Frequently Asked Questions

MSME Loan Scheme

1.  What are the available SME loan schemes implemented by the Government?

  • Small and Medium-sized Enterprises Line of Credit (SMELoC) Project funded by the Asian Development Bank (ADB)
  • Enhancing Small and Medium-sized Enterprises Finance Project (SMELOC2) funded by the ADB
  • Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

           Loan Component I  - Strengthening the Existing MSMEs and Start-ups

           Loan Component II - MSMEs in the NPL Category

 

2. Am I eligible to obtain SME Loans provided by the Government?

To be eligible to obtain a SME loan facility,

  • > Your business must be registered. 
  • > If your business has not formally registered yet, you need to submit evidence that the application for business registration has been accepted by the Registrar of Companies or the respective local government authority.
  • > You should operate a business acceptable to the bank.
  • > The annual turnover of your business should be less than Rs. 1.0 billion and number of employees is less than 200.

3. What are the eligible categories of SME loans of the Government?

 

  • Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

    Enhancing Small and Medium-Sized Enterprises Finance Project
    (SMELOC2)

    Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

    Loan Component I: Strengthening the Existing MSMEs and Start-ups

    Loan Component II: MSMEs in the NPL Category

    Small and Medium-sized Enterprises (SMEs)

    Micro, Small and Medium-sized Enterprises (MSMEs)

    MSMEs in operation

    MSMEs in operation but classified as non-performing borrowers

  •  

4. What are the eligible sectors in Government funded SME loan schemes?

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II:

MSMEs in the NPL Category

All the sectors

MSMEs in agriculture, tourism, manufacturing, technology, export-oriented sectors and any MSMEs that are women-led

MSMEs in  manufacturing, construction, export- oriented, apparel, agriculture and agro base industries sectors and any MSMEs that are women-led

MSMEs in operational but classified as Non-Performing Borrowers due to unsettled existing loans (Fully closed-down MSMEs are excluded)

 

5. What are the non-eligible sectors of Government funded SME loan schemes?

  1. Trading, leasing and renting related businesses. Trading is defined as “a business, which purchases finished/final products/service and sells the same without any value addition for reselling or final consumption”.

 

6. What are the types of loan facilities available for SMEs?

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

·   Investment loans

·   working capital loans

·   combined loans (investment + working capital)

Working capital loans

Investment loans

Working capital loans

 

7. What are the maximum loan amounts of Government funded SME loan schemes?

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

Rs. 50,000,000.00

Rs. 10,000,000.00

Rs. 15,000,000.00

Rs. 5,000,000.00

 

8. What are the eligibility criteria for government funded SME loans?

 

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

General Criteria

 

(i)            The enterprises must be registered.

(ii)          Sub borrowers who are not formally registered can submit a copy of the application for registration.

(iii)          Sub borrowers (the parent company and any subsidiaries) must have annual turnover of less than Rs. 1,000 million and less than 200 employees.

 

Specific Criteria

 

 

 

(i) MSMEs that are in operational level but classified as Non-Performing Borrowers due to unsettlement of existing loans are eligible. Fully closed-down MSMEs are excluded.

 

9. How do I repay the government funded SME loans?

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

Maximum of five (05) years including maximum of two (02) years grace period.

 Maximum of three (03) years including maximum of six (o6) months grace period

Maximum of 10 years including maximum of one (01) year grace period

Maximum of 5 years including maximum of six (06) months grace period

The bank has the sole right to decide on the maximum grace period to be approved for a borrower.

 

 

10.  Can I get a grace period to repay the government funded SME loans?

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

Maximum of 02 years

Maximum of 06 months

Maximum of 12 months

Maximum of 06 months

 

11. Can I obtain the loan facilities at concessionary rates?

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

Maximum 10%

Maximum 8%

Maximum 7%

Maximum 8%

 

12. Do I have to offer collateral?

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

(i)Working Capital Loans should be provided without collateral.


(ii) The bank obtain suitable collateral for other loans to minimize the risk involved in disbursement and recovery of loans.

The bank obtain suitable collateral for other loans to minimize the risk involved in disbursement and recovery of loans.

The bank obtain suitable collateral for other loans to minimize the risk involved in disbursement and recovery of loans.

(i)   Re-evaluate the already collateralized assets to the bank.

 

(ii) If it is insufficient to cover the risk of loan, the bank obtain suitable collateral to minimize the risk involved in disbursement and recovery of loans.

 

13. What are the banks that I can obtain the government funded SME loans?

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

1. Bank of Ceylon
2. People’s Bank
3. Regional Development Bank
4. Hatton National Bank
5. Seylan Bank PLC
6. Sampath Bank PLC
7. Commercial Bank of Ceylon PLC
8. DFCC Bank
9. National Development Bank
10. Nations Trust Bank
11. Sanasa Development Bank PLC
12. Union Bank of Colombo PLC
13. Pan Asia Banking Corporation PLC

1. Bank of Ceylon
2. People’s Bank
3. Regional Development Bank
4. Hatton National Bank
5. Seylan Bank PLC
6. Sampath Bank PLC
7. Commercial Bank of Ceylon PLC
8. DFCC Bank
9. National Development Bank
10. Nations Trust Bank
11. Sanasa Development Bank PLC
12. Union Bank of Colombo PLC
13. Pan Asia Banking Corporation PLC
14. State Mortgage & Investment Bank
15. Cargills Bank

 

14. What is the process to obtain the government funded SME loans?  

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

Step 01 –

Entrepreneur must reach the nearest bank branch of one of the participating banks that implement the loan schemes

 

Step 02 –

Eligible loan applications are sent for the approval of the head office of the respective bank along with the approval of the branch manager’s approval.

 

Step 03 –

The loan application approved by the bank’s head office is sent to the Department of Development Finance (DFD) for approval.

Step 01 –

Entrepreneur must reach the officers of the Ministry of Industries and the Ministry of Sports and Youth, who are attached to the Divisional Secretariats, i.e. officers of

·     National Enterprise Development Authority (NEDA)

·     Industrial Development Board (IDB)

·     Vidatha or

·     Small Enterprises Development Division (SED).

 

Step 02 –

Issuing a recommendation letter to the Entrepreneur by above officers.

 

Step 03 –

Submitting the loan application along with the recommendation letter to the respective bank branch.

 

 Step 04 –

Eligible loan applications are sent for the approval of the head office of the respective bank along with the approval of the branch manager’s approval.

 

Step 05 –

The loan application approved by the head office is sent to the DFD for approval.

 

Step 06 –

Issuing the ‘no objection’ letter to the banks with respect to approved loan applications

 

Step 07 –

Disbursing the loan to the entrepreneur by the respective bank branch

 

Step 08 –

Submitting the loan application to the DFD for refinancing the disbursed loan

 

Step 09 –

Refinancing the loan by DFD

Step 01 –

Calling applications from interested MSMEs by the Ministry of Industries (MOI)

 

Step 02 –

Submitting the application to the officers of the Ministry of Industries and the Ministry of Sports and Youth, who are attached to the Divisional Secretariats, i.e. officers of

·     National Enterprise Development Authority (NEDA)

·     Industrial Development Board (IDB)

·     Vidatha or

·     Small Enterprises Development Division (SED).

 

Step 03 –

Evaluating the loan applications by an expert panel formed under the MOI.

 

Step 04 -

Issuing a recommendation letter to the respective applicant by the expert panel of MOI

 

Step 05 –

Eligible entrepreneur apply for loans along with the recommendation letter through the same bank which he/she has become as a non-performing borrower.

 

Step 06 –

Eligible loan applications are sent for the approval of the head office of the respective bank along with the approval of the branch manager’s approval.

 

Step 07 –

The loan application approved by the bank’s head office is sent to DFD for approval.

 

Step 08 –

Issuing the ‘no objection’ letter to the banks with respect to approved loan applications

 

Step 09 –

Disbursing the loan to the entrepreneur by the respective bank branch

 

Step 10 –

Submitting the loan application to the DFD for refinancing the disbursed loan

 

Step 11 –

Refinancing the loan by DFD

 

 

15. What are the required documents? 

 

 

Small and Medium-sized Enterprises Line of Credit (SMELoC) Project

Enhancing Small and Medium-Sized Enterprises Finance Project
(SMELOC2)

Stimulating Package for Re-energizing the MSME Sector in Sri Lanka

Loan Component I: Strengthening the Existing MSMEs and Start-ups

Loan Component II: MSMEs in the NPL Category

General Criteria

 

i.         Descriptive project/business proposal

ii.       A copy of the business registration certificate or a copy of the application submitted for registration

iii.      If a MSME in export sector, documents to prove its engagement in export related activities

iv.     If a construction, provide BOQ

v.       If a machinery purchase, provide quotation

vi.     Environment Protection License, if it is a prescribed project under Gazette No. 2264/18 dated 27.01.2022

 

Specific Criteria

 

i.   Computation of Working capital

requirement

ii. The recommendation letter of Ministry of Industries

 

 

16. Can I get financial support for trading, rental and leasing related business activities?

No. The loans are provided only for the business activities, which do a value addition to a product or a service.

 

17. Is the business registration compulsory?

  • i. If you have already started the business in the forms of proprietor, partnership or company, the business registration is compulsory.

  • ii. If you are a Society, registered under any government institution other than Provincial Council/Divisional Secretariat, such registration certificates are considered.(SME loans can be obtained, if the business activities are carried out by the respective Societies itself. However, the Societies cannot obtain the SME loans and relend it to its members keeping an interest margin with the purpose of earning profits.)

  • iii. If you are a start-up and the business activities have not commenced yet, a copy of the application for business registration should be submitted along with the loan application.

18. Can I apply for loans, which are given under government funded loan schemes, through finance companies?

No. Only licensed banks implement the government funded loan schemes

 

For more information,