The logo of Credit Guarantee Fund Trust for Micro and Small Enterprises (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. CGTMSE 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 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. 

What Makes the CGTMSE Scheme Unique?

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.

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CGTMSE Loan 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. 

How to Get a CGTMSE Business Loan?  

A solid, viable business idea is the cornerstone of a CGTMSE loan. It is the first step that shapes the framework for further work. Registered enterprises, applying for a business loan under the CGTMSE scheme, will also require a blueprint of their business plan, illustrating the various aspects of the idea in-depth. 

Once the blueprint is ready, borrowers can approach any of the lending institutions enlisted under the CGTMSE scheme to get their loans sanctioned. The lending institution will evaluate the viability of the business plan, and if they think the idea is worthy of consideration, they will sanction the loan.

Borrowers can avail the CGTMSE loan from nationalized banks, private banks, or financial institutions. However, some lending organizations might find the idea feasible, whereas, some might not. We, at Indifi, save borrowers from the trouble of visiting multiple financial institutions to secure a CGTMSE loan for their project. 

Indifi collects and analyses data from varied sources to gain insight into the creditworthiness and risk profile of businesses that have no collateral or any credit track record. The comprehensive data analysis helps us to place relevant loan applications to different lenders, which enhances the loan sanction probability. 

The smart loan processing system minimizes risk, reduces paperwork, cuts costs, and saves time while offering a hassle-free, seamless experience. 

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CGTMSE Scheme Fees and Interest Rate

The CGTMSE scheme has two fee categories —Annual Service Fee and Guarantee Fee.

Member Lending Institutions (MLIs) will have to pay a guarantee fee to the government within 30 days from credit disbursement. The guarantee fee structure varies from 0.75% to 1.5% of the sanctioned loan amount. MLIs also have to pay an annual service fee, ranging from 0.5% to 0.75% of the credit guarantee, payable every year before 1st June. Lending institutions decide the loan interest rate at their discretion, but the interest rate should not exceed RBI’s Prime Lending Rate (PLR) by over 3%. For instance, if the PLR is 8%, the lender cannot charge more than (8 + 3) 11%.

Before approaching a bank, it is important to do market research to analyze the viability of the business plan. Also, get the project report prepared by a professional, providing necessary information like the promoter’s profile, business model, and projected financials.

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For more information about the CGTMSE Scheme, get in touch with our loan specialists today!

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