Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
Credit Guarantee Fund Trust for Micro and Small Enterprises helps small business owners get loans without the need for collateral. Here, you’ll explore how this scheme eliminates financial barriers and fosters entrepreneurship by making it easier for you to access the funds you need with greater trust and ease.
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is here to help you access collateral-free and third-party guarantee-free loans to grow your business. Initiated by the Ministry of MSME and SIDBI, this scheme has been empowering Micro and Small Enterprises (MSEs) across India since August 2000, making it easier for you to get the financing you need without the usual roadblocks.
For over two decades, CGTMSE has supported entrepreneurs, especially those who have been unserved, underserved, or new to conventional lending. This initiative has played a key role in fueling the growth of India’s small business sector, helping many businesses take off and thrive.
What is the Credit Guarantee Fund Trust for Micro and Small Enterprises?
The credit guarantee fund trust was established in 2000 as a joint initiative of the Ministry of MSME, the Government of India, and SIDBI. Its core function is to operate the credit guarantee fund trust scheme. It is a mechanism that enables lenders to offer collateral-free loans to eligible micro and small enterprises (MSEs). This scheme removes the need for you to provide traditional security, opening doors to easier financing options and helping your business grow.
Objectives of the CGTMSE Scheme
The CGTMSE Scheme is designed to help you by:
Expanding formal credit access to MSEs and startups, especially if you don’t have assets for collateral.
Fostering entrepreneurship and innovation across India, helping you bring your business ideas to life.
Reducing risk for lenders, which encourages more credit to flow into the MSME sector.
75-85% of the loan amount (up to Rs 10 crores per borrower), depending on borrower type.
Type of Loans
Working capital, business expansion, machinery purchase, technology upgrades, and other business purposes.
Exclusions
Self Help Groups, Joint Liability Groups, and certain agricultural activities are not eligible.
Hybrid Security
Secured and unsecured portions can be combined under the scheme.
Multiple Lenders
Credit from more than one bank/NBFC is allowed, up to the overall limit.
CGTMSE Loan Interest Rates and Fees
Category
Details
Interest Rates
Set by lending institutions, typically starting from 13% p.a. for term loans and overdrafts
Guarantee Fee
One-time fee on guarantee amount, ranging from 1% to 1.8%
Annual Service Fee
Charged on outstanding amount, it varies from 0.37% to 2.30%, depending on the risk and loan size.
Fee Payment
The initial fee is charged on the guarantee amount, with annual fees charged on the outstanding loan amount thereafter.
Fee Calculator
The CGTMSE fee calculator is available on the official CGTMSE portal to estimate your fees.
Hybrid Security Product in CGTMSE Scheme
The hybrid security option lets you secure part of your loan with collateral, while the unsecured portion is covered under the CGTMSE scheme. In this setup, CGTMSE holds a second charge on the collateral, but no legal documentation is required for this charge. This gives you the flexibility to secure your loan while still benefiting from the collateral-free advantage offered by the scheme.
Role of Banks and Financial Institutions in the CGTMSE Scheme
Banks and NBFCs act as Member Lending Institutions (MLIs) for:
Appraising proposals and assessing the eligibility of MSEs for loans.
Sanctioning loans to eligible MSEs based on the business’s viability.
Managing the guarantee process, including applying for the guarantee cover from CGTMSE.
Monitoring the loan throughout its tenure to ensure proper usage and repayment.
Handling claims in case of default, ensuring the lender is covered under the guarantee scheme.
Eligibility Criteria for the CGTMSE Scheme
Eligibility
New and existing micro and small enterprises in manufacturing or services (including retail and trading) can apply.
If you’re a startup or a first-generation entrepreneur, you can take advantage of CGTMSE loans to kickstart your new business.
Educational/training institutions are also eligible under current guidelines.
Non-Eligibility
Loans to SHGs or groups that are not registered as a business entity are not covered.
If your loan is already covered by another government or institutional credit guarantee scheme, you can’t double-dip with CGTMSE.
Documents Required for the CGTMSE Scheme
Business registration documents
KYC Documents
Udyam Registration Number
IT-PAN (mandatory for loans above Rs. 5 lakh)
Project reports (if applicable)
Financial statements
How to Apply for a CGTMSE Loan?
Step 1: Identify a Participating Lender
You should start by approaching a bank, NBFC, or financial institution from the CGTMSE bank list.
Step 2: Prepare Documents
Gather your business plan, KYC documents, IT-PAN, Udyam Registration, and financial statements to complete your application.
Step 3: Submit Application
The lender will assess your proposal and then apply for the guarantee cover with CGTMSE.
Step 4: CGTMSE Registration
The lender will complete the CGTMSE registration and pay the applicable CGTMSE fee.
Step 5: Loan Disbursement
Once everything is approved, the loan is disbursed to you without the need for collateral.
Benefits of CGTMSE Loan for Micro and Small Enterprises
No Collateral Required One of the biggest advantages for you as an MSE or startup is the ability to access credit without needing to pledge any assets as security.
Faster Approvals Thanks to the government-backed guarantee, the approval process is much faster and streamlined.
Access for New Businesses Even if you have limited or no credit history, you can still benefit from this scheme and get the financing you need.
Discounts If your MSE falls into specific categories such as geographic, social, or MSE status, you may be eligible for a maximum discount of 30%.
Hybrid Security You have the flexibility to combine secured and unsecured portions for larger loans, offering more funding options.
Government Support While there’s no direct CGTMSE scheme subsidy, the guarantee itself acts as a solid support mechanism, helping you secure the loan with greater confidence.
Real-World Examples of CGTMSE
Digital Printing Business
Microelectronics Manufacturing Enterprise
Food Processing Unit
Chemical Products Manufacturing
Glassware Production Business
Women-led Small Enterprises
Related Government Support Plans with CGTMSE
Scheme Name
How It Links with CGTMSE
Stand Up India
You can get collateral-free loans for your new business, with CGTMSE providing the guarantee to banks.
PMMY (Mudra Yojana)
If you’re a micro/small business, your Mudra loan can be covered by CGTMSE for added security to lenders.
MSME Credit Guarantee Fund
CGTMSE acts as the backbone, letting you access loans without collateral under multiple MSME schemes.
Final Words
The Credit Guarantee Fund Trust For Micro And Small Enterprises is a transformative force for India’s MSME sector. With its expanded coverage, hybrid security options, and focus on inclusivity, the CGTMSE scheme is enabling more entrepreneurs like you to access formal credit and realize their business ambitions.
By understanding the CGTMSE scheme details, eligibility, and application process, you can discover new growth opportunities for your enterprise.
Explore the CGTMSE scheme today to empower your business with collateral-free credit and government-backed support!
Frequently Asked Questions
1. What is the CGTMSE loan interest rate?
The CGTMSE loan interest rate is set by individual banks and financial institutions, not by the credit guarantee fund trust itself. Typically, interest rates range from 10% to 14% per annum, depending on the lender and the applicant’s credit profile. Some banks may offer rates starting from 8% or 10.30% per annum for specific categories.
2. What is the coverage period of CGTMSE?
The CGTMSE coverage period matches the tenure of the loan. For term loans, the guarantee cover lasts for the entire repayment period. For working capital loans, the coverage is generally provided for up to 5 years from the guarantee start date.
3. What is the lock-in period in CGTMSE?
The lock-in period in CGTMSE is 18 months from the date of the guarantee cover commencement. During this period, the lender cannot invoke the guarantee except in cases of fraud or willful default.
4. How do I check my CGTMSE eligibility?
To check your CGTMSE scheme eligibility:
Ensure your business is a micro or small enterprise engaged in manufacturing, services, retail, or trading.
Approach a bank or NBFC from the CGTMSE bank list.
Prepare required documents such as business registration, KYC, Udyam Registration, PAN, project report, etc.
The lender will assess your eligibility and forward your application to the credit guarantee fund trust if you meet the criteria.
Credit Guarantee Fund Trust Micro and Small Enterprise
