HP Financial Corporation has delegated powers to sanction the loans at various levels as under:

A.     INDUSTRIAL LOAN CASE:

1. Upto   Rs. 75.00 lacs                                             Managing Director
2. Above Rs. 75.00 lacs                                             Board of Directors

B.    TRANSPORT  LOAN CASES:

1.      At branch level                                                    Branch Managers

2.      At head office                                                      Managing Director

---

Time Taken for Processing the Loan Application

---

After receiving the loan application complete in all respects, the Corporation allots it to its technical officers, for appraisal. In order to process the application expeditiously, the prospective entrepreneurs are expected to complete the application forms in all respects and to attach the required documents.

---

IMPORTANT PARAMETERS FOLLOWED IN CONSIDERING LOAN APPLICATIONS

---

DEBIT EQUITY RATION

The Corporation insists upon adequate financial involvement of the entrepreneurs in the project and accordingly, it is kept 1.50  to 2.33.

While computing the debt equity ratio, the Corporation takes into account the paid-up capital of the company free reserves, central subsidy/state incentives and seed capital minus fictitious assets and accumulated losses, as equity. Debt includes deferred payments and term loans.

MARGIN

Loans are generally granted on 30% to 35% margin on security but this margin depends upon the financial aspects of the project. In case of small scale units having investment in plant & machinery not exceeding Rs. 60.00 lacs and ancillary upto Rs. 75.00 lacs the margin can be 25% to 30%.

Debt Service Coverage Ratio (DSCR)

The repayment period of loan is fixed by the corporation with due regard to the cash generation and profitability of the project. For this purpose, average DSCR ranging between 1.75:1 and above is accepted as reasonable. 

SECURITY OF LOANS

The HPFC advances loans keeping the first charge on the fixed assets existing as well as to be acquired out of the financial assistance extended by it. Such charge is created by executing hypothecation and/or mortgage deed in favour of the Corporation. In addition to the security of fixed assets, personal guarantees of promoters  major shareholders are also taken. Besides collateral security is also taken to secure the loan of the Corporation.  This depends upon the type of projects, location, sector, quality of primary assets etc. For transport loan collateral security of value minimum of 30% of loan amount is taken.

REPAYMENT PERIOD OF LOAN

The repayment period of loan is normally 5 to 8 years with moratorium for the one or  two years depending on the type of loan. The repayment period is fixed on the basis of the profitability estimates and availability of cash accruals. The loan is usually repayable in quarterly instalments. For transport loans repayment period is 3 to 5 year.