Objective. The main objective of Kerala Financial Corporation is to assist MSME units in the State. Since most of the good MSMEs are established at Industrial Estates, the Corporation shall have a special loan scheme to assist such units.

Eligible Activities. All Manufacturing/ Service sector activities.

Purpose of Assistance

• Setting up new units at Industrial Estates
• Modernization/ Expansion/ Diversification of existing units located at Industrial Estates
• To meet all other fund based/ non-fund based requirements of existing/ new units located at Industrial Estates.

 

Fund Based Facilities

• Term Loans
• Short Term Loans
• Working Capital loans

Non-Fund Based Facilities

– Letter of Guarantee (Bank Guarantee) for MSME units for availing:

-Letter of Credit (LC) from the Bank for import of machinery/ raw materials/ etc.

-For bidding process, obtaining advance payment, releasing retention money, procuring raw materials, etc.

Upper Loan Limit for Fund/ non-fund based facilities:

Government vide GO (Ms) No.91/2020/Fin dated 26.08.2020 have appointed KFC as the Agent of Kerala State Government, under Section 25(1)(e) of SFCs Act 1951, for providing various Guarantees up to Rs.50 crore to all Entities, for the purposes like undertaking works, participating in tenders, bids, etc. of State Government Departments/ PSUs.

Promoter Contribution (PC).

The facilities shall be processed as per the parameters applicable to any one of the existing loan schemes of the Corporation. Term loans for new units (up to 66% of the project cost) shall be processed with benchmark norms applicable to ‘Term loans under General Scheme’. While processing loans to new units under ‘Term loans under General Scheme’, if the project cost is arrived at without including the investment in land part (ie. For other assets like building, machinery, etc.), loans up to 75% of such project cost can be considered.  

Loans up to 90% of the modernization/ expansion project cost can be provided to existing units under Modernization Scheme. The parameters of working capital loans and short-term loans shall be as per the concerned scheme. For such loans, the land value shall not be considered in the project cost.

Security Coverage

• Mortgage/ Hypothecation of Primary Assets of the Entity
• Mortgage/ Hypothecation of all assets created out of the assistance of the Corporation.
• Charge overall receivables of the Entity (for working capital loans)
• Personal guarantee of all promoters and co-obligants.
• Personal guarantee of all shareholders having more than 5% shareholding.
• If the land is allotted on Hire Purchase basis or executing tripartite agreement is getting delayed on Outright Purchase interim collateral security to cover 100% of the loan amount is to be insisted (in addition to primary security) till the time the full land cost is remitted, allotment letter and NOC for the mortgage are issued and tripartite agreement is executed.

Benchmark overall Asset Coverage Ratio (ACR)

Parameter		Benchmark Norms
MSMEs in the Manufacturing Sector	New Entity	1.40:1
	Existing Entity	1.30:1
MSMEs in the Service Sector		1.75:1
Working Capital Loans/ Short Term Loans		1.50:1
Non-Fund based facilities		1:1

No separate collateral is required for all the facilities, including working capital loans and non-fund based facilities, if the primary property is sufficient to cover the ACR, except in the case of Hire Purchase of land.

Valuation. The valuations of land, building, machinery, etc. shall be done through KFC empanelled External Valuers as per the Valuation Policy. The land value shall be considered as follows:

(a) Outright Purchase/ 30 years Lease Agreement.

If the promoters have remitted the full cost of land and the department is ready to give NOC for mortgage & execute the tripartite agreement, the treatment of land shall be as follows:

For Project Cost – The entire amount remitted towards land cost can be included in Project Cost.  However, the land value shall be limited to 50% of the promoter’s contribution in the Project cost.

For ACR purposes – The realizable market value fixed by the External Valuer can be considered for ACR purposes.

(b) Hire Purchase/ License Agreement.

For Calculating the Project Cost – The part amount already remitted and due for remittance during the implementation period towards land cost can be included in Project Cost.  However, the land value shall be limited to 50% of the promoter’s contribution in the Project cost.

For calculating ACR purpose – The amount already remitted by the promoter towards land cost can be considered for ACR purposes. However, interim collateral security to cover 100% of the loan amount shall be insisted.

If land assignment rules of any department do not permit tripartite agreement, mortgage of the land in such cases can be done with the allotment letter and NOC issued by the department, provided the full cost of land is remitted and the lease deed permits mortgage rights.
          
Mode of Application, Selection and Sanction. The applicants shall apply online at www.kfc.org. BRCs shall give in-principle clearance within seven days. Processing and sanction shall be as per the Credit Policy/ Manual of the Corporation. 

CGTMSE.  Loans shall be covered under CGTMSE, wherever required. In case the loan amount is more than Rs.50 lakh or collateral is not sufficient to meet the ACR, the loan shall be covered under the partial CGTMSE Scheme.