Did you realise that since its introduction more than 45 lakh small businesses in India have been beneficiaries of the CGTMSE Loan Scheme? To most entrepreneurs, it seems almost impossible to access a business loan without collateral, and that is where the Credit Guarantee Fund Trust for micro and small enterprises (CGTMSE) comes in. It is a government-supported program that assists entrepreneurs, MSMEs, and small business owners in obtaining collateral-free loans in reputable banks and financial institutions. Be it a new business or an already established one, learning how to apply to a CGTMSE loan may be your key to a fuss-free financing process and a sustainable business growth.

What is CGTMSE Loan?

CGTMSE Loan (Credit Guarantee Fund Trust for Micro and Small Enterprises) is a scheme by the government to support startups and small enterprises in India to access credit without collateral. This scheme was introduced by the Government of India and SIDBI in the year 2000 in order to provide relief to micro and small enterprises (MSEs) by providing credit guarantees to the banks so that they can lend without demanding any security or third party guarantee.

The most important highlights are as follows:

  • CGTMSE Loan is targeted at the micro and small enterprises in India.
  • There is no collateral required and the maximum limit that borrowers can get is 5 crores.
  • You have to fulfill the CGTMSE Loan eligibility criteria to qualify such as having valid business papers and not having any defaults in the past.
  • The scheme includes term loans and working capital loans.
  • Interest rates under the CGTMSE Scheme loan interest rate vary from 9% to 14%, based on lender and profile.
  • A good CGTMSE project report sample increases chances of approval; this consists of business information, financial statements, and expansion strategies.
  • All the necessary CGTMSE loan documents required such as ID proof, address proof, business plan, bank details etc.
  • Entrepreneurs can now easily apply CGTMSE loan online through various bank portals.
  • The scheme is ideal for first-time borrowers, especially those lacking assets to pledge.

What is a Credit Guarantee under CGTMSE?

Credit Guarantee Fund Scheme for Micro and Small Enterprises was started to promote the SME and MSME sectors in India. Both new and existing micro and small enterprises including service enterprises are eligible for a collateral-free loan with a maximum credit cap of Rs. 5 crores. 

The CGTMSE scheme loan interest rate depends upon the applicant’s profile, business requirements, and project cost and is comparatively low, as compared to other direct loan schemes. It offers a maximum credit guarantee coverage of up to 75% of the total project cost.

What are the Features of the CGTMSE Loan Scheme?

The stand-out features of the CGTMSE scheme are:

  • Guaranteed repayment of 75% or 85% in some cases for the defaulted principal loan amount up to Rs.50 lakh.
  • The maximum guarantee is 50% for a loan amount greater than Rs.50 lakh but under Rs.1 crore.
  • Provides for 85% repayment for loans up to Rs.5 lakhs to micro-enterprises.
  • If a woman promotes the MSME or if the unit is located in the Northeast Region (NER), the guarantee amount for repayment is 80% of the loan amount.
  • The repayment procedure covers the entire loan amount inclusive of the interest component for 3 months.
  • Rs.1 crore as support to the lender if the business failure is beyond the control of the management.

What are the CGTMSE Loan Eligibility Criteria?

Let us look at the eligibility criteria for the CGTMSE loan scheme for credit providers and credit borrowers.

Eligible entities

  • Sole Proprietorship Firms, Partnership Firms, Private Limited Companies, Public Limited Companies 

Lending Borrowers

  • All Existing and New Small and Medium Enterprises (SMEs)

Lending Institutions

  • Scheduled Commercial Banks (SCBs)
  • Regional Rural Banks (RRBs)
  • Small Finance Banks (SFBs)
  • Non-banking Financial Companies (NBFCs)
  • Small Industrial Development Bank of India (SIDBI)
  • National Small Industries Corporation (NSIC)
  • North Eastern Development Finance Corporation Ltd. (NEDFi)

Women-operated small and micro-enterprises qualify for an 80% guarantee cover, while all credit/loans in the North East Region (NER) for credit facilities qualify for Rs. 50 lakh guarantee. Educational institutions, agriculture, training institutions, and Self-Help Groups (SHGs) are not eligible for guaranteed coverage under CGTMSEs.

What are the CGTMSE Loan Documents Required?

Documents required for a Loan under the CGTMSE scheme and its coverage:

  • CGTMSE loan application form with Passport-sized photographs
  • Business Plan
  • Company registration certificate / Business incorporation letter
  • Business Project Report
  • CGTMSE Loan Coverage Letter
  • Copy of loan approval from the bank
  • Any other document required by the bank

How to Apply CGTMSE Loan Online?

Online application of CGTMSE Loan has become easier than before. Due to online banking systems and government-sponsored websites, owners of micro and small businesses are able to apply at the comfort of their homes. So you are either a startup or an existing MSME, here is how you can start your CGTMSE Loan application online:

Step-by-Step Process:

  1. Select a Participating Bank or NBFC: Go to the website of any of the public sector banks, private sector banks or NBFCs which provide CGTMSE loans. SBI, Canara Bank, ICICI Bank, HDFC and SIDBI are some of the popular lenders.
  2. Registration and Filling the Application Form: Fill the application form by registering your basic information and start filling the business loan application form. Ensure that you choose CGTMSE scheme as a loan type (where applicable).
  3. Upload Required Documents:  You must upload all the documents needed to process CGTMSE loan like an ID proof, business registration, bank statements, and valid project report.
  4. Present a Bankable Project Report: This is a critical project report. It is possible to develop a bank-acceptable project report in 10 minutes using such a tool as Finline, which is fully customizable, easy to read and understand, and it is written in your own language.
  5. Bank Verification and Review: The bank will evaluate your application and project report in order to ascertain viability, risk and loan amount.
  6. Loan Sanction and Disbursement: As soon as the loan is approved, the amount will be added to your business account. CGTMSE will secure the loan to the bank, thereby you will not be required to give collateral.

Tip: Before you apply, it is always advisable to cross verify the interest rate, repayment tenure and eligibility conditions with the bank.

How Finline Helps you to Prepare the Project Report for  Bank Loan?

The CGTMSE Loan scheme has provided an opportunity to numerous small and micro enterprises in India to have access to collateral-free financial help. This scheme can be a game-changer whether you are starting a new venture or expanding an existing venture as long as you have good documentation and project plan. 

An effective project report is important in the approval of loans under CGTMSE. For the best project reports for bank loans, you can use trustworthy platforms like Finline. It is a user-friendly  platform that enables you to develop professional project reports in under 10 minutes, in any language of your choice. In addition to that, Finline reports are accepted in all the major banks in India. Therefore, in case you intend to apply for a CGTMSE Loan, it is best to begin by preparing an effective business plan using Finline.

 Click now to create your project report with Finline.

CGTMSE Loan FAQs

 CGTMSE (Credit Guarantee Fund Trust for Micro and small enterprises) loan scheme is a collateral free loan scheme to the micro and small enterprises. It is meant to help start up and existing businesses that lack assets to secure. The eligible banks and NBFCs can allow startups, small business owners, and MSMEs in manufacturing or service industries to apply.

 Interest rate under CGTMSE scheme is not fixed and will be subject to the lending policies of the bank. The interest rate is usually between 9 percent to 14 percent depending on the profile of the applicant, type of business and repayment capability.

 Some of the documents that are essential are PAN, Aadhaar, business proof (such as Udyam/GST registration), address proof, bank statements, ITRs (where applicable) and a detailed project report. The amount and type of loan might require some banks to ask for extra documents.

 Yes, there is a need to have a detailed and well-structured project report. It assists the bank in assessing your business plan, financial stability, risk and the ability to repay the loan. A good report will give you a high probability of getting a loan under CGTMSE.

 Yes, you can! Finline is a user-friendly platform where you can create a professional, bank-accepted project report in less than 10 minutes. It’s available in multiple languages and is ideal for applying under schemes like CGTMSE.