Government launches startup loan program with 3% interest rate

KATHMANDU: In a major boost to Nepal’s entrepreneurial landscape, the government has announced a groundbreaking initiative to provide financial support to startups through a new loan program.

Under the recently approved ‘Startup Venture Loan Operation Procedure 2024,’ the Ministry of Industry, Commerce, and Supplies has paved the way for startups to access loans at an attractive 3% interest rate.

This initiative is set to encourage innovation and economic growth by offering loans ranging from Rs 500,000 to Rs 2.5 million. To ensure accessibility, the loan disbursement structure allows for a single installment of a minimum of Rs 500,000 and up to Rs 2.5 million.

For flexibility, the loan amount can be disbursed in three installments, with a maximum of Rs 500,000 in the first installment and a cumulative total of Rs 2.5 million.

To facilitate this endeavor, government-owned commercial banks will play a crucial role in executing the loan program. However, startups availing themselves of this opportunity should be aware that the bank can charge service and administrative fees up to 0.1%.

In line with good governance practices, startups must provide evidence of the first installment’s utilization in the project before subsequent installments are released. Additionally, insurance coverage for the project is mandated as a protective measure.

Startups operating in a diverse array of sectors, including agriculture, animal husbandry, forestry, tourism, science, technology, information, communication, human health, education, and training, are eligible to participate.

The program also extends its support to startups in sectors such as transportation, automobile, traditional technology, production and service flow, mining research and development, household or daily lifestyle, food production, and processing.

Furthermore, startups focusing on areas like management and environmental protection, disaster management, alternative and renewable energy, and climate change mitigation can also seek financial assistance through this initiative.

The government aims to disburse loans up to Rs 2.5 million, with the distribution structured into three installments. Startups can receive a single installment for loans up to Rs 500,000, two installments for loans up to Rs 1.5 million, and three installments for amounts exceeding that threshold.

Committed startups that adhere to specified timelines and meet the program’s criteria can request loans with a repayment period of up to seven years. The Industrial Business Development Institution, in collaboration with state-owned commercial banks operating the Startup Venture Loan Fund, will oversee the facilitation of the loan process.

However, it’s crucial for startups to utilize the loan strictly for the designated objectives outlined in the agreement. The startup must repay the principal and interest amounts as per the agreement, with the regulatory body and the bank closely monitoring their progress through monthly reports on loan utilization.

In case of repayment challenges, startups can seek recommendations from relevant authorities for resolution. Failure to repay the loan within the specified timeframe could result in actions ranging from freezing bank accounts to discontinuation of social security benefits.

As a safeguard, the bank can keep the approved business or project as collateral in the form of a fixed deposit, and the startup must ensure insurance coverage for the business or project. The service charge for the loan cannot exceed 0.1% during the repayment period, adhering to the guidelines set forth in the Startup Venture Loan Operation Procedure 2080.