Financing 'Start Again'

Even as the outbreak of coronavirus hitherto seems unstoppable in near future, the pandemic has rolled out many important lessons not only as a health emergency but also as an economic catastrophe. In view of the nature of this column, let me deal with financial aspect of the impact which this deadly infection, COVID-19, has on economic sectors. As the pandemic induced lockdown, job losses have become rampant in every sector and people have been witnessing tremendous fall in their incomes. All this has disturbed domestic budgets of one and all. Precisely, for millions of people loss of jobs and fall in incomes is not less than a financial tsunami for them and they have been forced to rely on the mercy of relief measures.

In the context of Jammu & Kashmir, the COVID-19 induced lockdown has its own woeful stories of business losses. But at the same time, these local businesses are not facing this type of situation (lockdown) first time. In fact, three decades of turmoil and frequent shutdowns (official or unofficial) imparted lessons of survival to the businesses here. They not only survived the turmoil, but also expanded in many cases. We have scores of small entrepreneurial success stories which have emerged here in these decades amid the shutdowns.

In other words, at our place most of the business ventures, particularly small business have adopted ‘embrace the conflict’ attitude. Keeping general rules apart, these small businesses have time and again been working as partners – a way of working between people that makes a difference differently. These businesses have more been nurturing social entrepreneurship.

So, ours is a place having the biggest economic strength in hugely spread small enterprises. The small enterprise sector includes small manufacturing units, service sector units, shopkeepers, fruits / vegetable vendors, food-service units, repair shops, small industries, artisans, food processors, horticulture activities and others, in rural and urban areas.

As we know, appropriate financial support is pivotal to be part of this small enterprise sector, there are various government and individual schemes available in the product basket of the banks. A good number of readers have been mail their queries about the ways and means of seeking financial assistance through a financial scheme. There are some retired government employees who have expressed their urge to be an entrepreneur, but lack financial support to venture into entrepreneurship. They have this impression that the banks won’t finance their ventures for being retired personnel and age not on their side. “Even we don’t find any government sponsored scheme which can render financial assistance to a retired person’s business venture,” writes a retired government employee in his communication.  Why banks are wary to finance retired personnel for their business ventures? he further asks.

It’s a fact, today there are many retired government employees who have still appetite to work and be productive as entrepreneurs. But the financial constraints deny most of them to explore their potential. When they look at the banking and financial institutions to seek funding for their entrepreneurial projects, they get disappointed. The retired employees are hardly trusted by banks and financial institutions for business activities, as they feel age is not on their side.

However, banks, of course, have loan schemes in place for them, but only under consumer loan segment. Here the quantum of finance is too low to meet their project requirement and higher rate of interest is also a concern.

But the fact is that in the modern times, retired government employees still have time on their side. Imagine a person retiring at 60, living till at least 75 (if not more), perhaps physically weakened, but still mentally at the top. What do they do with such a long retirement? And besides the fact that the increase in life expectancy leaves retirees with too much time on their hands and their skills un-utilized.

So, helping the retired employee to capitalize on potential to engage themselves in the productive activities makes a sense. Precisely, self-employment ventures through entrepreneurship should not be a forbidden area for the retired government employees, if they have skill and appetite for it.

J&K Bank has taken a lead in the banking fraternity by introducing a finance scheme (‘Start Again’) to finance start-ups of retired employees below the age of 65 years in Greenfield enterprise in manufacturing and services sector.  Notably, hand holding of the retired employees seeking financial assistance for his/her entrepreneurship venture is part of the scheme. The bank shall be provided guidance to them to set up business enterprise.

What are the indicative ventures eligible for finance under the scheme?

Some of the indicative ventures include media & entertainment, tourism, healthcare, IT & allied services, food product sector, arts and crafts etc. Besides, ventures like fitness centre, kinder garden / pre-school, formal school, crèches, tuition centers also fall under the ambit of the scheme.

Notably, projects allied to agriculture such as pisciculture (fishery), apiculture (beekeeping), poultry, livestock, dairy, agri-clinics & agribusiness centers, aggregation agro industries, food & agro processing, etc. are also eligible for funding.

What is the amount of loan granted under the scheme?

Quantum of loan is linked to the nature of activity. It ranges between Rs.2.00 Lakh to Rs. 20.00 Lakh. However, the scheme has a provision of extending enhancement facility or an additional working capital facility to such units which generate employment. The enhanced / additional facility ranges from Rs 1.00 Lakh to Rs. 2.00 Lakh which will be basically funding the salary component of the employees working in the unit.

Against what security the loan would be granted

The loans are primarily secured by way of hypothecation/assignment/ mortgage (registered or equitable mortgage) of all the assets (fixed and current) financed by the bank. In collateral terms, the loans up to Rs.10.00 Lakh are covered under credit guarantee scheme for which the fee shall be borne by the bank. Loans above Rs.10.00 Lakh, are secured either through credit guarantee scheme for which fee shall be borne by the borrower, to be paid upfront to the trust; third party guarantee of two persons or through mortgage of property, registered or equitable.

What’s the repayment procedure?

The loan is to be repaid within 7 years including a repayment holiday of two years.

Any word of caution for this kind of prospective entrepreneur (retired employee)?

There’s an adage: Look before you leap. Cross check the circumstances around you before taking a loan for setting up the unit. Avail loan only when there is absolute need for it. A big loan outstanding will be detrimental not only to your finances but to your family too. Once you go for the loan, better would be to cover your liability through insurance loan protection policy.