What Happens After your Loan is Approved?

Pre-disbursement stageThe letter of intent(LOI) for sanction of financial assistance is issued  with certain terms and conditions. Once your company unconditionally accepts LOI through Board resolution, the following documents need to be executed as may be applicable as per the terms of assistance.

  • Loan Agreement(LA) between the lender and the borrower crystallising the contractual relationship between them
  • Deed of Hypothecation(DOH)
  • Undertaking for non-disposal of shareholding
  • Undertaking for over-run/shortfall
  • Guarantee deed
  • Pledge of shares document
  • Registration of Form 8 & 13 relating to Deed of Hypothecation with the concerned Registrar of Companies for creation of interim security  

Creation of Final SecurityYour company will need to submit the following :

  • Title Deeds
  • No objections from the existing secured creditors for ceding pari-passu/ prior charge
  • Permission of the lessors to mortgage the leasehold land, if required
  • Statutory permissions, if any, required for creation of mortgage.

Disbursement of sanctioned assistance

  • Your company is required to submit application for drawal of loan specifying progress of the project and requirement of funds.
  • Since creation of final security takes time, the disbursement request is considered by the Bank/ institution after execution of legal documents so as to avoid delay in implementation of the Project.
  • Your company will have to bring in Promoters’ contribution as stipulated and furnish Chartered Accounts Certificate therefor alongwith utilisation of funds.
  • Based on the certificate, pro-rata disbursement is normally  considered by the bank/institution. Bank / Institution may insist on a minimum Promoters contribution deployment prior to disbursement.
  • Site visit and Bank Account Scruitiny are carried out by bank officials to check the progress thereof before disbursal of assistance.
  • Progress regarding creation of security is reviewed by the bank at the time of each disbursement.

 Post-disbursement stageProject monitoring is done by the lender bank/institution during implementation period and post operation period. The lender will insist on the following :

  • Periodical progress reports
  • Site visits by bank /institution's officials
  • Periodical interaction/ discussions with Chief executives/senior executives of the company to ascertain progress
  • Annual report of Your company
  • Appointment of bank/institutional nominee on the Board of  your company
  • Insurance of assets of your company in your name jointly with bank/institution.

The project follow-up basically aims at ensuring end use of the assistance granted for intended purpose and timely repayment of the assistance as per terms of sanction.