The country boasts about 26 million companies in the micro and small enterprises (MSEs) segment, offering employment to roughly 60 million employees. The MSE sector provides about 45% of the manufacturing gross domestic product and 40% of the export sector. Perhaps one of these enterprise’s biggest problems was the availability of sufficient credit at reasonable interest rates. 

CGTMSE is a trust created by the Government of India under the Ministry of Micro, small, and Medium Enterprises and the Small Industries Development Bank of India. It was launched in August 30, 2000 and operational from January 1, 2000, and provides credit card guarantees to banks and financial institutions that lend to micro and small enterprises. It includes credit card guarantees varying from 75% to 85% for loans to MSEs nationwide.

Credit Guarantee under CGTMSE Scheme

Credit Guarantee means a scheme covers the loan, so you don’t need extra collateral or a third-party guarantee. This scheme covers the large portion of the loan amount provided by the lender. With the CGTMSE scheme, new and existing small businesses, including those in manufacturing and services, can get a loan up to Rs. 5 crores.

Benefits of CGTMSE Schemes

Here are some of the benefits of CGTMSE  scheme;

• The maximum guarantee coverage has been raised from Rs. 200 lakh to Rs. 500 lakh.
• The guarantee fee has been lowered to reduce borrowing costs for small businesses.
• Micro Finance Institutions can now also be Member Lending Institutions (MLIs).
• SC/STs get special discounts on fees and more coverage.
• The guarantee fee is cut by 10%, and coverage goes up to 85% for women, ZED Certified Units, and businesses in Aspirational Districts.
• The annual guarantee fee has been revised, and the cost can be as low as 0.37%. 

The CGTMSE recently introduced a Hybrid Security product that allows MSEs with partial collateral coverage to be covered under the CGS. The scheme also offers discounts and concessions to specific categories, including social categories, women, SC/ST, people with disabilities, and Agniveers. As of April 1, 2023, the CGTMSE provides a guarantee cover of up to INR 5 crore for credit facilities extended by its Member Lending Institutions (MLIs). 

Types of CGTMSE Loans

The CGTMSE loans offers two main types of credit facilities to micro and small enterprises (MSEs): Term loans and working capital loans:

• Term Loans: Used for acquiring fixed assets or long-term investments, repaid over 1 to 30 years.
• Working Capital Loans: For day-to-day operations, with guarantee coverage for up to 5 years or as specified.

CGTMSE Eligibility Criteria

Let’s read eligibility criteria structure;

• Lending Institutions: Must be registered members of CGTMSE.
• Enterprises: Must be classified as micro or small enterprises.
• Project Type: Both new and expansion projects are eligible.
• Loan Purpose: Must be for business activities, not personal expenses.
• Business Owner: Should have relevant skills and comply with statutory requirements.

Application Process

Here are the steps of the application process;

1. Identify Lending Institution: Choose a participating bank or financial institution.
2. Documentation: Prepare necessary documents (business plans, financial statements).
3. Submit Application: Apply to the chosen institution.
4. Evaluation & Approval: Institution reviews, approves, and forwards the application to CGTMSE.
5. Disbursement: Approved loan amount is disbursed.
6. Repayment: Follow the agreed repayment terms.

Frequently Asked Questions (FAQ)

   1.CGTMSE loan interest rate?

Interest rates are decided by the lending institution, varying based on the borrower’s profile and market conditions.

   2.What is the Sanction and Disbursement Time

The sanction and disbursement time typically takes a few weeks to a couple of months.

   3.Explain Business Expansion

CGTMSE can support expansion from ₹2 crore to ₹5 crore subject to approval.

   4.What are the Unsecured vs. CGTMSE Loans?

Unsecured loans have no collateral but higher risk, while CGTMSE loans are guaranteed, potentially offering better terms.

This CGTMSE scheme provides valuable support to MSEs by mitigating risks and improving access to finance, donating to the growth and sustainability of small businesses. Stay tuned to find out more about business brokers and their role in the corporate world. For a free consultation on your business valuation, visit us at www.matchvalley.com. You can also email us at [email protected] or call +9195381 11008.