The financial assistance under this scheme is available to the existing profit-making companies for acquiring machinery & equipment for expansion/ modernisation/ balancing. The company should satisfy the following eligibility norms to be covered under the scheme.
- The unit should be in operation for last four years and should be in profits and/ or declared dividend in the preceding two financial years;
- The current ratio should preferably be 1.33:1 or above;
- The cost of proposed equipment normally should not be more than 50% of the existing gross block;
- The applicant company should not be in default with the Institutions/ Banks; and
- The proposed equipment should be separately identifiable.
INR 500 lakhs per proposal
2 to 5 years
Rate of interest
12.5% p.a. floating
0.20% of loan amount
0.50% of loan amount
Service Tax & Processing Charges
Procedure is same as applicable under General term loan
In case of any default, the rate of interest applicable to general term loan is chargeable for the balance loan amount and it becomes the documented rate of interest for all intents and purposes. In addition, penal interest is charged @ 3% p.a. over and above this revised documented rate on the defaulted amount for the period of default.
HOW TO GO ABOUT AVAILING FINANCIAL ASSISTANCE UNDER THIS SCHEME
The Applicant is required to submit Application on the prescribed Performa which is available without any payment at Head Office and Branch Offices of the Corporation. The Application, along with processing charges & Service tax may be submitted at Head Office or Branch Office or in the Business Meets, which are organised from time to time along with the following information:
- Balance sheets for the last 4 years;
- Details of proposed equipments;
- Justification for the proposed equipments and likely benefits of the scheme;
- Details of existing borrowings with repayment schedule;
- Profitability Projections for the next five years;
ACCEPTANCE OF APPLICATION
The proposal is analysed with main focus on past performance of the unit and the advantages the proposed equipment will provide in its operations. It is accepted for appraisal immediately if it fulfills the basic parameters laid down in the scheme.
A quick appraisal is carried out with special emphasis on the following points:
- Performance of the unit;
- Credit record with other institutions;
- Justification for the proposed equipment;
- Incremental benefits of the scheme;
- Overall viability of the scheme;
VERIFICATION AND VALUATION OF COLLATERAL SECURITY
Procedure is same as under General Term Loan.
A decision with regard to sanction of loan is taken by the Managing Director on the recommendations of the Advisory Committee. The entire process takes about one month after receipt of requisite information.
DISBURSEMENT OF SANCTIONED ASSISTANCE
The process of disbursement of EFS loan starts with the acceptance of terms & conditions of sanction by the borrower as conveyed in the Sanction Letter and deposit of Imprest Money and Up-front Fee. The objective of Imprest Money and Up-front Fee has been explained earlier under the General Term Loan Scheme. Other requirements are given as under:
The details of Legal Documents required to be executed is supplied immediately after sanction. However, legal documents/ resolutions required before disbursement are briefly explained hereunder:
General body resolutions under section 293(1)(a) to mortgage the assets of the company and under section 293(1)(d) regarding borrowing powers.
Board resolutions to approve loan application to HSIIDC, to accept terms and conditions of loan and authorising the Director(s) to sign loan agreement, hypothecation deed, creation of equitable mortgage, to open special current account, for creation of charge on fixed assets of the company and other documents under the common seal of the company.
- Other documents
As detailed under the General Term Loan.
- Details of stamp papers (Non-Judicial) for various documents ( to be purchased from Haryana only).
- Stamp paper for INR 10.00 in the name of company for loan agreement.
- Stamp paper for INR 10.00 in the name of company for undertaking for meeting shortfall in promoters’ contribution.
- Stamp paper for INR 10.00(three Nos) in the joint name of all promoters/ directors/ guarantors for undertaking.
- Stamp paper for INR 20.00 in the name of company for hypothecation deed.
- Stamp paper for INR 15.00 in the joint name of all guarantors for guarantee bond.
- Stamp paper for INR 10.00 in the name of owner of collateral security for declaration and undertaking.
In case of creation/ extention of charge on existing fixed assets of the Company, the following stamp papers are required.
- Stamp paper for INR 10.00 in the name of authorised Director/Managing Director (with co’s name) authorised to create mortgage for declaration & undertaking.
- Stamp paper for INR 300.00 in the name of company for power of attorney.
- Stamp paper for INR 10.00 in the name of company for letter of undertaking.
- Forms 8 is required to be filed with the Registrar of Companies immediately after execution of legal documents and proof of filing to be furnished to the Corporation together with original receipt issued by Registrar of Companies.
- Other requirements:
- Deposit of imprest money which is INR 25000/- for loan up to INR 150.00 lakh, INR 35000 for loans above INR 150 Lakh
- Deposit of Up-front fee @ 0.5% of loan amount.
- Compliance with the terms of sanction;
- Certificate from the Statutory Auditors of the company indicating the investments made under different heads and sources of funds as per the prescribed format.
- Physical verification of assets and checking of books of accounts and invoices/bills by the officers of the Corporation;
- Valuation and verification of collateral security, if any;
- Insurance of assets already created;
Details of suppliers in whose favour disbursement is to be released.
For subsequent disbursements, the steps under legal documentation are not repeated except for charge registration, if pending and insurance of assets.
The disbursement of loan is linked to the extent of promoters’ contribution raised and security created at site as per scheme. The extent of disbursement is restricted to lower of amount worked out on the basis of promoters’ contribution raised and security created.
Letter of Credit
The Corporation has made arrangements with some Commercial banks for opening Letter of Credits for the purchase of machinery from India or abroad against term loan. This scheme aims at reducing the efforts of the client to approach the bank to open the Letter of Credit, which is a de-novo process, after the sanction of loan from HSIIDC.
Minimum 15% against disbursement eligibility and 25% on the balance amount of Letter of Credit. However, the Corporation ensures tie-up of total funds required for retiring the Letter of Credit.
The Corporation levies service charges which are shared with the Commercial Banks through whom the Letter of Credit is opened. The HSIIDC’s charges are comparable with those of the Commercial Banks in case the Letter of Credit is directly opened through them. The details of charges are as under:
Letter of Credit up to Rs 100.00 lakh
1% of the amount of Letter of Credit
Letter of Credit above Rs 100.00 lakh
@ Double the FEDAI* rates
*stands for Foreign Exchange Dealers Association of India, which is a Confederation of Foreign Exchange Dealers for deciding various charges on services provided by the members.
PROCEDURE FOR OPENING OF LETTER OF CREDIT
Following information is required for opening the Letter of Credit:
Where the amount of Letter of Credit is not covered by the eligibility of disbursement, following additional information is required:
Letter of Comfort
The Corporation also issues Letter of Comfort in favour of Commercial Banks to facilitate opening of the Letter of Credit by the latter, in case the client so wishes. Since it amounts to commitment of funds by the Corporation, service charges @ 0.5% of the amount of Letter of Comfort are charged. The Letter of Comfort is issued on the request of the client and the amount is restricted to the extent of disbursement eligibility.