CGTMSE Scheme | Here’s Everything You Need to Know

There are more than 42 million registered and unregistered small and micro enterprises in India. The majority of them, including the new ones, require financial support in some way or the other.

Financial institutions in India provide collateral-free business loans to MSMEs for fulfilling their funding requirements. However, such businesses avoid taking loans as they fear a default. And defaulting on a loan can bring severe consequences to those enterprises.

The Government of India launched the Credit Guarantee Fund Trust for Micro and Small Enterprises or CGTSME scheme aimed at small and micro enterprises to help them avail financing without any distress.

The scheme was launched on August 30, 2000, by the Ministry of MSME or Medium, Small and Micro Enterprises and the Small Industries Development Bank of India.

This scheme empowers lenders to offer collateral-free loans to SMEs with the scheme itself providing with credit guarantee cover to the lenders. The maximum cap for such loans is Rs. 200 Lakh for small and micro enterprises.

The CGTSME scheme provides guarantee cover to the tune of 50, 75, 80 or 85% depending on the loan and the borrower.

Maximum extents of credit guarantee facility by CGTSME:

For micro enterprises –

  • 85% to a maximum of Rs. 4.25 Lakh when the loan amount is Rs. 5 Lakh or less.
  • 75% to a maximum of Rs. 37.5 Lakh when the loan amount is between Rs. 5 Lakh and Rs. 50 Lakh.
  • 75% to a maximum of Rs. 150 Lakh when the loan amount is between Rs. 50 Lakh and Rs. 200 Lakh.

For women entrepreneurs and enterprises located in North East including Sikkim –   

  • 80% to a maximum of Rs. 40 Lakh when the loan amount is up to Rs. 50 Lakh.
  • 75% to a maximum of Rs. 150 Lakh when the loan amount is between Rs. 50 Lakh and Rs. 200 Lakh.

For other categories –

  • 75% to a maximum of Rs. 37.5 Lakh when the loan amount is up to Rs. 50 Lakh.

For MSE retail trade –

  • 50% to a maximum of Rs. 50 Lakh when the loan amount ranges between Rs. 10 Lakh and Rs. 100 Lakh.

Who are eligible under the CGTSME scheme?

The lending institutions –

A majority of financial institutions, as well as NBFCs, come under this scheme. All eligible institutions under the CGSTSME are known as Member Lending Institutions (MLIs).

The borrowers –

All existing new and old micro and small enterprises are eligible for loans under this scheme. They may have to provide the following to avail financing under the CGTSME:

  • Business plan

SMEs have to provide a business plan that will outline their prospects and goals. It will vouch for the feasibility of the company in the long run. The pre-requisite business plan can also include various business statements like balance sheet, profit and loss statement, cash flow, etc. However, make sure to avoid certain business plan errors.

  • Proof of business

Small and micro enterprises have to register as single ownership, partnership, Limited Liability Company, Private Limited entity, etc. They also have to provide various other registrations like GST and others.

Enterprises that are not eligible for the CGTSME scheme include educational institutions, training institutions, self-help groups, and service-oriented retail traders.

The Credit Guarantee Fund Trust for Micro and Small Enterprises has made availing loans more risk-free than ever. Several NBFCs also offer loans to MSMEs which are easy to avail and at affordable interest rates.

Some of the features of a collateral free business loan from NBFCs include:

1) Minimal documentation

Businesses only have to provide KYC documents, address proof, proof of business, bank account statements, income tax returns, and audited business turnovers.

Note: Lenders may require a credit score of 750 or above to qualify for such loans.

2) Loans within a day

Businesses don’t have to wait for prolonged days as NBFCs approve MSME and SME loans within 24 hours.

3) Extended repayment tenures

The tenures for these loans range from 12 to 60 months giving small businesses abundant time for repayment.

4) Pre-approved offers

NBFCs like Bajaj Finserv provide pre-approved offers with their business loan. Pre-approved offers reduce the loan availing time by making it straightforward. Individuals only need to provide few essential details for checking out their pre-approved offers.

Small and micro enterprises get massive benefits both from the CGTSME scheme and also from financial institutions to expand their business.

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Ajay Deep

Ajay Deep is a young enthusiast who Loves Chandigarh and is always eager to make this beautiful city even more beautiful. A Mechanical Engineer By Chance and Working in an IT MNC by Choice. A Writer, Photographer and a Budding Entrepreneur. A Designer, Developer and Digital Marketing Expert. In brief : A Jack of All Trades and Master of Few :) You may reach Ajay Deep at ajay@chandigarhmetro.com