Credit Facilitation Scheme for Businesses by NSIC: Definition, Types and Salient Features

6 min read • Published 8 January 2023
Written by Anuj Agarwal

Micro, Small, and Medium Enterprises (MSMEs) are one of the primary contributors to the economy. Still, there has been a lack of proper funding mechanisms to continue their growth. Some of these businesses often shut down due to a lack of proper and timely financing. 

The Central Government has taken multiple initiatives and launched facilities to aid these MSMEs financially. National Small Industries Corporation (NSIC) has launched the Credit Facilitation Scheme. 

Here’s a detailed overview of NSIC.

What is a Credit Facilitation Scheme by NSIC? 

The NSIC has signed a Memorandum of Understanding with multiple private and public sector banks to help MSMEs financially. NSIC, through these banks, helps MSMEs in getting credit support. This joint venture to help such businesses in getting the required funding from both public and private sector banks is known as Bank Credit Facilitation Scheme (BCFS). 

What Are the Features of the NSIC Credit Facilitation Scheme? 

Here are some major features of the NSIC Credit Facilitation Scheme that should be highlighted: 

  • Facilitates credit to MSMEs by integrating with banks from the public and private sectors.
  • It helps MSMEs complete necessary paperwork and submit it to the bank.
  • It gives MSMEs a choice to switch over an account to a new bank or apply for a new bank.
  • This scheme enables MSMEs to get loans at an affordable rate of interest from financial institutions after a favourable rating is given to units under the Performance and Credit rating scheme.
  • A credit request sponsored by NSIC is given special consideration under the Credit Facilitation Scheme, which allows MSMEs to obtain bank finance based on their lending policies.
  • It offers MSMEs hand-holding support.
  • It makes it easier for many MSMEs to secure funds who want to apply for credit.

What Are the Types of Loans under the Credit Facilitation Scheme? 

The following types of loans are available for MSMEs under NSIC Credit Facilitation Scheme: 

  • Term Loan 

These loans enable business owners to get the financing they need to put up the necessary infrastructure and buy assets and equipment. Term loans typically have a loan term of 1 to 10 years, however, depending on the loan amount and interest rate, this period can be extended to 30 years. There are three kinds of term loans: short-term, medium-term, and long-term.

  • Working Capital Loan 

Under the BCFS, working capital limits serve as revolving cash credit facilities. Business owners can withdraw working capital up to the credit limit sanctioned by the financial institution. Business owners can utilise such facilities as cash credit, overdrafts against book debts, discounting facilities, etc.

  • Non-fund Based Limit 

Business owners can obtain financial help from a financial institution, such as a bank or NBFC, using this credit facility provided by the BCFS. The service entails opening a credit account with the bank, from which the company owner can withdraw money up to the set amount to finance various business activities.

What Are the Eligibility Criteria for Credit Facilitation Scheme? 

All MSMEs in India are eligible to apply for Credit Facilitation Scheme. You just need to make sure that your business is registered with the necessary authorities and recognized by the government of India. 

What Are the Documents Required to Apply for NSIC Credit Facilitation Scheme? 

There is a long list of documents that you need to submit to apply for a Bank Credit Facilitation Scheme. The list might vary depending on the loan’s purpose. However, here is a list of necessary documents: 

  • Identity proof 
  • Address proof 
  • Business address details 
  • Rent lease/permit if the business premise is on rent/lease 
  • Asset and liability reports of guarantors, promoters, directors, etc. along with the latest IT return. 
  • Copy of Entrepreneurs Memorandum/ SSI registration certificate 
  • Past 3 year’s balance sheet with IT/ ST returns 
  • Profile of the Unit that includes name and address of promoters, activity type, experience, shareholding pattern, etc.
  • Application in the recommended format 
  • Projected balance sheet for two upcoming years 
  • Position of account with current bankers 
  • CMA data in the recommended format if the loan amount is above ₹100 lakh and more 
  • For term loans, project reports 
  • Quotations/ estimates/ sanctioned building plan
  • Clearance from Pollution Control Board 
  • Sanction letter from electricity authority 
  • Trust Deed/ Memorandum & Articles of Association/ Rules & Bye Laws 
  • Monthly production and sales data for the current financial year, finished goods, the value of stock in process, debtors, creditors, etc. 

How to Apply for an Avail Loan under Credit Facilitation Scheme?

The application process is simple. You just need to follow the given steps: 

Step 1: Visit the official website of NSIC. 

Step 2: Download the application form and get a printout. 

Step 3: Carefully fill out the form with all the necessary business and personal details. 

Step 4: Submit the application form along with all the documents to the designated official. 

You need to approach the officer of a bank that has an agreement with NSIC or is registered under the credit facilitation scheme. Also, you need to open a current account with the bank along with KYC documents. The branch officer will help you throughout the process. 

Final Word 

NSIC Credit Facilitation Scheme is aiding multiple MSMEs in getting the credit facility that they need. It is one of the excellent moves by the government to support indigenous enterprises and help them grow. 

FAQs 

What is the general repayment tenure for the Credit Facilitation Scheme?

The general repayment tenure for Credit Facilitation Scheme is 5 to 7 years. However, this limit is extendable to 11 years in some unique scenarios.

How much credit support can I receive under this scheme? 

You will receive credit support as per your need. However, banks have fixed-term loan limits. If you need credit support for up to ₹5 crore for working capital, the requirement should be 25% of the next year’s turnover as expected. Maximum Permissible Bank Finance Method is used to assess a working capital loan requirement of above ₹5 crore.

Do I need to pay any fee for applying to NSIC Credit Facilitation Scheme?

No, you do not have to pay any processing fee for applying to NSIC Credit Facilitation Scheme. 

Do I need to submit any collateral or security for availing loan under NSIC Credit Facilitation Scheme? 

The requirement for submitting any collateral or security for availing a loan under NSIC Credit Facilitation Scheme varies from one bank to another. You should check with the bank before applying. 

Was this helpful?

Anuj Agarwal

Investment Principal
Anuj is an investment professional with a demonstrated history of working in Debt Capital Markets. He has completed his B.Com (Hons) in St. Xavier’s College, Kolkata and holds PGDM (Finance) degree from GIM. He is currently working as Investments Principal at Wint Wealth. He has been working in the debt capital market space for the past 4+ years and is also an NISM certified mutual fund expert.

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