This section provides broad description about different funding facilities provided from different banks with a list of Nationalize and Private Banks.
Fund based Bank Facilities
Term Loans: Term loan is an installment credit repayable over a period of time in monthly/quarterly/half yearly/yearly installments. Term loan is generally granted for creation of fixed assets required for long-term use by the unit. Term loans are further classified in three categories depending upon the period of repayment as under:
- Short term repayable in less than 3 years.
- Medium term loans repayable in a period ranging from 3 years to 7 years.
- Long term loans repayable in a period over 7 years.
Cash Credit Facility: a major part of working capital requirement of any unit would consist of maintenance of inventory of raw materials, semi-finished goods, finished goods, stores and spares etc. In trading concern the requirement of funds will be to maintain adequate stocks in trade. Finance against such inventories by banks is generally granted in the shape of cash credit facility where drawings will be permitted against stocks of goods. It is a running account facility where deposits and withdrawals are permitted. Cash credit facility is of two types (depending upon the type of charge on goods taken as security by bank).
(i) Cash credit - pledge: when the possession of the goods is with the bank and drawings in the account are linked with actual movement of goods from/to the possession of the bank. The physical control of the goods is exercised by the bank.
(ii) cash credit- hypothecation: when the possession of the goods remains with the borrower and a floating charge over the stocks is created in favour of the bank. The borrower has complete control over the goods and the drawings in the account are permitted on the basis of stock statements submitted by the borrower.
Overdraft Facility: Overdrawing permitted by the bank in current account is termed as an overdraft facility. Overdraft may be permitted without any security as 'clean overdraft' for temporary periods to enable the borrower to tide over some emergent financial difficulty. 'Secured overdraft' facility is against fixed deposits, NSC, and other securities.
Bills Finance: This facility is against bills of sales raised or book debts.
Export Finance: Banks grant export credit on very liberal terms to meet all the financial requirements of exporters. The bank credit for exports can broadly be divided in two groups as under:
1. Pre Shipment advances/packing credit advances: Financial assistance sanctioned to exporters to enable them to manufacture/procure goods meant for exports and arrange for their eventual shipment to foreign countries is termed as pre shipment credit.
2. Post shipment credit the bills purchase/discount facility granted to exporters is grouped as post shipment advance.
Non-Fund based Bank Facilities
Credit facilities, which do not involve actual deployment of funds by banks but help the obligations to obtain certain facilities from third parties, are termed as non-fund based facilities. These facilities include issuance of letter of credit, issuance of guarantees, which can be performance guarantee/financial guarantee.
- National Level Financial Institutions
- State Financial Corporations Offering Specialized SSI Schemes
- Venture Capital Organisations
- Other Banks Offering Financial Assistance