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Startup Kerala - Comprehensive Scheme by KFC for Financing Startups

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  • Startup Kerala - Comprehensive Scheme by KFC for Financing Startups
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Objective. The objective of the Scheme is to assist Startups in all stages of their growth starting from proof of concept, prototype development, product trials, market entry, commercialization, scaling up, etc. Further, they would need financing purchase orders, Venture Debt, etc. These facilities would enable the Startups to graduate stage wise.

Eligibility Criteria. The Startup shall meet all the following eligibility criteria for getting assistance under the scheme:

  • Startups registered with Kerala Startup Mission/ The Department of Industrial Policy & Promotion (DIPP) GOI and having the registered office in Kerala.
  • Shareholding by Indian promoters in the Startup should be at least 51% at the time of sanction of loan.
  • Startup should be using technology in its core product or service, or business model, or distribution model, or methodology to solve the problem being targeted
  • The proposal should be viable and the product/ service should be market fitting.
  • The business model should be scalable with a high potential of employment generation or wealth creation.

 

Additional Eligibility Conditions.

(a)Productization:

  • There should be a potential market for the product.
  • The entity should have a clear sales plan
  • KFC’s assistance will be up to Rs.25 lakh. The assistance already received as loan/ grant/ prize money/ equity funding/ angel funding/ venture capital/ other monetary support will be considered to arrive at the eligible amount.
  • Credit Report from other funding agencies, if any. 

(b)Commercialization:

  • The Startup should have reached a stage to commercialize the product.
  • Should be able to market the product in next one year.
  • The entity should have a clear sales plan and should generate cash inflow from sales within one year.
  • Credit report from other funding agencies, if any.

(c) Scaling up:

  • Should have started earning income.
  • The Startup should have reached a stage to scale up the production.
  • There should be a potential market for the product.
  • The entity should have a clear sales plan and should generate cash inflow from sales within one year.
  • Credit report from other funding agencies, if any.  

Eligible Activities. All Manufacturing/ Service sector/ IT/ ITES activities.

Purpose of Assistance. The assistance will be to set up the workshop, purchase necessary machinery, computers, servers, software, setting up infrastructure, purchase raw materials, working funds (like rent/ electricity/ salary), working capital, cloud expenses, licenses, permits, consultancy charges, marketing expenses, preliminary & preoperative expenses, interest during the implementation period, etc.

Nature of Facilities. Term Loan/ Working Capital/ Composite loan.

Term loan shall be for setting up the workshop, purchase machinery, computers, servers, software, setting up infrastructure, cloud expenses, one-time license fees, initial permits, consultancy charges, one-time marketing expenses, preliminary & preoperative expenses, interest during the implementation period, etc.

The working capital loan shall be used for paying salaries, rent, electricity, other expenses needed for the day to day running of the project, marketing expenses, other recurring expenses, etc.

Upper Loan Limit. The maximum assistance for each stage will be as follows:

  • Productisation : Rs.25 lakh
  • Commercialization: Rs.50 lakh
  • Scaling up: Rs.100 lakh

 

Subject to 90% of the project cost in each stage.

The loan will be considered for each stage separately.

Rate of Interest.  Loans shall be covered as per the interest rates applicable to CMEDP. However, other terms and conditions will be as per this Scheme.

Mode of Repayment. Term Loan: Maximum repayment period shall be 60 months including moratorium period of maximum 12 months.

Working Capital: Working Capital shall be sanctioned as a WCTL repayable in a maximum of 60 installments including 12 months moratorium.

Mode of Application, Selection and Sanction.  Startups shall apply online at www.kfc.org. KFC shall do necessary screening on the application. KFC shall take the assistance of experts having domain knowledge to process the Startup loan applications. The sanction will be considered by an Expert Committee

Additional Funding. In pursuance of Government of Kerala order GO (MS) No. 79/2020/Fin dated 28.07.2020, the Corporation vide Circular No. KFC/CIR 28/CR 14/2020-21 dated 07.08.2020 have formulated three loan schemes for Startups as follows:

  • Scheme for Financing Working Capital Requirements of Startups for Executing Purchase Orders
  • Venture Debt Funding for IT Hardware & Software Enterprises
  • Seed Loan Assistance to Startups for developing socially relevant products prescribed by UNO and required by Government departments

 

The schemes are operational now. Considering the experience gained in running the scheme, the operational parameters are refined to the requirements of the Startups and the modified scheme is provided as Appendix ‘A’.

The rate of interest of all the above schemes shall continue to be 9% pa. KSUM shall provide 2% pa interest subvention so as to make the effective interest rate at 7% per annum. The interest subvention will be credited in the loan account as and when received from KSUM. 0.60% additional interest (Corpus fee) will be charged for all loans under all schemes for coverage under ‘Startup Guarantee Funds’.

 

 

 

Appendix ‘A’.

Scheme for Financing Working Capital Requirements of Startups for

Executing Purchase Orders

Name of Scheme

Scheme for Financing Working Capital Requirements of Startups for Executing Purchase/ Work Orders

Additional Eligibility conditions

The applicant Entity should have firm Purchase Orders (The Purchase Order includes Work Orders/ Letter of Intent/ Letter of Award/ Letter of Agreement which are equivalent to Purchase Orders).
In case the Purchase Order is from a non-Governmental entity or agencies outside Kerala State, a due-diligence report from MIRA Inform P Ltd/ Dun & Bradstreet shall be obtained.

Upper Loan Limit (LoC)

Category ‘A’ Entities as defined in Credit Policy of KFC (like Public/ Private Limited Companies) - Rs.1000 lakh
Category ‘B’ Entities as defined in Credit Policy of KFC (like Limited Liability Partnerships, Partnership Firms, One Person Companies) – Rs.800 lakh

The assistance will be sanctioned as a Line of Credit (LoC) depending on the Purchase Order in hand and prospects of getting new Purchase Orders.

Validity LoC

The Line of Credit is valid for a period of two years from the date of sanction (with rollover facility).

The project officer shall do annual renewal of the limit in the Software, if the repayment is good, works are progressing satisfactory and analysis of financial statements & tax returns indicate satisfactory levels.

The LoC can be re-sanctioned as a fresh LoC after two years based on the past performance and repayment history of the entity.

Multiple LOCs cannot be sanctioned to an entity. Existing LOC can be either enhanced or reduced.

If the Corporation feels that it is prudent to get the loans repaid at any time/ not to re-sanction the Line of Credit or if the entity is not interested in re-sanction of the Line of Credit, they have to be provided with a schedule for repayment according to the expected repayment of each Purchase Order. No further facility should be provided in such cases.

Upper Limit for Disbursement for Each Purchase Order

The maximum amount that can be disbursed for execution of a Purchase Order shall be limited to the expense required for its execution and shall not exceed 80% of the value of the Purchase Order. Loans for each purchase order will be treated as a separate facility (Purchase Order Facility) under the LoC.

Mode of Repayment
  • The payment from the POIA, for executing a purchase order, shall be made directly to the Corporation and this shall be credited to the concerned loan account with the Corporation.
  • The maximum time allowed for execution of purchase order shall not exceed one year from the first disbursement of financial assistance.
  • The maximum time allowed for full repayment of the amount advanced for execution of a purchase order shall not exceed one year and six months (ie, one year for execution of purchase order and further six months for collection of funds from POIA) from the first disbursement of financial assistance.

Charges/ Fees

Processing fees: 0.20% of the sanctioned amount without upper cap, subject to a minimum of Rs.10000/- plus GST.
All other fees and charges as per the Guidelines of KFC applicable to ‘LoC Scheme for Government Contractors’.

 

Venture Debt Funding for IT Hardware & Software Enterprises

Name of scheme

Scheme for Funding Venture Debt for IT Hardware & Software Enterprises

Additional Eligibility conditions

The applicant entity has undergone due diligence by a SEBI Registered Venture Capital Fund / SEBI Registered Alternative Investment Fund and they have already invested or they have confirmed the amount to be invested and the mode of the same.

Eligible Activities

IT Enterprises engaged in both hardware and software products.

Eligible Purpose

To meet the requirement of the applicant for manpower, materials, marketing, etc.

Upper Loan Limit

Category ‘A’ Entities as defined in Credit Policy of KFC (like Public/ Private Limited Companies) - Rs.1000 lakh
Category ‘B’ Entities as defined in Credit Policy of KFC (like Limited Liability Partnerships, Partnership Firms, One Person Companies) – Rs.800 lakh

Promoters’ Contribution

20% of the Project Cost

Mode of Repayment

The maximum moratorium period allowable is two years and the maximum repayment period allowable, including the moratorium period, shall not exceed five years.

Charges/ Fees

As per the Circular on other income.

 

Seed Loan Assistance to Startups for developing socially relevant products prescribed by UNO and required by Government departments

Name of Scheme

Seed Loan Assistance to Startups for developing socially relevant products prescribed by UNO and required by Government departments

Additional Eligibility conditions
  • Startups working on development of a socially relevant product which addresses any of the Sustainable Development Goals prescribed by UNO are eligible for this scheme.
  • Preference will be given to Startups that are developing products to address the issues relevant to Kerala. Towards this, Startups addressing issues under various Navakerala Missions or RBK (Re-build Kerala) will be given preference.
  • The Startups should have a working prototype of the product and the loan is given for scaling up the product and commercialization.
  • Only products that can generate a positive return on deployment are eligible for this loan.
  • Startups that have received CSR funds in recognition of the social impact of their product will be given preference.
  • Startups that are part of the reputed social accelerators like KSUM-UNIDO Green Technology Accelerator or of accelerators formed by reputed social organizations will be given preference.
  • Startups that already got funding from leading Impact funds operating in India will be given preference.
  • Government entities like PSUs/ Corporations/ Societies/ Research Institutes also are eligible to get assistance, provided they are developing socially relevant products which address any of the Sustainable Goals as prescribed by UNO. For such entities, surplus expected/ total proceeds need not be reckoned for calculating upper loan limit. Instead, the upper loan limit (subject to maximum of Rs.100 lakh) shall be calculated based on the Project Cost.

Eligible Activities

All Manufacturing/ Service sector activities

Upper Loan Limit

Maximum amount per Startup is limited to Rs.100 lakh.

The amount of loan shall not exceed 50% of the surplus expected to be generated by Startups from the product in 3 years or 10% of the total proceeds in 3 years from the product whichever is lower.

Promoters Contribution

20% of the Project Cost

Mode of Repayment

There will be maximum of one year repayment moratorium for the loan. The loan along with applicable interest needs to be repaid within 36 months after the moratorium period

Charges/ Fees

As per the Circular on other income.