CGTMSE is a government sponsored startup scheme where loans are provided without collateral. Learn more about CGTMSE in the following article…
Micro and small enterprises are the backbone of the Indian Economy. There are about 63.05 million micro and 0.33 million small enterprises providing employment to millions of people. These MSE sectors are not only involved in manufacturing, but contributing to nation’s exports as well. It is, therefore, essential to encourage these sectors to strengthen Indian economy.
There are many young minds with good business ideas in India. However, they are unable to execute their ideas due to a lack of funds. They cannot even apply for loans as they do not have collateral or a third-party guarantee. That’s where CGTMSE (credit guarantee fund for micro and small enterprises) plays a significant role by providing a guarantee in order to help these young entrepreneurs access loans. In other words, now entrepreneurs can obtain credit without the hassles of collateral or a third-party guarantee.
What is CGTMSE?
CGTMSE is a government startup scheme launched in the year 2000 by the Government of India to provide collateral-free loans to micro and small enterprises. CGTMSE is a trust that has been formed by the association of MSMEs (The Ministry of Micro and Small Enterprises) and SIDBI (Small Industries Development Bank of India). This trust is responsible for providing credit guarantee fund to micro and small enterprises. The corpus of this trust is being contributed by the government and SIDBI in the ratio of 4:1 respectively. In other words, CGTMSE is a trust that offers credit guarantee to financial institutions that offer loans to micro and small enterprises.
According to the CFTMSE scheme, the micro and small enterprises can avail loans of up to 200 lakhs. And, under this scheme, special preference has been given to women entrepreneurs. Besides, loans are also given to entrepreneurs belonging to Northeastern states, and Jammu and Kashmir.
Credit Guarantee Coverage under CGTMSE
Credit guarantee means that the government trust fund takes responsibility on behalf of micro and small enterprises to repay the financial institutions if borrowers’ default on the loan repayment. The following table summarizes the credit guarantee coverage percentage:
| Category | Up to 5 lakh | Above 5 lakh and up to 50 lakhs | Above 50 lakhs and up to 500 lakhs |
| Micro Enterprises | 85% | 75% | |
| MSE in NE-regions including Sikkim, UT of J & K and UT of Ladakh | 80% | 75% | |
| Women Entrepreneurs / SC/ST | 85% | ||
| All other category of borrowers | 75% |
Fee Structure under CGTMSE
Though micro and small enterprises can avail guarantee free loans from financial institutions, but the government charges some fee from borrowers per year against the loan amount. Following is a table that provides information regarding the fee structure on the loan amount:
| Slab | Standard rate (Per Annum) |
| 0 — 10 lakhs | 0.37% |
| Above 10 – 50 lakhs | 0.55% |
| Above 50 to 1 Cr | 0.60% |
| Above 1 -2 Cr | 1.20% |
| Above 2 – 5 Cr | 1.35% |
Eligibility for CGTMSE Scheme
The CGTMSE scheme is exclusively for micro and small enterprises, and not for medium enterprises. But who are considered micro and small enterprises? The definition is based on two essential criteria: 1. Investment in plant and machinery, and 2. Total turnover.
Micro enterprises are those with an investment in plant and machinery not exceeding Rs. 1 crore and an annual turnover not exceeding Rs. 5 crore. On the other hand, small enterprises are those with an investment in plant and machinery not exceeding Rs. 10 crore and an annual turnover not exceeding Rs. 50 crores.
Documents Required Under CGTMSE Scheme
Following documents are required while applying for CGTMSE loan:
- Duly-filled CGTMSE application form
- Passport-size photographs
- Company Registration Certificate
- Business Project Report
- CGTMSE loan coverage letter
- Loan approval copy from the Bank
- Other documents, if any required by the bank
Purpose of CGTMSE Loan
For what purpose is the CGTMSE loan offered? There are two main purposes for taking a CGTMSE loan. The first is for a term loan. If an enterprise takes a loan to buy machinery or construct company infrastructure, it is called a term loan. The second purpose is for working capital finance (CC). This means financial assistance is required every month to run a business, and it is called working capital finance. In simple terms, the CGTMSE scheme is suitable for both term loans and working capital finance.
How to Apply Loan Under CGTMSE Scheme
There are two kinds of projects in business. The first is called a greenfield project. These projects are new with no previous experience associated with them, making them risky as they are based entirely on new ideas. Such projects are typically financed only by government financial institutions and not by private financial institutions.
The second type is called an expansion project. This involves a business that is already running and needs to grow. Expansion may require new machinery or infrastructure. For this kind of project, both government and private banks may be willing to offer loans under the CGTMSE scheme.
How to Get Loans Under CGTMSE Scheme Easily?
There are a few important points that need to be considered before applying for a loan under CGTMSE scheme. Some of the important points are mentioned below:
- Detailed understanding of the project
- Provide small collateral, if available
- Don’t depend on any one bank
- Explore private banks for expansion
- Seek professional advice, if necessary
Banks Associated with CGTMSE Scheme Loan
Some of the banks which are associated with CGTMSE scheme are listed below:
- Commercial Banks (Public sector banks/ Private sector banks /Foreign banks)
- Regional Rural Banks (NABARD)
- National Small Industries Corporation Ltd (NSIC)
- North Eastern Development Finance Corporation Ltd (NEDFI)
- SIDBI
- 26 Public Sector Banks
- 21 Private Sector Banks
- 73 Regional Rural Banks
- 4 Foreign Banks
- Delhi Financial Corporation
- Kerela Financial Corporation
- Jammu and Kashmir Development Finance Corporation Ltd
- Export-import Bank of India
- The Tamil Nadu Industrial Investment Corporation Ltd
FAQs (Frequently Asked Questions)
Q. What would be the interest rate on CGTMSE loan?
A. The rate of interest on this type of loan is quite competitive and ranges between 10 and 12 percent.
Q. How much time it takes to sanction and disburse the loan amount?
A. Well, it totally depends on the bank where the loan application has been submitted. However, on an average, it takes between one and three months.
Q. If a person seeking CGTMSE loan has other business purpose than term loan and working capital finance, will he be eligible?
A. The answer is NO. This loan is given for only two purposes – term loan and working capital finance only.