If you are a woman entrepreneur in need of funds for your business, there are a few loan schemes that you can take recourse to. We discussed one such scheme Stand up India in an earlier post. Under the scheme, women entrepreneurs can take loans up to Rs 1 crore. The loans under Stand up India scheme can be availed from any of the scheduled and commercial banks.
While Stand up India is a scheme promoted by the Government of India and almost all banks will offer loans under the scheme (at least on paper), certain banks have launched special products for businesswomen. In this post, let us look at Nari Shakti Loan, a loan product from the Union Bank of India aimed at businesswomen.
Union Nari Shakti Loan: Eligibility
- For micro and small enterprises managed by women.
- In case of a partnership concern, the majority of the partners shall be women. In case of a company, the majority of the directors shall be women. As I understand, the majority controlling stake should be held by women.
- Both existing and new borrowers can be covered under this product.
- Minimum credit rating requirement: For new loans, minimum credit rating should be UBI-5. For takeover loans, the minimum credit rating should be UBI-4. These ratings are internal to Union Bank of India. You can find out more about these ratings here. For quick reference, UBI-1 is a better rating than UBI-5.
- Available both as Cash credit and term loan. Also available as a composite loan (mix of term loan and working capital loan)
Loan Amount and Loan Tenure
Loan amount can range from Rs 2 lacs to Rs 1 crores.
The loan tenure depends on the type of loan.
- For working capital facility: 1 year. As I understand, working capital or cash credit facility will have to be renewed every year.
- For Term Loans: Up to 7 years. This can include moratorium of up to a maximum of 12 months.
The bank must safeguard its interest. The bank achieves this by specifying a margin requirement, creating a charge on funded assets, by asking the borrower to bring in collateral or by asking the borrower to furnish a personal guarantee.
This is the amount that the borrower must manage from own funds while taking a loan. For instance, if the project cost is Rs 50 lacs and the margin is 10%, the borrower must bring Rs 5 lacs from own funds while the bank will provide the finance for the remaining Rs 45 lacs.
For loans up to Rs 10 lacs, there is a margin requirement of 5%. For loans more than 10 lacs, margin requirement is 15%.
In case of a working capital loan/facility, the bank will create a charge on current assets. In case of a term loan, the bank will create exclusive charge on the assets created out of the bank loan.
Asking for Collateral
No collateral is needed:
- For loans up to Rs 10 lacs,
- If the loan is up to Rs 1 crore and is covered under CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises). However, the borrower needs to pay a fee for such guarantee.
If the loan is NOT covered under CGTMSE and is greater than 10 lacs, then the borrower must furnish collateral of up to 25% for working capital loan and 15% for other loans.
Personal guarantee of proprietor / partners / directors. Personal guarantee of property owner which has been offered and accepted as collateral. This can be painful.
What Is the Rate of Interest?
The loan interest rate depends on the credit profile of the borrower. Here’s an excerpt from the product page on Union Bank website. Not sure if the page has updated information.
There is no processing fee on this loan.
How to Apply?
You can apply from any of the Union Bank branches.
Disclaimer: I have prepared this post while gleaning the information from the website. More details and requirements will come out when you apply for the loan. For additional details, visit the Union Nari Shakti Loan product page.