A Working Capital Term Loan Scheme (WCTL) that funds the daily operations of a business. These loans do not include purchasing long-term assets or investments. Also, use instead provide the working capital that meets the short-term operating needs of a business.
Introduction to Working Capital Term Loan Scheme
The TIIC introduces the scheme to assist various business financially. However, it is a fundamental necessity of any organization. Without which is at stake to operate very well. So, to help them resolve problems such as erratic cash flows and non-availability of cash reserves. Also, to expand long-term working capital credit facilities to entrepreneurs.
So, this helps in seeking to raise awareness of the term loan system of the Tamil Nadu Working Capital. In terms of how it caters to the deserving recipients.
Moreover, it’s a great helping hand to reach long-term working capital credit tools for entrepreneurs.
- Firstly, provide to extend long term working capital credit facilities to entrepreneurs.
- Secondly, suitable for Mid or Large corporate holding turnover of more than Rs.500 Crores.
- It evaluates the working capital limits. Also, it can be available as a sub-limit of funded working capital limit.
- The term of the loan is up to 60 months.
- Repayment payable in terms of Monthly, Quarterly, or Half-yearly instalments
The TIIC, which is an undertaking of the Tamil Nadu Government. Therefore, extends the scheme to the unit’s help and not help by the developmental body. Further, such companies must be operational for the previous two financial years. Also must earn a cash profit during these two years.
However, the units mentioned above do not qualify-if not include in categorization in the standard asset’s category of TIIC or Banks for the previous two years. Moreover, the net worth of these units must positive trajectory.
All the unit(s)
a. Must involve in existence and operation for the past two fiscal years.
b. Also must earn cash profit for the last two years.
c. Must hold a positive net worth
d. Include support by the corporation which have standard assets category for the previous 2 fiscal years.
e. Holding loans with other Banks/ or FIs must involve in a standard category. That’s with respective institutions for the last two fiscal years.
f. Must not come under the purview of the invalid unit definition.
Purpose of the Scheme
So, the main purpose of introducing the scheme is to give financial help to the industry’s units. Therefore, the TIIC sought to raise the Working Capital Term Loan Scheme to provide sufficient funding to companies to engage in :
A) Manufacture and processing of industrial units,
B) Equipping them to satisfy the demands for working or additional working capital.
C) Also, to increase financial support to Rice Mill units to meet their working capital/ or additional operating capital requirements.
Benefits of Working Capital Term Loan Scheme
So, you will find various benefits in availing the scheme that is;
a) However, the immediate advantage of a working capital loan is that it is quick to access and helps business owners. To efficiently cover any gaps in spending on working capital.
b) Also, another noticeable advantage is that it is a form of debt financing and does not require an equity exchange. Meaning that even if the financing need is urgent, a business owner retains full ownership of their company
c) Make sure that working capital loans usually attach to a business owner’s credit. Therefore any missed payments or defaults may hurt their credit score.
Quantum of Loans
A loan of up to Rs. 200 Lakh in the initial period for usage by the qualifying units under the scheme. While additional or increase working capital can consider after one year. Also, the promoter expects to include at least 25 per cent of the working capital assessment out of the total contribution.
You must repay in 42 months include a moratorium of 6 months. For following support moratorium period shall not provide.
Debt Equity Ratio
The Debt equity ratio is a type of the relevant contribution of the creditors, shareholders or owners. That to the capital employ in the business. In this scheme, the overall Debt Equity Ratio of a unit must not hold more than 2:1. They are involving working capital Term Loan Component as well.
In this scheme, a minimum of 25% of the working capital is an estimate.
Repayment under the scheme
In the working term capital loan scheme, 42 months are given. They also include up to 6 months of the moratorium for the first time assistance only. So, it is appropriate to render the repayment in equal monthly instalments. For the following help moratorium period shall not be given.
Documents required for Working capital term loan scheme
If you are looking to avail the scheme, you require to keep the following documents handy:
- KYC documents
- The business vintage of 3 years
- Business proof: Certificate of practice
- Bank account statement of last month
- Proof of residence or business/industry or office
Security in Working Capital term loan scheme
- First fee by way of present asset hypothecation.
- Also, pay for the unit’s fixed assets, as to provide for by the sanctioning authority.
- Including Personal Promoter(s) Guarantee.
- Besides, Corporate promise, if appropriate, of group businesses.
- If essential, collateral protection.
A security property or property that a borrower offers as collateral for a loan. Bond security terms vary from unit to unit, mention below for your reference:
A) Existing units assisted – units place under the general sector for the last two financial years must provide 100% of the WCTL. Therefore, the residual value of existing land and construction as a security of mortgages collateral.
B) Units Aided by TIIC – Such companies, which do not include any funds to meet the operational requirements. Also must provide collateral protection for up to 125% of WCTL.
C) TIIC-assisted units – TIIC-assisted units, with limit operating costs in any bank must provide 150% WCTL collateral security.
The requester may get an application form for this purpose at Head Office or the TIIC Branch Office. So, When the application, the same must submit to the TIIC office.
Applicants must pay an amount of Rs. Ten thousand loans are requiring the approval of a Branch Selection Committee (BSC) or the Regional Election Committee (RLSC). If in the case of loan is in consideration by the EC or Board at Head Office, the amount is Rs. 50,000 must release.
The scheme aims to provide financial assistance for a single basic unit to eligible units in the form of working capital loans—up to 75% of the business finance requirement for a single operating cycle. Promotional margins may be at least 25% of the total amount produced for operating expenses. So, to get support TIIC helps for the financial existence to all business, companies and enterprises.
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