As a business owner, especially of a Micro, Small, or Medium Enterprise (MSME), arranging for funds to meet your capital or other financial requirements can be challenging. Keeping these entrepreneurial hurdles in mind, the Government of India has created various schemes and grants to provide MSMEs with financial assistance. One such measure is the Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE). Continue reading to learn more about CGTMSE and how it can benefit your business.
What is CGTMSE?
CGTMSE is a trust that has been established by the Government of India. It has been set up under the Ministry of Micro, Small and Medium Enterprise (MoMSME) and Small Industries Development Bank of India (SIDBI). The CGTMSE scheme was launched in 2000 and offers credit guarantees to financial institutions that offer loans to Micro and Small Enterprises (MSEs). It is a scheme that offers credit guarantees ranging from 75%-85% to MSEs across the country.
Thus, under the scheme, an applicant’s loan is backed by a party without the provision of any external collateral or third-party guarantee. When you apply for a loan under CSTMSE, the lending institution is supported by the scheme, which provides the guarantee for a substantial portion of the loan. Under CGTMSE, new and existing MSMEs are eligible to avail of a credit facility up to ₹2 crore.
You can read more about CGTMSE here.
What are the salient features of CGTMSE?
The primary objective of CGTMSE is to create a credit relief system that promotes improved credit flow to the MSME sector. The following features of the CGTMSE have made it a viable financial aid option for MSMEs:
Eligible activities: You are eligible under the CGTMSE scheme if your business falls within the manufacturing and service-based category, including retail trade. Educational and training institutions, self help groups, and agricultural activities do not fall within the purview of this scheme.
Loan amount: If you own an MSE, then the credit facility you can avail of runs up to ₹200 lakh. However, for Regional Rural Banks (RRBs) and select financial institutions, the credit facility offered only runs up to ₹50 lakh.
Guarantee coverage: With CGTMSE, you can avail of 75-85% repayment in case you default on the principal loan amount. However, this feature only applies if the principal loan amount is up to ₹50 lakh.
Collateral: With CGTMSE, you require absolutely no collateral or third-party guarantee.
What are the eligibility criteria for CGTMSE?
CGTMSE is available to all lending institutions that offer financial support to the sectors that fall within the scheme. The entities and institutions that can avail of Business Loans under the scheme are as follows:
Eligible borrowers: any existing or new MSEs.
Lending institutions that offer funds under the scheme:
Scheduled Commercial Banks (SCBs)
Regional Rural Banks (RRBs)
Small Finance Banks (SFBs)
National Small Industries Corporation (NSIC)
North Eastern Development Finance Corporation Ltd. (NEDFi)
Non-banking Financial Companies (NBFCs)
Small Industrial Development Bank of India (SIDBI)
What are the documents required under CGTMSE?
While applying for a loan under the CGTMSE scheme, you have to provide the following documents:
Duly filled CGTMSE loan application form along with the requisite passport-sized photographs.
Business Incorporation or Company Registration Certificate.
Business Project Report.
CGTMSE Loan Coverage Letter.
Loan approval copy provided by the bank.
Any other document that is required by the bank.
Now that you know more about CGTMSE, you can apply for a Business Loan under the scheme for financial assistance with utmost ease.
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*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. HDFC Bank recognises the challenges entrepreneurs face while acquiring capital. Thus, HDFC Bank has created MyBusiness, a one-stop solution that gives you easy access to loans, digital solutions and provides you with the essential knowledge you need to run your business. With HDFC Bank MyBusiness, you can scale up, expand your operations, and nurture your business.