The Ministry of Industry, Commerce, and Supplies, with the aim of increasing the entrepreneurship culture in Nepal, issued the <a href="https://moics.gov.np/uploads/shares/CCF20230323_compressed.pdf">Startup Enterprise Loan Fund Procedure, 2079</a>. Interestingly, this procedure mandates that any startup in Nepal can obtain a loan of up to 25 lakhs at a concession interest rate of 3% by keeping the business as collateral.&nbsp;&nbsp;<h2>What is a Startup Enterprise?</h2>&nbsp;<figure class="image image_resized" style="width:64.82%;"><img src="https://api-v1.biznestbazaar.com/public/blog_media/Startup_Enterprise_OCoP6EF.jpg"></figure>&nbsp;“Startup Enterprise” means an enterprise or&nbsp; business performing supply of goods, services,&nbsp; process development, production, operation, and distribution, applying creative/innovative thinking&nbsp; and operating commercially and having&nbsp; the possibility of growth."&nbsp;<h2>How is the Fund Established?&nbsp;</h2>&nbsp;The Ministry of Industry, Commerce &amp; Supply has designated a specific allocation for startup enterprises, which will be periodically transferred to <a href="https://www.nrb.org.np/">Nepal Rastra Bank (NRB)</a>. The NRB will manage this allocated amount in a separate account known as the Startup Enterprise Credit Fund.&nbsp;<h2>What are the Eligibility Criteria to Apply for Startup Loan Program?</h2>&nbsp;<figure class="image image_resized" style="width:63.37%;"><img src="https://api-v1.biznestbazaar.com/public/blog_media/Eligibility_Criteria_to_Apply_for_Startup_Loan_Program_dqwBqai.jpg"></figure>&nbsp;To get the credit facility for the startup business, the business must be registered and in operation during the issuance of the notice. However, the operation of the business shouldn’t have crossed seven years to qualify for the loan.&nbsp; The startups willing to apply for the credit facility must adhere to at least three of the criteria listed from clauses (a) to (d)&nbsp; and two clauses from (e) to (g) to enjoy the consensus.&nbsp;&nbsp;<ol><li>Paid-up capital of no more than NPR 5 million (NPR 50 lakhs),</li><li>Annual Gross income of no more than NPR 5 million (NPR 50 lakhs),</li><li>Fixed capital (except land and building) of no more than NPR 20 million (NPR 2 crore),</li><li>Full-time employees not exceeding ten employees,&nbsp;</li><li>Allocation of at least 5% of total expenditure for product development, market research and development,</li><li>Involved in the use of information and technology and working to mitigate problems associated with the production or distribution of products and services.&nbsp;</li><li>Having registered intellectual property or having the capacity under the prevailing law to register intellectual property such as patents, designs, or software.&nbsp;</li></ol>&nbsp;Also read: <a href="https://www.biznestbazaar.com/blog/advantage-of-buying-registered-business-in-nepal">Advantages of Buying Registered Business in Nepal</a>&nbsp;<h2>Which Sectors are Identified as Eligible for Applying for the Startup Loan Program?&nbsp;</h2>&nbsp;The industry or the <a href="https://www.biznestbazaar.com/buy-a-business">business</a> entity falling under the following categories can apply for the loan.&nbsp;&nbsp;<ol><li>Agriculture and poultry-based ventures</li><li>Forest-related activities involving herbs and forestry products</li><li>Tourism promotion, entertainment, and hospitality ventures</li><li>Science, technology, information, and communication technology-related businesses</li><li>Education or educative learning-based enterprises</li><li>Safe and convenient transportation services</li><li>Education and educational institutions-related initiatives</li><li>Human health-related services</li><li>Infrastructure development-related businesses</li><li>Automobile industry ventures</li><li>Improvement of traditional practices, production, and service providers</li><li>Mines and mining-related research and development</li><li>Initiatives aimed at simplifying and enhancing daily lifestyle affairs for households</li><li>Food production and processing industry enterprises</li><li>Waste management or environmental-related businesses</li></ol>&nbsp;<h2>What are the Criteria for the Ineligibility of Startup Loan Program?</h2>&nbsp;<figure class="image image_resized" style="width:80.53%;"><img src="https://api-v1.biznestbazaar.com/public/blog_media/Criteria_for_Ineligibility_of_Start-up_Loan_Program.jpg"></figure>&nbsp;A startup enterprise is not eligible for a loan if it:<ol><li>Is not legally registered under the prevailing law of Nepal.&nbsp;</li><li>Imports goods or services from abroad without using information technology and innovative thinking.</li><li>Is formed through de-merging or is a subsidiary company of an already established holding company.&nbsp;</li><li>Is blacklisted in the Credit Information Center, or is it managed by someone blacklisted.</li><li>Does not have a PAN for tax purposes.</li><li>Is classified as a medium or large-scale industry under the <a href="https://moics.gov.np/uploads/shares/laws/Industrial%20Enterprises%20Act%20%202020.pdf">Industrial Enterprises Act 2076</a> if it is a holding company.</li><li>Other matters as prohibited by applicable law.</li></ol><h2>&nbsp;</h2><h2>What is the Process for Applying to the Loan?&nbsp;</h2>&nbsp;First, the Startup enterprise execution committee, which is a committee formed by the <a href="https://doind.gov.np/">Department of Industries (DOI)</a>, calls for application. The application information is provided through public notice via electronic means or the daily national newspaper. Those startups interested in applying for the loan can apply within 21 days of such notice. Applicants can submit the application either to the Department of Industry (DOI) or online at startup@doind.gov.np, following the provided schedule.&nbsp;While applying for the loan, the following documents must be submitted along with the application.&nbsp;&nbsp;<ul><li>Certificate of registration of the firm/company or industry (1&nbsp; Photocopy)</li><li>PAN (1 Photocopy)</li><li>Tax clearance certificate for last fiscal year (1 Photocopy)&nbsp;</li><li>Citizenship certificate of the authorised representative of the firm/company or industry (1 Photocopy)</li></ul>&nbsp;&nbsp;<figure class="table" style="width:26.5%;"><table class="ck-table-resized"><colgroup><col style="width:70.81%;"><col style="width:29.19%;"></colgroup><tbody><tr><td>Document</td><td>No of Copy</td></tr><tr><td>Certificate of Registration of company</td><td>1</td></tr><tr><td>Personal Account Number (PAN)</td><td>1</td></tr><tr><td>Tax Clearance certificate</td><td>1</td></tr><tr><td>Citizenship of authorised representative</td><td>1</td></tr></tbody></table></figure>&nbsp;After receiving the application, the Startup enterprise execution committee evaluates them. The Department of Industry (DOI) lists the shortlisted enterprises on its website within 30 days of receiving the application. DOI then notifies NRB and the Short-listed enterprises&nbsp;&nbsp;DOI will notify NRB and the shortlisted startup enterprise about the listing of recommendations. NRB then communicates with the bank responsible for the credit disbursement. The selected enterprises must contact the allocated bank within seven days of such notification by the NRB. If they do not contact the bank on time, the system will automatically cancel their application, and the next best alternative enterprise will be given priority.&nbsp;<h2>Does the Business Need to Secure the Loan with any Collateral?</h2>&nbsp;No, the business entity does not have to put any additional security or collateral. The business or the project itself consists of collateral. The bank shall secure the loan with the Deposit and Credit Guarantee Fund, and Nepal Rastra Bank (NRB) shall reimburse the charges relating to such insurance.&nbsp;<h2>Does the Enterprise Need to Pay any Additional Charges?&nbsp;</h2>&nbsp;The lending bank may charge a service fee of up to 0.1% of the loan amount and a repayment fee of up to 0.5% of the principal amount, as agreed upon in the contract.&nbsp;<h2>How Long Shall the Duration of the Loan be?&nbsp;</h2>&nbsp;Enterprises that receive concessional loans must repay the principal and interest within the period specified in the contract. However, enterprises can repay the loan early at any time during the debt period. If the enterprise repays the loan early, it will not be required to pay additional charges. However, if the enterprise fails to repay the loan on time, the government will collect the remaining amount as a loan, and the enterprise may be subject to legal penalties.&nbsp;<h2>What is the Complaint Mechanism Provisioned in the Procedure?&nbsp;</h2>&nbsp;If the bank decides not to disburse a loan as decided by the committee recommends, the bank must inform the concerned entrepreneur with a reasonable justification. In case of refusal by the bank to grant loans, the concerned entrepreneur may submit a written complaint against the bank to the committee. Upon receiving such a complaint, the committee may direct the bank to investigate and address the issue within fifteen days. The bank must follow the committee's instruction&nbsp;Disclaimer: The information provided here is for informational purposes only and should not be considered as legal advice. Please consult with a qualified legal expert for professional legal opinions. You can also consult with our <a href="https://www.biznestbazaar.com/hire-professional">professionals</a> for further assistance.&nbsp;

A Comprehensive Guide to Securing Startup Funding in Nepal

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