Some insights into the lending process and source of funds. Link:http://www.smetimes.in/smetimes/face-to-face/2012/Oct/16/intec-capital-helps-smes-get-loans-fast-sanjeev-goel891069.html
Relevant sections:
_What kind of benefits do you provide to the Small and Medium Enterprises (SMEs) in raising finance?
**Sanjeev Goel:**Back in 1990s, I realized that fund raising is the biggest challenge faced by the SMEs in India apart from other challenges. That prompted me to do something about the situation and contribute to the SME sector by setting up Intec, a company exclusively engaged in machinery loans to the sector. My first priority was to devise ways in which small and medium entrepreneurs could get fast loans for purchasing machineries. Second was to ensure that the SME gets the financial credit within a short period as in business world, timing is crucial, and if you fail to get the required money to get the job done on time, someone else will.
SMEs are typically characterized by a lack of collateral. In case of debt financing, lenders typically request collateral to mitigate the associated risks. The lack of collateral is probably the most widely cited obstacle encountered by SMEs in accessing finance. In our endeavor to serve the SMEs, we, hence strategized loans without taking real estate as collateral. We only hypothecate the machineries against which the loans are disbursed.
Intec also finances the needs of first generation maverick entrepreneurs and helps them fulfill their dreams by financing as low as Rs 5 Lacs.
We have been primarily focusing on sectors such as Auto and Engineering, Printing and Packaging, Plastic and Injection molding. We are also looking fulfilling machinery finance requirements of Healthcare, Medical and Pharmaceutical sector along with the food processing sector this year.
We are associated with the leading machine manufacturers of all these sectors and we fund the machinery purchased by SME clients. The market for refurbished machineries is also substantial in India and to tap the potential of this segment, we also finance the pre-owned machineries for the SME clients.
Since we understand the DNA of SME Customers, we do not go for the evaluation of the balance sheet in a traditional way. We look beyond the other things which are not reflected in the balance sheet. We basically see his experience in a particular business, education, residence stability, past and present cash flows, repayment track records & investment in business. On that basis, we are able to fund all his machinery requirements._
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We normally take 25 percent as the margin money and the machineries are the only collateral in that case.For instance, suppose the machine is costing to be Rs. 100, so he (the customer) is supposed to pay Rs 25 as margin money and rest Rs 75 will be the loan given to him.
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Also, we have a credit delivery arrangement with SIDBI. This channel partnership with SIDBI provides economical financial assistance and subsidy to SME customers of Intec Capital Limited. Under CDA scheme, the company sources the proposal in compliance with all due diligence and SIDBI disburses the loan directly to the client. With this association, the MSME customers are entitled for a subsidy of 15% of the machine purchase cost under a Credit Linked Capital Subsidy Scheme (CLCSS).
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How do you get funds to provide finance to your clients?
**Sanjeev Goel:**In the business of financing small and medium enterprises, success is derived from an ability to mobilize funds at the lowest cost. Intec is focused on procuring low-cost funds through short term and long term financial instruments comprising cash credit, term loans, letters of credit, credit delivery arrangements and direct assignment. We are working very closely with various nationalized banks and renowned financial institutions for procurement of funds. We are also looking at reducing the cost of funds by adding more banks to our consortium and raising funds from international sources.