The Government of India has formulated the GECL (Guaranteed Emergency Credit Line) scheme to help business enterprises and MSME sectors revive from the unprecedented hardship they have faced in the wake of Covid-19. The scheme intends to provide an additional line of credit loan to struggling enterprises by assuring Member Lending Institutions (MLIs) incentives and helping MSME sectors mitigate the economic distress and flourish.
The National Credit Guarantee Trustee Company (NCGTC) will extend 100% guarantee coverage to the MLIs (Member Lending Institutions) for disbursing the GECL loan to the business bodies.
GECL loan in business- An overview
GECL loan is extended to offer additional liquidity, helping business bodies to fund their operational obligations, including inventories, raw materials, working capital etc. and start their business all over even after facing the wrath of the pandemic. It is an important component of the Emergency credit line guarantee scheme (ECLGS).
Credit under GECL will be offered to scheduled commercial banks and financial institutions in the form of additional working capital term loan facility. On the other hand, NBFCs, eligible MSMEs or business enterprises and PMMY (Pradhan Mantri Mudra Yojana) borrowers will receive GECL loans in the form of additional term loan facility. The loan amount accounts for 20% of the total outstanding credit amount of up to Rs.25 crores of borrowers as on 29th Feb 2020. All information related to mergers and acquisitions, loan amounts etc. will be updated in the MSME databank.
Know the features of the ECLGS scheme
ECLGS scheme comes with the following features:
- ECLGS interest rates differ for banks and financial institutions, NBFCS and existing customers of MLIS.
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- Banks and Financial institutions (FI): The Reserve Bank of India has set an external benchmark-linked rate for MSMEs and for non-MSMEs marginal cost-based lending rate that stands at +1% and can reach up to a maximum rate of 9.25%.
- NBFCs: Interest rate cannot exceed 14% per annum.
- Existing customers of MLIs: Extra fees are not charged from them.
- GECL loans are offered for a repayment period of 4 years for borrowers availing of the scheme under ECLGS 1.0. The fund provided under ECGLS 2.0 and ECLGS 4.0 will have a loan tenor of five years.
- Under ECLGS scheme, Member Lending Institutions will not be levied any guarantee fee, applicable prepayment charges etc. globalwebhealth
Eligibility criteria for MSME sectors
Here are the eligibility criteria that MSME sectors must adhere to before availing of ECLGS scheme:
- MSME or business enterprise borrowers must have accounts with all MLIS and have combined credit of up to Rs.50 crores in any sector with an annual turnover of Rs.250 crore to be eligible for a GECL loan.
- The enterprises eligible to avail of the scheme are proprietorships, partnerships, registered companies, willing borrowers under PMMY and LLPs (Limited Liability Partnerships) and trusts.
- MSME sectors must be GST verified to avail of the loan.
Besides getting financial assistance under a GECL loan, borrowers can opt for a more comprehensive external financing choice like a business loan. Business loans also enable entrepreneurs to sustain their growth after the pandemic.
However, to make the most out of the credit option, borrowers must know the important checklist before applying for a business loan.
A business loan is an effective financing option that boosts the growth of MSMEs and business enterprises by extending adequate working capital. In this context, individuals must know how much working capital does their business needs. thewebdevs
To improve the chances of receiving quick loan disbursal, borrowers must know the factors affecting the terms of business loan.
An informed step will enable borrowers to reap the benefits of pre-approved offers. Reputed financial institutions extend these offers on financial products like business loans, personal loans, etc. Intending borrowers can check their pre-approved offers by submitting their names and contact details.
To sum up, a GECL loan is a credit product that enables business enterprises to grow even after the economic slowdown resulting from the pandemic. However, business enterprises can also rely on a business loan.