‘KFC schemes: not much cheer for startups’

THIRUVANANTHAPURAM: Finance minister T M Thomas Isaac has announced a flurry of schemes under Kerala State Finance Corporation (KFC), which he said would help promising start-up companies to realise their dreams. However, opposition and experts are singing a different tune.
Isaac said the schemes emerged firm clear through interactions with start-up companies during a webinar organied by KFC on Wednesday.
According to his social media post in this regard, KFC and government would together come out with schemes that would help entrepreneurs have access to faster and easier and above all, hassle free access to credit.
“Are you a start-up company? Do you have work orders from government, quasi government, corporate companies or other well-known companies? Then you are eligible for loan worth 90% of the work order value, with a ceiling of Rs.10 crore and an interest rate of 10%. You only need to contact KFC. Only condition that you would have to pay back the loan through Escrow account. No other security is required…,” thus starts the finance minister’s social media post.
According to Isaac, an expert committee under the chairmanship of IT secretary would be set up in a fortnight. Once that committee approves that project, there won’t be any delay in KFC, he said. However, experts, politicians and entrepreneurs beg to differ with what Isaac’s claims.
“You should note the interest rate. It’s 10%. It’s not an inviting one. If the government is really interested in helping companies and entrepreneurs, they should, say for example, lend out at 6% or 7% interest. Even commercial banks offer better rates than what KFC has offered,” said seasoned technocrat and state planning board former member G Vijayaraghavan.
Isaac said a consent of the government level committee would help start-ups source up to Rs.1 core from KFC for establishing the production line for an enterprising prototype with a start-up company. Government would create a special corpus fund worth Rs.20 crore as guarantee for this scheme. "If it’s an IT company that has under gone the assessment of a Sebi accredited venture capital fund, you will get up to Rs 5 crore as loan. KFC aims to provide finance assistance to at least 1,000 organisations through these schemes," the minister said.
“This is nothing short of bill discounting offered to civil contractors. Even if the schemes sound like the one being offered without guarantee, it proves otherwise on a closer look.
“Entrepreneurs are offered loan at a high interest rate on the basis of solid guarantees that comes in the form of work order and other guarantees. There is nothing to cheer for start-ups in these schemes,” said Congress legislator V D Satheesan. “Red tapism is at its worst in KFC and it needs to shun its condescension and talk business if it really wants to reinvent itself,” said while recalling his ordeal when he approached KFC with a proposal a few years back.