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    How to take Business Loan under CGTMSE Scheme

    Indians are known for their entrepreneurial nature, with the country being home to millions of entrepreneurs. While one might think that venturing into the world of business is easy, the fact is that there is a lot which goes into it, with money being the most important factor. One might have the idea, zeal, passion and motivation, but without money/finance they have nowhere to go. The government, on its part has initiated a number of schemes designed to offer financial aid to entrepreneurs, setting them on the path to success.

    Understanding CGTMSE

    Micro and Small industries are the backbone of the Indian economy, offering employment to millions. A number of these enterprises face issues when it comes to availing funds, which is why the government set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). The Indian Government tied up with SIDBI to set up this Credit Guarantee Scheme which aims to provide credit to deserving individuals/entities based on project viability, ensuring they have access to working capital and/or term loans from a single lending entity.

    What is the CGTMSE Scheme?

    A brainchild of the Ministry of Micro, Small and Medium Enterprises, the CGTMSE Scheme is a unique offering which aims to bridge the gap between a business idea and its execution, offering financial support to entrepreneurs. Under the scheme, eligible members can get credit facilities from banks to finance medium and small enterprises. Loans upto a maximum of Rs 1 crore can be availed, with the differentiating factor being the Credit Guarantee provided by the government.

    This Credit Guarantee offers security to entrepreneurs in the event of their business failing. A maximum cover equivalent to 85% of the loan amount is available under the scheme. In cases where a borrower is unable to repay the loan, the scheme will cover the loss, paying lending institutions the financial loss incurred by them due to non-repayment of loan. The quantum of repayment depends on the amount borrowed, the borrower (male/female) and the purpose of loan.

    Eligibility criteria for CGTMSE Loan

    Availing a loan under the CGTMSE Scheme isn’t hard, for the government has set eligibility criteria which can be met by almost everyone. Listed below are the main criteria the government expects borrowers to fulfil.

    • Borrower status – Loans under this scheme can be availed by both new and existing borrowers.
    • Business plan – A concrete and feasible business plan needs to be in place to avail the loan.
    • Registration – The organisation/entity should have registered the business as per existing rules.

    Quantum of credit offered under CGTMSE

    Eligible individuals/organisations can get loans to the tune of Rs 1 crore under this scheme, depending on their business plan and requirement. The cover offered under the Credit Guarantee Policy varies depending on the loan availed, with the maximum guarantee amount being Rs 65 lakh.

    Getting a business loan under CGTMSE

    A simple process is followed by most lending institutions who are part of the CGTMSE Scheme, with borrowers expected to follow a few basic steps in order to get credit.

    • Idea generation – The first step towards achieving a dream is to have an idea. Any idea which is feasible and can contribute to the growth of the MSME sector can be the basis for further work.
    • Registration – One should register a business entity as per existing laws. This can be a partnership firm, a private company, proprietorship, etc.
    • Business development plan – A concrete and workable business development plan is required before approaching lending institutions for a loan. This plan should have in-depth information about multiple aspects related to the idea.
    • Approach lending organisation – Post the preparation of a business plan one could approach any of the lending organisations associated with this scheme. The banks will process the information and grant a loan under CGTMSE.
    • CGTMSE cover – The cover will be availed on paying a certain fee to lending institutions.

    Fees and Interest rate charged under CGTMSE Scheme

    Being a scheme which is implemented by Member Lending Institutions (MLIs) on behalf of the government, there are certain fees and charges associated with it. One can classify the fees into two major categories, a Guarantee Fee and an Annual Service Fee.


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