For trading, distribution, and manufacturing enterprises in Pakistan, maintaining smooth liquidity between customer payment cycles and supplier raw-material procurement is essential. Rather than locking capital in fixed installments, most enterprises utilize a revolving Running Finance (RF) facility, also known as a commercial overdraft.
Bank Alfalah provides tailored working capital programs through products like Alfalah Karobar Finance (AKF), Merchant Line (for POS terminals), and cash-flow-backed SME programs. These facilities allow businesses to draw funds as needed and pay mark-up only on the exact utilized amount.
Below is an itemized breakdown of Bank Alfalah’s SME working capital limits, the crucial 3x turnover rule, cleanup requirements, collateral options, and documentation standards.
Financing Parameters & Facility Structure
| Facility Dimension | Alfalah Karobar Finance (AKF) Policy Terms |
| Financing Range | PKR 500,000 up to PKR 50,000,000 (50 Million) |
| Facility Types | Running Finance (Revolving Overdraft), Letter of Credit (LC), and Letters of Guarantee (LG) |
| Pricing Benchmark | Variable: 3-Month KIBOR + Bank Spread |
| Tenure | 1 Year (12 Months); renewable annually upon satisfactory review |
| Facility Clean-Up Rule | Only 25% clean-up required for 2 consecutive days every 6 months |
| Collateral Options | Mortgage of urban residential/commercial property, or third-party collateral |
| Loan-to-Value (LTV) | Up to 70% of the assessed property market value |
| Asset Hypothecation | Floating charge / hypothecation over inventory and receivables with 25% margin |
Key Eligibility Criteria
To qualify for an SME credit line with Bank Alfalah, the business entity must meet regulatory and bank underwriting standards:
- Business Constitution: Sole proprietorships, registered partnerships, and private limited companies.
- Business Vintage: The business must have been operational in the same trade for at least 3 continuous years with a verifiable operational track record.
- Age of Principal: Between 23 and 60 years of age at application (maximum 60 years at financing maturity).
- Tax Status: Must possess an active National Tax Number (NTN) and maintain active filer status on the FBR Active Taxpayer List (ATL).
- Credit History (e-CIB): A clean credit record across all commercial and microfinance institutions, with zero loan write-offs or defaults over the preceding 24 months.
The 3x Annual Account Turnover Rule
Under Bank Alfalah’s working capital guidelines, sanctioning a running finance line requires meeting the 3x Annual Account Turnover Rule:
- The total credit turnover passing through your commercial checking account over a 12-month period must equal at least three times the requested credit line.
- Example: If you request a Running Finance line of PKR 10,000,000 (1 Crore), your operational bank statements must demonstrate an aggregate annual throughput (cleared deposits) of at least PKR 30,000,000 (3 Crores).
- If your historical transactions are spread across other commercial banks, Bank Alfalah assesses those external statements during initial underwriting, with a contractual commitment to route proportional sales through your Alfalah account post-disbursement.
Understanding the 25% Facility Clean-Up Rule
Traditional bank overdrafts frequently demand a strict “100% clean-up,” requiring the borrower to pay the running balance entirely down to zero at least once a year.
Bank Alfalah simplifies this for SMEs:
- Borrowers are required to clear only 25% of the assigned limit for 2 consecutive days once every 6 months.
- This allows the business to retain 75% of its working capital permanently mobilized in inventory and receivables without halting day-to-day trade.
Unsecured Alternative: Bank Alfalah Merchant Line
For retail stores, restaurants, and pharmacy chains that do not own mortgagable real estate, Bank Alfalah provides an alternate unsecured working capital facility:
- Eligible Businesses: Merchants running a Bank Alfalah Point-of-Sale (POS) swipe machine for at least 1 year.
- Sales Threshold: Minimum PKR 1,000,000 in annual POS credit/debit card sales.
- Financing Limit: Up to PKR 15,000,000 total, with up to PKR 5,000,000 completely collateral-free (clean).
- Credit Assessment: The credit line is calculated as a direct percentage of verifiable monthly digital sales processed through the POS terminal.
Documentation Checklist
Assemble these records before approaching your local Bank Alfalah commercial branch:
- CNIC copies of the sole proprietor, partners, or corporate directors.
- Business registration proof: NTN certificate, registered partnership deed/Form C, or SECP Certificate of Incorporation alongside Memorandum & Articles of Association.
- Bank account statements for the preceding 12 months (stamped by the issuing branch).
- Latest 2 years’ financial statements (borrower-signed accounts are acceptable for smaller tiers, without requiring audited statements).
- Copy of title deeds, registry, and excise tax challans for the property offered as collateral.
- Signed borrower basic fact sheet and SBP e-CIB declaration.
Application and Disbursement Roadmap
- Meet with an SME Relationship Manager (RM): Visit an Alfalah commercial branch or dedicated SME center to review your inventory cycle and determine your required limit.
- Property Legal Search & Valuation: The bank assigns an approved lawyer and engineering surveyor to assess the legal title and commercial market value of the property.
- Credit Committee Approval: The bank audits your 3x turnover velocity, business margins, and repayment capacity.
- Mortgage Creation & Hypothecation: The legal mortgage is registered at the sub-registrar office, alongside hypothecation filings with the SECP (for companies).
- Limit Activation: The Running Finance sub-limit is linked to your current account. You can withdraw funds via corporate cheque, mobile banking, or Pay Order up to your approved ceiling, with mark-up calculated daily on the utilized balance and debited quarterly.