Check out our most Popular Searches
Choose The Product You Are Applying For
Check out our most Popular Searches
Choose The Product You Are Applying For
Understanding Credit Guarantee Fund Trust for Micro and Small Enterprises (CGMSE)
To encourage small businesses to boom, the Government of India introduced the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGMSE) scheme. This is a unique credit system that a person can avail for businesses without pledging any collateral. Read on to know how this scheme may help your small business grow.
SIDBI or the Small Industries Development Bank of India with the Government of India introduced the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and this scheme to help India’s MSE industry grow. With the help of this program, micro and small companies can avail collateral-free loan facilities from Indian banks or NBFCs.
It is a major issue for micro and small businesses to pledge sufficient collateral to apply for loans that will help them with business expansion. Therefore, under this scheme, a stronger party backs the loan application of such an applicant. This eliminates the requirement for small business owners to pledge a separate collateral like a house or shop unit.
Following are a few things you must know before applying for this scheme:
Following are the eligibility criteria and documents required to avail this credit guarantee facility:
To be eligible for this credit facility scheme, you should be one of the following entities:
To successfully apply for the credit facility under the scheme, you must furnish the following necessary documents.
The MSME of India recently revamped the fee structure of the scheme to increase the credit flow and empower new businesses to boom. The table below displays the revised Annual Guarantee Fee Structure under CGS-1. These charges are applicable on all guarantee-approved or renewed applicants from April 1, 2023.
|
Slabs |
Standard Rates (per annum) |
|
Up to Rs. 10 lakhs |
0.37% |
|
Above Rs. 10 lakhs to Rs. 15 lakhs |
0.55% |
|
Above Rs. 15 lakhs to Rs. 1 crore |
0.60% |
|
Above Rs. 1 Crore to Rs. 2 Crore |
1.20% |
|
Above Rs. 2 Crore to Rs. 5 Crore |
1.35% |
Also Read - Importance of MSME Loan for Small Business Owners
To apply for a loan under the CGTMSE scheme, here are a few standard steps you must follow:
Step 1: Formation of Business Entity
To avail a credit guarantee facility for your business, you must register your company as a Private Limited, Proprietorship, One Person Company or LLP. You must also obtain the necessary tax registrations and approvals to operate the business.
Step 2: Prepare a Business Project Report
Conduct a market analysis and prepare a business project or report. This document will carry the business model, future financials, promoter profiles and main objectives of the business. A well-curated business report will help business owners get their CGMSE application approved seamlessly.
Step 3: Secure Approval for Bank Loan
Submit the business project to those banks and NBFCs that provide CGTMSE credit facility. Fill out and submit the application form with the necessary process to initiate the process of loan sanction. The lending institution will review your documents and sanction your loan application as per the bank’s policy.
Step 4: Acquire CGTMSE Coverage
Once the lending institution sanctions your loan application, they will forward your application to the CGTMSE organisation. The lending institution will serve as your guarantor, affirming that your business is eligible for the loan and ensuring secure repayment.
Once the CGTMSE institution approves this request, they will sanction a cover against your name. Following this, your loan will be considered under CGMSE and you must pay the required guarantee and service fee.
Also Read - What is MSME Loan? Why is it Useful for Small Business Owners?
The Indian Government along with MSME and SIDBI aims to increase the flow of institutional credit in the Indian economy with CGMSE. It helps the underprivileged avail finance to fulfil their entrepreneurial dreams. Small businesses can apply for loans under this scheme to avail funds for the expansion of their business without pledging any collateral. In the long run, this scheme is assumed to play a crucial role in enabling several entrepreneurial drives to take flight.
1. What is the maximum limit of CGTMSE?
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) provides financial support to micro and small businesses by offering a maximum coverage limit of Rs. 5 Crore.
2. What is the annual guarantee fee in CGTMSE?
Borrowers have to pay an annual guarantee fee for availing CGMSE during the tenure of their loan. This fee is charged as a percentage of the borrowed amount.
We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply
Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.
Most small and medium-sized businesses need to raise funds from time to time to take the company to the next level. These businesses have always been the backbone of the economy.
Collateral-free loan refers to any loan that does not require any asset, security deposit or the backing of a guarantor. These are also called unsecured loans.
Micro, small, and medium enterprises (MSMEs) are among the largest employment providers in India. The total contribution of MSMEs to the overall employment in the country is 69%.
A small business incurs many expenses, from stocking inventory, and repairing machinery, to managing payroll for daily working capital needs. As small business owners, they have limited cash flow and capital.
Getting a business loan is easy and opens many options for growth and expansion. While getting a Business Loan is relatively easy, provided you choose the right lender, using the proceeds of the Business Loan correctly is a challenging task.
