How to Apply for a CGTMSE Loan?

CGTMSE (Credit Guarantee fund Trust for Micro and Small Enterprises) is setup by the Government of India and SIDBI (Small Industries Developent Bank of India) in August 2000 to make collateral-free credit facilities available to MSEs (Micro & Small Enterprises).

CGTMSE is an important scheme and every Indian entrepreneur and business owner must know about it. The availability of an investment is a must in the form of debt or equity to start and manage a business and CGTMSE provides easy access to debt funds. Businesses in the manufacturing and service sectors are eligible. However, retail trade, agriculture, educational institutions, Self Help Groups (SHGs) and training institutions are eligible to obtain a loan under CGTMSE Scheme.

The main aim of the CGTMSE scheme is that banks give importance to project viability/ business model validation and get the loan facility only based on the assets financed by the bank loan. If a Micro or Small Business (MSME) availed loan under the CGTMSE scheme and fails to repay it to the bank, the CGTMSE organization will make good the loss sustained by the bank up to 85% of the credit facility.

Under CGTMSE, a bank loan of up to Rs. 1 Crore extended to a startup or an existing business as a term loan or working capital or both can be covered. For covering a loan under the CGTMSE Scheme, the borrower has to pay an additional CGTMSE Guarantee and CGTMSE Service fee along with the interest rate charged by the lending bank. 

Currently, the borrower has to pay a CGTMSE guarantee fee of 1.5% (0.75% in case of North Eastern Region including the Sikkim) on the credit facility that is agreed to be covered by the CGTMSE. Similarly, there is a CGTMSE annual service fee payable 0.75% on the guaranteed amount. However, Public Sector Banks are encouraged to absorb the Annual Service Fee in excess of 0.25% per annum for all the borrowers falling under the below categories:

• Loans of up to Rs. 2 Lakhs.
• Loans provided to eligible women entrepreneurs.
• Loans provided to eligible borrowers who are located in the North Eastern Region (including Sikkim) and Jammu & Kashmir.

How to apply for a loan under CGTMSE scheme?

You have to follow some easy steps given below to get a loan under CGTMSE Scheme without any collateral security:

Firstly, you must have a successful business idea/project in mind to execute.

• Then incorporate a business entity and acquire necessary registrations to apply for a bank loan.
• Make a business plan/project report.
• Submit your business plan/project report to banks offering loan under CGTMSE Scheme and get sanction.
• Once your loan request is sanctioned, the lending bank will apply to CGTMSE and provide CGTMSE scheme coverage. 

Who can register for CGTMSE scheme?

Presently, only scheduled commercial banks are eligible to register with CGTMSE for operating the credit guarantee scheme.

If Regional Rural Banks wish to register with CGTMSE, they may send in complete details about their performance including:

• Last 3 years’ annual reports.
• Details of geographical areas of operation.
• Average loan size 
• Recovery performance, % of the standard assets to total assets, capital adequacy ratio.

Registration process for new members 

Banks desirous to register with CGTMSE have to submit an undertaking on a stamp paper of the appropriate value to the registered office of the Trust.

In addition to the undertaking, the following documents may be furnished for registration purpose:

• Annual reports for the last 3 years.
• List of offices with their addresses designated to operate the CGTMSE scheme.
• Name and designation of the designated officers with their signatures, for operating the scheme.

The undertaking has to be stamped as an agreement under the local Stamp Act, where the document is executed, and sent to the following registered office address:

The Head/Registered Office of the Credit Guarantee Trust
The Chief Executive Officer,
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE),
7th Floor, Swavalamban Bhavan, SIDBI,
C - 11, G - Block,
Bandra - Kurla Complex,
Bandra (East),
Mumbai: 400051
Telephone Number: (022) - 6143 7805 (other lines (022)-61437-802 to 832)
Fax Number: 26541821