Interim Finance is a short-term, super-secured lending for 6 to 12 months granted to the companies undergoing insolvency and is used to pay operational costs of immediate needs such as payments to professionals, workers, security personnel etc. The main objective of grant of interim finance is to keep the companies under insolvency running under the legal backing and safeguards provided by the Insolvency and Bankruptcy Code, 2016.
“We follow a very stringent due diligence and risk assessment process before arriving at a decision. The number of admitted CIRPs is set to grow specifically after the introduction of a pre-packed insolvency process, which is a much quicker 120 day process. We see the insolvency market as a very strong foot-hold for us and look forward to providing the best possible solutions to organise the market and make it efficient,” said Kundan Shahi, founder of LegalPay.
This segment is dominated by private equity and ARC giants such as Edelweiss, KKR, and Eight Capital, which generally does high-ticket transactions. LegalPay targets mid-market companies including the MSMEs undergoing insolvencies in which the requirement of interim finance ranges from Rs10 lakhs to Rs5 crores.
“We never expected that the term sheet could be finalized by any interim finance provider in less than 12 days from the initial communication,” said Ravindra Beleyur, who was appointed resolution professional for Yashomati Hospitals.
The interim financing requirements for the companies undergoing insolvencies vary between the range of an amount as small as INR 10 lakh, to as hefty as INR 800 crore.
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Many lenders now find interim financing as an investment opportunity as the interest rates on these loans are highly market-competitive and lucrative. In addition, several provisions under IBC secures the interests of creditors and investors.
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