Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) launched in 2000 is a trust established by the Government of India, under the Ministry of Micro, Small and Medium Enterprises (MSME) and Small Industries Development Bank of India (SIDBI). 

Availability of bank credit without the hassles of collaterals / third party guarantees would be a major source of support to the first generation entrepreneurs to realize their dream of setting up a unit of their own Micro and Small Enterprise (MSE). The government of India launched Credit Guarantee Scheme (CGS) to strengthen the credit delivery system and facilitate the flow of credit to the MSE sector.

The main objective is that the lender should give importance to project viability and obtain both term loans and working capital facilities from a single agency.

What is a Credit Guarantee under CGTMSE?

Credit Guarantee Fund Scheme for Micro and Small Enterprises was started to promote SME and MSME sector in India. Both new and existing micro and small enterprises including service enterprises are eligible for a collateral-free loan with a maximum credit cap of Rs. 2 crores. 

The interest rate depends upon the applicant’s profile, business requirements, and project cost and is comparatively low, as compared to other direct loan schemes. The credit guarantee coverage is offered a maximum of up to 75% of the total project cost.

Features of the Credit Guarantee Scheme:

The stand out features of the CGTMSE scheme is:

  • Guaranteed repayment of 75% or 85% in some cases for the defaulted principal loan amount up to Rs.50 lakh.
  • The maximum guarantee is 50% for a loan amount greater than Rs.50 lakh but under Rs.1 crore.
  • Provides for 85% repayment for loans up to Rs.5 lakhs to micro-enterprises.
  • The guarantee amount for repayment is 80% of the loan amount in case the MSME is promoted by a woman or the location of the unit is in the North East Region (NER).
  • The repayment procedure covers the entire loan amount inclusive of the interest component for 3 months.
  • Rs.1 crore as support to the lender if the business failure is beyond the control of the management.
What are the Eligibility for the CGTMSE Scheme?

Let us look at the eligibility criteria for the CGTMSE loan scheme for credit providers and credit borrowers.

Eligible entities
  • Sole Proprietorship Firms, Partnership Firms, Private Limited Companies, Public Limited Companies 
Lending Borrowers
  • All Existing and New Small and Medium Enterprises (SMEs)
Lending Institutions
  • Scheduled Commercial Banks (SCBs)
  • Regional Rural Banks (RRBs)
  • Small Finance Banks (SFBs)
  • Non-banking Financial Companies (NBFCs)
  • Small Industrial Development Bank of India (SIDBI)
  • National Small Industries Corporation (NSIC)
  • North Eastern Development Finance Corporation Ltd. (NEDFi)

Small and micro-enterprises operated by women are eligible for a guarantee cover of 80% whereas all the credit/loans in the North East Region (NER) for credit facilities are eligible for a guarantee of Rs. 50 lakh. Educational institutions, agriculture, training institutions, and Self-Help Groups (SHGs) are not eligible for guarantee cover under CGTMSE. s.

What are the Documents required for Loan under CGTMSE Scheme?

Documents required for a Loan under the CGTMSE scheme and its coverage:

  • CGTMSE loan application form with Passport-sized photographs
  • Business Plan
  • Business incorporation letter / Company registration certificate
  • Business Project Report
  • CGTMSE Loan Coverage Letter
  • Copy of loan approval from the bank
  • Any other document required by the bank

CGTMSE also provides recovery support to the business units. The scheme covers the loan for rehabilitation within the credit cap of Rs. 1 Crore if a business unit is beyond the control of the management.