It extends help to MSMEs while switching banks or transferring account details from one financial institution to another. The scheme also assists when applying for a new account. 
Other than these, this scheme also aims to provide transparency to MSMEs to filter and access more favourable credit proposals sponsored by NSIC.

Steps To Apply For Bank Credit Facilitation Scheme

You can apply for this bank credit facility by following these steps – Step 1 - Go to the NSIC's official website  Step 2 - Look for the application form  Step 3 - Download and print the form  Step 4 - Provide essential details to fill up the form  Step 5 - Submit the duly filled form along with all the essential documents 

Documents Required For Bank Credit Facilitation Scheme

Based on your purpose of taking a business loan, you may need to submit a different set of documents –
  • Proof of Identity 
  • Proof of residential and business address
  • Asset and Liability Statement with latest ITR
  • Rent agreement or lease deed
  • Copy of SSI registration certificate or Entrepreneurs Memorandum 
  • Profile of the unit
  • Balance Sheet with IT/ST returns of the last 3 years
  • Projected Balance Sheet for the next 2 years
  • CMA data shared in
  • The prescribed format when the limit is Rs. 100 lakhs or more 
  • Details of an account standing with existing bankers
  • Project Report highlighting term loan requirements
  • Quotations of the sanctioned building plan, etc.
  • Partnership Deed/Certificate of Incorporation/Trust Deed/Memorandum and Articles of Association, etc.
  • Sanction from Electricity Board or clearance from Pollution Control Board
  • Monthly production and sales data, finished goods, value of the stock, debtors, creditors, etc.

Bottom Line

There are several parameters and processes that entrepreneurs must meet to avail a business loan under the bank credit facilitation scheme. But in case you are looking for a simpler financing option that does not increase the loan burden, you can opt for an alternative funding option like invoice discounting.  Such a financing option helps businesses to leverage unpaid invoices to raise capital. Through invoice discounting, businesses can easily access funds within 24 hours to 72 hours and meet immediate working capital or cash flow-related crises.