TERM LOAN ASSISTANCE

Purpose

RFC grants loans for meeting the long term requirements of the concerns in the form of land, building, plant and machinery etc. Working capital requirement is also considered in its special schemes such as composite term loan scheme and single window scheme. In case of our regular and good borrowers assistance for working capital is also considered, under good borrower's scheme.


Norms of Financing:

*Minimum promoter's contribution: The Corporation stipulates a condition of minimum promoter's contribution which is presently 33% of the project cost. It may be suitably increased on case to case basis considering various factors of the project.
*Debt Equity Ratio (DER): Not to exceed 2:1 in any case.

* Debt Service Coverage Ratio(DSCR) : Not below 1.7:1

Security/ Mortgage of Assets:

Loans are granted against the first charge ( pari- passu charge in case of joint finance) of the existing and future fixed assets ( viz. land, building, machinery and other tangible assets of the concern). However, on availability of working capital finance from Banks, the second charge in favour of bank on the fixed assets mortgaged to the corporation, can also be considered/ allowed, on the request.

Nature of Mortgage:

To minimize the expenditure and delay in obtaining the loan by the entrepreneurs, RFC does not insist on registered mortgage of land and buildings, except in rare cases, allows advances on equitable mortgage of land and buildings and hypothecation of plant and machinery wherever original documents are available. We expect from our entrepreneurs that only unencumbered assets having clear and marketable title deeds are offered as security.

Personal Guarantee and Collateral Security:

The Corporation creates the charge on the assets being financed. In addition to the charge on existing as well as proposed assets, the Corporation also secures the loan by taking personal guarantee of the promoter, partners and directors. 
In cases where the project is considered risky or where net worth of the promoters is not adequate, collateral security, 3rd party guarantee is also taken of persons of repute. The Corporation also takes collateral security in certain cases which involve acquisition of second hand plant and machinery, assistance under Single Window Scheme, under NEF scheme, Assistance in rented premises, mining industry, transport loan or projects which are considered risky or in cases of those industries where in the opinion of the Corporation there is limited scope or fast changing technology projects. The collateral security may be of full value of loan, or reduced amount depending upon the risk perception. The property furnished for collateral security should be easily marketable/ mortgageable having clear title and should not be an agricultural land.

Security Margin:

The Corporation generally grants loans retaining a security margin of 30% on assets. Higher margin varying from 40% to 50% is retained on moulds, dies, kilns and certain traditional industries like cotton ginning, oil , guargum etc. and for second hand P&M if considered for finance.


Interest Rate Structure:

New Interest Rate Structure

 Period of Repayment:

The period of repayment of loan is decided in each case depending upon the cash generation of the project. It varies from 5 to 10 years. The principal amount is repayable in quarterly instalments usually after 12 to 18 months from the date of commercial production. In case of projects relating to setting up of hotels or hospitals where comparatively higher implementation period is envisaged then the repayment period is determined after 24 months from the date of implementation of the project. Additionally the repayment schedule is also drawn up in a manner that the repayment obligation is tapered by asking for smaller Instalments in the initial years with progressively increasing amount.


Favourable Indicators:
While examining the applications approvals are granted considering the following favourable indicators. In case of new promoters the appraisal is done carefully to assess the viability of the project:
* Promoters should already have industrial experience either in the same industry or in some other industry.
* Promoters with high net worth and having adequate investible funds.
* Promoters disclosing high total income in their income tax returns.
* Promoters having good past track record with the Corporation with satisfactory dealings.
* Promoters should have invested heavily in the proposed project of their own without waiting for Corporation's assistance.
* Units where there is a firm tie-up arrangement for sale of the goods or who have experience of bulk exports.
* Promoters having adequate financial resources and setting up a 50% EOU/ infrastructure projects.


When We Say Sorry:
Our endeavour is to support every viable project of good promoter but we have to say sorry, if :
* The aggregate paid up capital and free reserves of your company/ concern exceeds Rs. 30 crores.
* Any Director of our Corporation is Proprietor/ Partner/Director/ Manager/ Agent/Employee or guarantor in your concern or having substantial interest in your concern (except for those Directors nominated by the Government or the Corporation).
* You propose to set up an industry, registration of which has been banned by the Industries Department/ RPCB/ State Govt.
* Your proposed industry, in the opinion of the Corporation, is hazardous in nature or otherwise not to be encouraged.
* It is in restrictive list of the Corporation/ SIDBI/IDBI, if any.
* When the antecedents/ banker's report about the promoters is not satisfactory.
* Setting up of a unit would adversely affect the existing units.
* Promoter's contribution is not adequate and promoter does not agree to increase it.
* Process technology is not proven on commercial scale.
* Availability of raw material is inadequate.
* Product does not have adequate market potential.
* Promoter hails from a group which is not taking steps to rehabilitate other assisted unit.
* Proprietor/ Partner/ Director of the company and / or their family members are defaulter in other assisted units of the Corporation/ Financial Institution.
* When the Corporation feels that proposed loan is not adequately secured.

Restrictive List of RFC (Schedule LA (S) 1/6 A)