SIDBI : Trade Finance Scheme (TFS) / Raw Material Assistance (RMA)

Objective & Purpose:

• Several MSMEs source their raw material from large Corporates /PSUs , whose terms are mostly on “cash on delivery (COD), i.e. no credit period is available to the MSMEs on their raw material purchases. This adversely affects the liquidity position of the MSMEs since they also have to provide credit on their sales.

• The scheme envisages financing such MSMEs for procuring raw materials / inventory which would ease the liquidity position of the MSMEs. The scheme would also help MSME units in availing benefits of bulk purchases such as cash discounts, etc. from their suppliers.

Eligible customers:

Purchaser:

Existing assisted MSME units of the Bank with 2 years payment track record with at least one year’s principal repayment track record.

Other Eligibility parameters include at least 3 full years of operations, satisfactory financials viz. earning of cash profits, good repayment record, no arrears / defaults to Banks/FIs etc.

Seller:

• Generally, large Corporates or their Authorized Dealers. Large corporate would generally mean and include listed corporate entities or entities who have AA rating and above.

• Should not be an Associate / Group concern of the Purchaser. • Should be selling goods which are required by the Purchaser in its normal course of business

• Generally 1-2 sellers from whom the Purchaser is purchasing bulk of its requirement should be covered.

Methodology:

Disbursement is made against 100% of the value of Tax Invoice (accepted by the purchaser).

Tenor:

The eligible credit period would be normally within 90 days. The credit period to be fixed keeping in view the working capital cycle of the unit.

Quantum of assistance:

Decided on the basis of total quantum of such purchases and credit period allowed within the assessed overall working capital requirement.

Rate of Discount:

Discount rates are linked to the internal rating of the MSME.

Security:

i) Extension of charge on assets already charged to SIDBI/ Coverage under Credit Guarantee Scheme as per extant guidelines in force.
ii) Demand Promissory Note from the Purchaser for the entire quantum of limit sanctioned.
iii) Personal Guarantee of the promoters of the Purchaser company / firm / proprietor
iv) Post dated cheques from the Purchaser.
v) Any other fixed assets including movables excepting current assets

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