CGTMSE Scheme

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme is established by the Ministry of Micro, Small & Medium Enterprises (MSME).

 

Keeping this in mind, the scheme aims to help entrepreneurs access bank credit and establish their small businesses. The Government of India partnered with SIDBI (Small Industries Development Bank of India) to implement the scheme. The maximum limit for guarantee coverage under the scheme has been increased to ₹5 Crores.

This scheme comes with a wide range of attractive features to promote entrepreneurship in the country. Here are some of them:

• High Coverage

You can get coverage of up to ₹5 Crores for your micro and small business through member lending institutions

• Interest Rate

The interest rate applicable for funds under this scheme is accordance to the guidelines of the Reserve Bank of India (RBI)

• Multiple Lending Institutions

There are a significant number of lending institutions, including banks, PSUs, NBFCs, RRBs, SUCBs, foreign banks, that can offer financial assistance through CGTMSE Scheme

• Credit Guarantee Coverage

The CGTMSE scheme covers up to 75% to 85% of the loan amount

• Collateral Requirements

It provides a guarantee to get funds if you do not have collateral or a third-party guarantor

• Low Annual Guarantee Fees

The fees vary with the loan amount and range between 0.37% and 1.35% p.a. 

• Lock-in Period 

The lending institution cannot revoke the guarantee before the 18-month lock-in period ends

Knowing the eligibility criteria is essential to ensure that you qualify for the scheme. Here is a list of eligible entities:

• New as well as existing enterprises

• Small road transport operators

• Businesses in manufacturing and service activities as per MSMED Act, 2006

Here are the documents you need to submit:

• Latest Annual Report of the business

• Duly filled, stamped and signed Undertaking

• Compliance with specific conditions of MLI registration according to the applicable guidance

If you qualify to apply for the scheme, you need to follow these steps to send your application:

1. Incorporate a Private Limited Company, LLP, or Proprietorship as per your business requirements

2. Get tax registrations and approvals required for operating the business

3. Conduct market analysis and create a business plan or project report, which includes business model, promoter profile, and projected financials

4. Submit the business plan or project report to the participating bank from which you want to borrow

5. Request for a bank loan, such as a term loan or working capital loan, based on the business plan

6. Banks will process the loan application and sanction the loan as per their policy

7. Upon sanction, the bank will apply to CGTMSE and obtain CGTMSE scheme cover for the sanctioned loan

8. Once approved by CGTMSE, the loan will be covered under the CGTMSE scheme

9. You need to pay CGTMSE guarantee and service fees as applicable for your business