Collateral has been one of the traditional tool for mitigation of credit risk of loss in credit.Most of SMEs are first generation entrepreneurs and they do not have collateral to seek loans from banks which remains one of the reasons for poor credit to them. In view of this limitation of SMEs, financing against personal guarantees is specifically designed for meeting business needs of Small Enterprises (SEs).
- Existing business entities (at least 2 years) having status of (Sole proprietor, or Partnership) are eligible to avail this type of facility.
- Avail finance facility from Rs. 100,000 to Rs. 2,000,000.
- 1 to 5 years (in line with type of respective product).
- Mark-up rate: 1 year KIBOR +12% p.a (to be adjusted for incorporating KIBOR changes annually.
- Personal guarantee of sponsor(s) / partners or directors are to be obtained.
- Two personal guarantees of person(s) acceptable to the Bank.
- Person(s) having net worth equal or more than the financing amount and income more than the monthly instalment may be acceptable as guarantors for financing amount up to Rs 1.0 million. This limit shall also be applicable even in case one guarantor is government / semi government officer (BPS-17 or above within the age bracket of 21 – 54 years) and other is a private person.
- Government / semi government officers of scale (BPS-17 or above within the age bracket of 21 – 54 years) with income more than the monthly repayment instalment may be acceptable as guarantors for financing amount up to Rs 2.0 million.
- Where applicable, hypothecation of moveable fixed / current business assets including plant & machinery, stocks etc.