Margin Money Loan Scheme

Introduction

Entrepreneurs are the essential engine for an economy through innovations, creating jobs, and fostering growth. However, it is not always easy to raise funding, especially at the startup stage. Here we come to the role of Margin Money Loan Schemes.

The Government established the Margin Money Loan Scheme targeting entrepreneurs to enhance their ability to apply for a bank or any financial company loans by covering their initial cash deposit (i.e. margin money contribution). These programs act as lifesavers for future entrepreneurs helping them transform their dreams into material success.

Margin Money Loan Scheme 

Entrepreneurs play a vital role in the economy. Entrepreneurs potentially earn money, acquire recognition, and have a chance of growing the business larger. Risk-taking is one of the important characteristics of the entrepreneurs.

Margin money is the first payment you make on a specific loan which is usually a percentage of the full loan amount. For example, if you are buying a house, and you require a mortgage, the bank most likely will want to see 20% (marginal money) of your down payment on the house’s value before lending you the remaining 80%.

Margin money loan plan offers a margin loan option designed just for this purpose. This gives the individual or business who may not have the upfront capital for the down payment but still qualify for the main loan an opportunity.

Objective of the scheme

The scheme seeks to support young entrepreneurs to set up small industrial businesses by lending low-interest loans to cover the required amount of equity for financial institutions.

• Eligibility: The initiative applies only to newly registered SSI units. The majority of the grants would be directed to technology-centered small industries and businesses that are led by professionals, women entrepreneurs, physically challenged people, disabled veterans, and the population from marginalized regions.
• Funding Limit: Margin money loan (MML) applies both to term loans as well as working capital loans, where the organization sponsoring such loans charges a service fee on the loan amount to recover the loan disbursal and setting up costs, which includes the cost of providing the loan products. The maximum limit that would be offered is 2.5 crores. The interest is fixed at a rate of 9% per annum.
• Repayment: The loan must be repaid in 16 equal quarterly installments. For term loans, the first installment of repayment is due three months from the date when the last installment of the term loan falls due/51st months of the disbursement of the margin money loan whichever is earlier. Also, the first repayment for a working capital loan is due 51 months after the disbursement date.

The government backs up these entrepreneurs directly it is through the Margin Money Loan scheme in Kerala.

Types of Margin Money Loan Schemes

In Kerala, there are a few Margin Money Loan Schemes provided by the government to assist various beneficiary groups:

Margin Money Grant Scheme to Nano Units

For this scheme, nano units are very small enterprises in the domain of manufacturing, services, or job work, with a project cost of up to ten lakh rupees.

It aims to develop the women business owners class (30% lady beneficiary reservation) and offers top-up grants for the youth, differently-abled people, veterans, and SC/ST class applicants (10% additional assistance provision).

Features

• Grant Percentage: 30% to 40% of the whole project cost and if the amount is more than ₹4 lakh per unit, it will not be refunded.
• Subsidy: Yes, sure, it’s a grant, not an investment, hence there is no obligation for payment back.
• Interest Rate: The grant does not include such a category, therefore it cannot be applied.

Kerala Margin Money Loan Scheme (administered through DIC & DI&C)

The scheme is designed to meet the needs of small- to medium-scale manufacturing enterprises looking to establish a new unit, expand an existing one, or implement a more sophisticated production method.

Features:

• Loan Amount: Up to 20% of the project cost or working capital or 50% of the margin set by the financing institution (whichever is lower). The limit is high that is up to ₹2.5 crore.
• Interest Rate: 9% per annum the rates.
• Repayment: The loan must be repaid in 16 equal quarterly fees from the 3rd month since the main loan has been granted.

Eligibility Criteria and Application Process

• The nano proprietary enterprises engaged in manufacturing/food processing and job works also as the units involved in service industries are eligible for assistance through the scheme if their project costs from a provision of up to 10 lakhs including the fixed as well as working capital.
• The program should not have received funding from the Government of India, the Government of Kerala, or the “Local Self Government Department”.
• Special categories of people are given special attention which are including women, handicapped persons, ex-servicemen, and persons belonging to SC/ST
• However, the program has a separate category for young entrepreneurs under the age of 40.
• At least 30% of the entrepreneurs under this program should be women entrepreneurs.
• Conditions of the industrial units receiving the grants include ensuring that they will work continuously for three years starting from the date they are granted.
• The applicant should specify all the details requested and sign a signature indicating that he/she is providing the true information.
• The applicant will be required to clarify the application and allow inspection or verification of the details if requested.
• The information provided by the applicant should give the original documents as verifications of this ownership, for instance: land title deed, lease agreement, ownership certificate of the building, and invoice or bill of plant and machinery.
• Electronic agreement via the web should be provided and the applicant should submit a signed paper copy if necessary.
• The Applicant should utilize the loan amount only as per the agreed-upon terms with the company.
• To run the unit in the manner as stated in the agreement, the applicant has to produce a re-scheduled payment plan to the authority, or else assistance may be suspended under the Kerala Revenue Recovery Act.

Financial Assistance  

Application Process

Online

• Step 01: Online application can be filled out via the Website. The applicant should also go to the official website to find out more about the programs being offered.

• Step 02: Candidates can choose from the available online services on the homepage which is ‘One Family One Enterprise’ and then click on the ‘Apply Now’ button. When clicking the “Apply Now” a registration window opens, the “Registration” option for a new user and the “Login” option for an already registered User.
• Step 03: A new user registers himself/herself by entering such details and if the registration is successful, he/she can sign in.
• Step 04: Once the applicant has logged in, the form may be filled out.
• Step 05: After filling out the application form and then clicking on ‘Submit’.

Offline

• The duly filled application form be submitted to the Assistant District Industries Officer, Taluk Industries Office by the beneficiaries in the prescribed format along with the bank sanctioning letter mentioning the loan approval with the bank’s recommendation. 

• A photocopy of the passbook of the beneficiary showing the details of the beneficiary’s contribution to the account should be submitted along with the application.

Documents Needed

• Report on the Project
• Proof of Ownership of Land/ Land Tax Receipt if needed
• Certificate of Ownership for the building if needed
• Official Lease Deed or Rent Deed in specific situations
• Estimated Invoice/Quotation for equipment, machinery, and electrical work
• Evaluation by an authorized Engineer or Chartered Engineer for Construction
• Approval letter from a financial institution/Bank if applicable
• Any additional document requested by the recommending/sanctioning authority.

Conclusion

Margin Money Loans are core for the empowerment of the entrepreneurs who in turn steer the wheel towards realizing economic glory. These types of schemes ensure that people have the money they require to run their businesses, whether new or established. 

In Kerala, the Government has different Margin Money Loan Schemes that provide loans to aspirant people who are subjected to various categories. Such programs not only facilitate the establishment of businesses but also stimulate the involvement of various groups particularly women, youth, and persons with disabilities. 

We can keep up our support and build a more dynamic and vibrant small business community by doing this.