The pandemic brought most economic activity to a halt, and the organisations struggled with losses of billions of rupees. Small businesses bore the brunt of this loss, and several lost their savings in this period.
As a way of supporting numerous sectors across the country, the government aimed to provide 100% guaranteed coverage to banks, non-banking financial companies (NBFCs) and other lenders. This allowed them to provide an emergency line of credit to businesses that have suffered financially due to the COVID-19 pandemic. Thus, the Emergency Credit Line Guarantee Scheme (ECLGS) was born.
The Scheme’s Origins
ECLGS was initially introduced as part of the Aatmanibhar Bharat Abhiyan, the Rs 20 lakh crore relief package announced during the pandemic. It had a goal of providing collateral-free, government-backed loans to micro, small, and medium enterprises (MSMEs) with the goal of helping them navigate the lockdown triggered by COVID-19 restrictions.
To put it briefly, ECLGS helps MSMEs facing challenges in surviving and growing during the pandemic. It allows businesses to tackle daily expenses and helps provide them with a sustainable income. The scheme played a pivotal role in making sure that the small companies affected by the pandemic had the funds necessary for them to stay afloat.
Under this scheme, loans have been sanctioned at a rapid pace as there is already a central government guarantee against them. Furthermore, all processing, foreclosure, and prepayment charges have been removed. This makes ECLGS an extremely attractive offering for most small businesses.
The Objectives of The Emergency Credit Line Guarantee Scheme (ECLGS)
The COVID-19 pandemic was devastating to MSMEs in the manufacturing and other sectors. ECLGS was directed towards this very loss, created with the goal of helping businesses stay afloat through difficult times.
It aimed to address the distress faced by businesses across the nation, providing them with funding in the form of a fully guaranteed credit line. It gives credit to these businesses at a low cost, empowering them to address all operational liabilities and grow in this challenging period.
How Does One Apply For ECLGS
You do not reach out to the central government to avail of this facility. You can simply get in touch with any of the country’s lending institutions, such as commercial banks, financial institutions, and non-banking financial companies. The interest rate offered by each financial entity will differ, so it is important to carry thorough research before making a decision.
Eligibility Criteria For ECLGS
The requirements to apply for ECLGS are as follows –
- You need to be a member of the GST registrar. This is the most significant requirement to qualify for the scheme and must be met
- Candidates with SMA 2 or NPA do not qualify for this scheme
- Most funds are offered to small companies, trusts, and businesses with partnerships. Businesses run by individuals may not receive the requisite funds
The credit limit for ECLGS is around 20% for businesses. For businesses present in the hospitality, tourism, leisure and sports sectors, the limit is extended to 40%. There is a range of interest rates, but the maximum loan rate is around 14%.
ECLGS allows for a period of 48 months to repay the amount borrowed. In most cases, only interest needs to be paid in the first year. For the next three years, you will need to pay the interest as well as the principal on the basis of the dictated loan rate.
ECLGS – The Potential Solution For Your Business
If you qualify under the criteria laid down by the central government, you could benefit immensely from ECLGS. The absence of any processing and prepayment charges can help this scheme provide your business with an invaluable injection of funds without costing too much. The central government’s backing of the loan, too, is a lucrative addition.
If you are able to secure a loan under an attractive interest rate in this scheme, it might help you address the needs of your business. To know more about the possibilities here, just reach out to us at Ruloans. Ruloans Distribution Services Private Limited (RDSPL), popularly known as Ruloans, is one of the leading Loan DSA Businesses in the market today and continues to grow professionally with exceptional financial experts. A one-stop shop for all your financial needs, Ruloans disburses approximately Rs.1,900 to Rs.2,000 crores per month, pan-India. Having partnered with more than 150 banks and NBFCs, the company has a presence in more than 1,600 cities across India.