Over Draft Against Receivables : Overview

Any kind of authenticated receivables like Bills Receivable, Rent Receivables can be pledged as security for the overdrafts. Is known as Overdraft against Receivables .The proceeds of all such receivables are routed through the overdraft account and immediately settled against the overdrawn amount. However drawings can be allowed against fresh receivables. Thus the amount of receivables remains as a continuing security for all drawings. The bank or lending institute ensures that no other loan or obligation is availed by the customer pledging the same receivables. The amount of receivables and the time required to honor or materialize the receivables are the key factors to determine the limit of overdraft.

Over Draft Against Receivables : Documents

The borrower and/or the guarantors have to provide the following documents to the banks or the lending institutions while submitting Overdraft against Receivables Application. Certain documents may be demanded by the bank or the lending institutions in post sanction phase or on periodical basis.

• Address Proof : Latest Electricity/Telephone Bill or Receipt of Maintenance Charges or Valid Passport or Voter’s Identity Card or Purchase/Lease Deed/ Leave & License Agreement of Residence or Office Premises
• Identity Proof: Valid Passport, PAN Card, Voter’s Card, Any other photo identification issued by Government Agencies
• Business Proof : VAT/CST Registration No. or MIDC Agreement or SSI Permanent Registration Certificate or Warehouse Receipts or Shop & Establishment Act Certificate or Copy of Lease Agreement along with the latest Rent paid Receipt
• Business Profile on Company’s LetterheadM
• Partnership deed in case of partnership firms
• Certificate of incorporation, Date of Commencement of Business and Memorandum of Title Deeds, Form 32 in for Addition or Deletion of Directors in case of companies
• Detailed Project Report ( for new ventures)
• Last three years Trading, Profit & Loss A/c. and Balance Sheets (duly signed by a Chartered Accountant wherever applicable)
• Last one years’ Bank statement of the Firm
• If existing loan, then sanctioning letter and repayment schedule of the same
• Firm/Company’s PAN Cards
• Individual Income Tax Returns of the Individual/Partners/Directors for last three years
• Last one years’ Bank statement of Individuals, Partners, Directors
• SEBI formalities in case of listed companies
• Share Holding pattern of Directors duly certified by a Chartered Accountant
• List of the Existing Directors of the company from the Registrar of the Companies
• Written & approved confirmation of having No Legal Suit filed against any of the directors. If any such legal suit or proceedings are pending then the details of such legal suit or proceeding

When Overdraft against Receivables :

• Legal Contract for receivables

Over Draft Against Receivables : Process

The following are the sequence of steps taken by the banks on receipt of completed application forms.

1. Application form is accepted and acknowledged.
2. Personal interview /discussions is held with the customers by the bank’s officials.
3. Bank's Field Investigation team visits the business place/work place of the applicant. (All the documents submitted are verified by the bank with the originals so as to ensure the authenticity of the same.)
4. Bank verifies the track record of the applicant with the common information sharing bureau (CIBIL).
5. In case of fresh projects the bank analyses the back ground of the applicant/firm/company and the Technical feasibility/financial viability of the project based on various parameters and also the existing market conditions.
6. Depending on the size of the project the file is put up for sanction to the appropriate level of authority.

SANCTION AND DISBURSEMENT :

1. On approval/sanction, the sanction letter, is issued specifying the terms and conditions for the disbursement of the loan. The acceptance to the terms of sanction is taken From the Applicant.
2. The processing charges as specified by the bank have to be paid to proceed further with the disbursement procedure.
3. The documentation procedure takes place viz.Legal opinion of various property documents and also the valuation reports.(Original Documents to title of the immovable assets are to be submitted)
4. All the necessary documents as specified by the legal dept., according to the terms of sanction of the loan of the bank are executed.

Disbursement of the loan takes place after the Legal Dept. Certifies the Correctness of execution documents.