KFC - Letter of Guarantee Scheme
The Letter of Guarantee Scheme is a special loan facility implemented by Kerala Financial Corporation (KFC) to support MSMEs and industrial units assisted by the Corporation by offering Bank Guarantees (BGs). The scheme is currently operational and is designed to help your business meet guarantee requirements without blocking cash or fixed deposits. Through this scheme, your enterprise can obtain bank guarantees for imports, bidding processes, and contract execution, thereby improving liquidity and operational flexibility.
Key Features
- Type of Loan: This is a special loan facility in the form of a Bank Guarantee support, classified as a non-fund based assistance.
- Purpose: The scheme is intended to offer Bank Guarantees to eligible units for availing Letters of Credit (LCs) from banks and for meeting guarantee requirements related to business and project execution.
- Guarantee Coverage: KFC can extend guarantee support up to 100% of the guarantee amount required, subject to appraisal and sanction.
- Internal Credit Rating: There is no minimum internal credit rating requirement under this scheme, making it accessible to a wider range of eligible units assisted by KFC.
- Guarantee Period: The guarantee issued under the scheme shall not exceed a maximum period of five years.
- Guarantee Commission: Guarantee commission, along with applicable GST, is charged for the entire guarantee period as per KFC’s prevailing norms.
Financial Assistance
Eligibility Criteria
Who can apply:
- Units assisted by Kerala Financial Corporation
- MSMEs and industrial concerns requiring Bank Guarantee support
- Units requiring BG for availing Letter of Credit for import of machinery, raw materials, or other eligible purposes
- Units requiring guarantees for bidding, advance payment, release of retention money, or procurement of raw materials
Who cannot apply:
- Units not assisted by KFC
- Entities without a valid requirement for Bank Guarantee
- Units not compliant with KFC’s basic eligibility conditions
Documents Required
- MSME–Udyam Registration Certificate (if applicable)
- KFC assistance details
- Purpose-specific documents (LC requirement, tender document, contract agreement)
- Financial statements
- KYC documents of promoters
- Bank correspondence requiring BG
Application Process for the Scheme
Option 1: Apply with Bullit (Recommended)
Start instantly with our guided application support, where our team verifies eligibility, prepares documentation, and coordinates with the Industries Department on your behalf. Using our business loans and compliance calendar, you can track progress while focusing on project execution, we manage the application end-to-end.
Recommended for: MSMEs and industrial units requiring frequent or high-value bank guarantees.
Option 2: Apply through KFC
- Approach the concerned KFC office
- Apply under Letter of Guarantee Scheme
- Submit guarantee requirement and supporting documents
- Appraisal of eligibility and exposure
- Issue of Bank Guarantee as per sanction terms
Related Schemes
Frequently asked questions
What is the main purpose of the KFC Letter of Guarantee Scheme?
The scheme is intended to offer Bank Guarantees to units assisted by KFC, enabling them to meet guarantee requirements for imports, bidding processes, and contract execution without blocking their own funds.
For what activities can the Bank Guarantee be used?
The Bank Guarantee can be used for availing Letters of Credit for import of machinery or raw materials, bidding for tenders, obtaining advance payments, releasing retention money, and procuring raw materials.
Does the scheme provide cash loan or only guarantee support?
The scheme provides only non-fund based support in the form of Bank Guarantees and does not involve direct disbursement of funds.
What is the maximum guarantee amount available under the scheme?
KFC can extend guarantee support up to 100% of the guarantee amount required, subject to appraisal and sanction under the scheme guidelines.
Is there any minimum internal credit rating requirement?
No. The minimum internal credit rating requirement is not applicable under the Letter of Guarantee Scheme.
What is the maximum period for which the guarantee can be issued?
The guarantee period shall not exceed a maximum of five years, irrespective of the purpose for which the guarantee is issued.