Credit Guarantee Fund Trust For Micro and Small Enterprises (CGTMSE Scheme)

CGTMSE Full Form is Credit Guarantee Fund Trust for Micro and Small Enterprises and the logo of (CGTMSE) — a colorful flying bird — reflects the entrepreneurial zest of the country’s youth, who have sensational ideas,

but no third-party guarantee or collateral security to get loans from formal sources. There are many business loans that are collateral free. Look after how it is beneficial for MSMEs

CGTMSE Loan aims to support these young, aspiring entrepreneurs in setting up sustainable micro and small enterprises, transforming them from employment seekers to employment providers.

What Is the CGTMSE Loan Scheme? 

The CGTMSE scheme, a brainchild of the Government of India’s Ministry of Micro, Small and Medium Enterprises, intends to improve the credit distribution system and ease the flow of credit to MSEs. (Micro and Small Enterprises).

The unique offering fills the vacuum between an idea and its execution, by extending financial support to micro and small entrepreneurs. Under the CGTMSE scheme, eligible businesses can get a loan of up to ₹1 crore from banks and financial institutions. 

Also Read:- Lines of Credit: Online Lenders vs. Traditional Banks

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme details:-

Loan Schemes Covered Under CGTMSE Scheme

The CGTMSE scheme primarily supports collateral-free loans for MSMEs. Below are the types of loan schemes available under the CGTMSE scheme:

Benefits of CGTMSE Scheme

The primary goal of CGTMSE is to establish a credit relief system that facilitates enhanced credit accessibility for the MSME sector. The scheme’s key attributes make it a practical financial assistance option for MSMEs

• Eligible Activities: Businesses falling within the manufacturing and service-based categories, including retail trade, are eligible under the CGTMSE scheme. However, educational and training institutions, self-help groups, and agricultural activities are not covered by this scheme.

• Loan Amount: MSE owners can access credit facilities of up to ₹200 lakh. Regional Rural Banks (RRBs) and specific financial institutions, on the other hand, provide credit facilities up to ₹50 lakh.

• Guarantee Coverage: CGTMSE provides a guarantee covering 75-85% of the repayment amount in the event of a default on the principal loan. This guarantee is applicable for principal loan amounts up to ₹50 lakh.

• Collateral: Under CGTMSE, no collateral or third-party guarantee is required, offering a hassle-free lending option for businesses.

• Encourages Entrepreneurship
  The scheme supports individuals with innovative business ideas, helping them overcome financial barriers.

• Improved Loan Availability
  Banks and financial institutions are more willing to lend to micro and small enterprises due to the credit guarantee, fostering growth opportunities.

• Enhanced Credibility
  Being part of a government-backed scheme can improve the business’s reputation with lenders and other stakeholders.

Documents Required for CGTMSE Scheme

Here is the list of CGTMSE loan documents mentioned below

1. Business Documentation

• Business Registration Certificate: Proof that the enterprise is registered (e.g., GST registration, MSME certificate, or shop establishment license).
• Business Plan: A detailed blueprint explaining the nature of the business, its operations, financial projections, and loan utilization.
• Proof of Ownership/Lease Agreement: For business premises.

2. Financial Documents

• Bank Statements: Last 6 to 12 months’ statements of the business or personal account.
• Income Tax Returns (ITR): Filed ITR for the past 2-3 years (if applicable).
• Financial Statements: Balance sheet, profit and loss account, and cash flow statement (audited or self-declared).

3. Personal Documents of Borrower

• Identity Proof: Aadhaar Card, PAN Card, Passport, Voter ID, or Driving License.
• Address Proof: Utility bills, passport, or any valid government-issued proof.
• Photographs: Recent passport-sized photographs.

4. Loan-Specific Documents

• Loan Application Form: Duly filled and signed by the applicant.
• Project Report: If the loan is for setting up a new project, include detailed cost estimates, resources, and expected outcomes.
• Quotation for Equipment or Machinery: For loans used to purchase equipment or machinery.

5. CGTMSE-Specific Documentation

• Undertaking: A declaration stating that the borrower does not have collateral to offer.
• Agreement with Lending Institution: As per the CGTMSE guidelines.

6. Other Documents (if applicable)

• Existing Loan Details: For borrowers with prior loans, details of outstanding dues.
• Partnership Deed/Articles of Association: If the enterprise is a partnership or company.

CGTMSE Scheme Eligibility Criteria 

To make credit accessible to all micro and small enterprises, the government has set simple eligibility criteria for CGTMSE loan. Any registered enterprise, with a workable business idea, can avail the CGTMSE loan scheme, which is open for both new and existing businesses. 

• Credit facilities are extended to Micro & Small units, defined as per the MSMED Act 2006, based on the investment in Plant & Machineries/Equipment.
• Borrowers engaged in Wholesale trade & Educational/Training Institutes are eligible for credit facilities.
• Credit facilities are also sanctioned for Agricultural activities such as Fishing, Poultry, Dairy, etc.
• Units in both manufacturing and services sectors, including Retail Trade, can be covered under CGTMSE.
• Covered units must be engaged in activities approved by CGTMSE for inclusion in the scheme.
• The maximum CGTMSE loan limit for coverage to a single borrower should not exceed Rs. 500 Lakhs.
• For loans above Rs. 10 Lakhs, Partial Collateral security may be required.
• Both Term Loan and Working Capital (both fund-based and non-fund based) can be covered under the scheme.
• Composite Loan structures are also eligible for coverage.

How to apply for CGTMSE Loan online?

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme is designed to facilitate collateral-free loans to Micro and Small Enterprises (MSEs). Here’s a step-by-step guide to applying for a CGTMSE loan online:

Step 1: Understand Eligibility

Ensure that your business falls under the Micro or Small Enterprise category as defined by the MSME Act. Also, verify that the loan you seek qualifies under the CGTMSE scheme.

Step 2: Prepare Required Documents

Typically, you will need:

1. Business registration or incorporation certificate.
2. PAN Card and Aadhaar of the business owner.
3. Bank statements (last 6–12 months).
4. Project report or business plan.
5. Proof of business address.
6. GST registration certificate, if applicable.
7. Financial statements (e.g., profit and loss statement, balance sheet).
8. Details of existing loans, if any.

Step 3: Choose a CGTMSE Member Lending Institution

CGTMSE does not directly provide loans. Instead, it works with banks, NBFCs, and other financial institutions. Some popular options include:

• State Bank of India (SBI)
• ICICI Bank
• HDFC Bank
• Bank of Baroda
• NBFCs like Bajaj Finserv, etc.

Step 4: Visit the Bank/NBFC Website

1. Go to the official website of the chosen lending institution.
2. Look for the CGTMSE Loan or MSME loan section.
3. Fill in the online application form with details like your business profile, loan requirement, and contact details.

Step 5: Submit Application with Supporting Documents

Upload all the necessary documents mentioned above. Ensure that they are clear and complete to avoid delays.

Step 6: Wait for Verification and Approval

The bank/NBFC will:

1. Evaluate your application and documents.
2. Check your business’s financial health.
3. Process the loan under the CGTMSE guarantee framework if approved.

Step 7: Loan Sanction and Disbursement

Once approved, the loan amount will be disbursed to your business account.

Also Read: Everything You Wanted To Know About PMEGP Loan

CGTMSE Scheme Fees and Interest Rate

The CGTMSE charge has two categories

Why to Choose CGTMSE Scheme?

The CGTMSE scheme not only grants credit up to ₹1 crore, but it does so without asking for a third-party guarantee or collateral security. Furthermore, the CGTMSE scheme provides a credit guarantee, liberating entrepreneurs from the burden of repaying the loan, if by any chance their business fails. 

If a project fails, and the borrower cannot repay the loan, the CGTMSE scheme will directly pay the outstanding loan amount to the lending institution to compensate for the monetary loss they suffered due to non-repayment of the loan. 

The quantum of the credit guarantee, or credit cover, varies between 50 percent and 85 percent of the loan amount, depending on a range of factors, including the gender, industry type, the purpose, and the amount of loan.

Also Read: Top Facts About PMRY Loan

CGTMSE lock-in Period

The lock-in period under the CGTMSE scheme is 18 months from the date of the first loan disbursement, during which lenders (MLIs) cannot invoke the credit guarantee. This period ensures that lenders make genuine recovery efforts before claiming the guarantee in case of borrower default.

After the lock-in period, lenders can invoke the guarantee if the loan is classified as a Non-Performing Asset (NPA) and recovery efforts are documented. Exceptions may apply in extraordinary cases, such as the borrower’s demise. This mechanism ensures fair recovery practices and prevents misuse of the guarantee facility.

CGTMSE New Guidelines

1. Enhanced Guarantee Limit: The maximum guarantee cover has been raised from ₹2 crore to ₹5 crore, facilitating larger loans without the need for collateral.

2. Reduced Guarantee Fees: For loans up to ₹1 crore, the annual guarantee fee has been reduced significantly, from a peak rate of 2% to as low as 0.37%, lowering the cost of borrowing for enterprises.

3. Simplified Claim Process: For loans up to ₹10 lakh, lenders no longer need to initiate legal proceedings to settle claims, streamlining the process for small borrowers.

4. Increased Fund Infusion: A corpus infusion of ₹9,000 crore has been made to provide collateral-free guaranteed credit of up to ₹2 lakh crore.

5. Focus on Informal Micro Enterprises (IMEs): Special provisions and simplified processes have been introduced to extend credit guarantees to informal micro-enterprises, further enhancing their access to credit.

FAQ

Which bank provides a CGTMSE loan?

Many banks and financial institutions in India provide loans under the CGTMSE scheme. Some of these banks include:

1. State Bank of India (SBI)
2. Punjab National Bank (PNB)
3. Bank of Baroda (BoB)
4. Canara Bank
5. Union Bank of India
6. Bank of India (BoI)
7. Central Bank of India
8. Indian Bank
9. UCO Bank
10. ICICI Bank
11. HDFC Bank
12. Axis Bank

Apart from these, several regional rural banks (RRBs) and non-banking financial companies (NBFCs) also participate in the CGTMSE scheme.

Here is a simplified version of the content:

Who can get a CGTMSE loan?
Micro, Small, and Medium Enterprises (MSMEs) including individuals, sole proprietors, LLPs, partnerships, private limited companies, and registered companies can apply for this loan scheme.

Is CGTMSE Loan is for new business?

Yes, the CGTMSE loan is available for new businesses, making it a valuable option for entrepreneurs starting their ventures. The scheme is specifically designed to provide collateral-free credit to both new and existing Micro and Small Enterprises (MSEs) in the manufacturing and service sectors.

What is CGTMSE portal?

The CGTMSE Portal is an online platform where lenders can apply for guarantee coverage, track applications, and manage claims under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. It is also a resource for borrowers to understand the scheme and check updates.

What are the schemes covered under CGTMSE Scheme?

Although CGTMSE itself does not provide a direct subsidy, it can be combined with government subsidy programs like:

• Prime Minister’s Employment Generation Programme (PMEGP): Offers subsidies for new businesses.
• Credit Linked Capital Subsidy Scheme (CLCSS): Provides a 15% subsidy for technology upgrades in MSEs.
• Stand Up India: Supports loans for women, SC/ST entrepreneurs, with certain benefits.

What is Locked in Period in CGTMSE Scheme?