What is the CGTMSE?

The Ministry of Micro, Small and Medium Enterprises (MSME) launched the Credit Guarantee Scheme (CGS) to strengthen credit delivery system and facilitate credit flow to the MSE sector. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), set up by the Government of India and the Small Industries Development Bank of India (SIDBI), came up as the operational element for the scheme. They have committed to raise a corpus of Rs 2500 crore in the ratio of 4:1 to start on a firm footing.

What are the benefits of receiving a loan guaranteed by the CGTMSE?

Under the CGS, business owners of micro, small and medium businesses can access working capital without having to pledge assets like inventory, equipment or real estate.  

How does it work?

The CGTMSE does not lend directly to small business owners. Instead, the CGTMSE guarantees unsecured loans that are provided to micro, small and medium enterprises through a network of participating institutions known as Member Lender Institutions (MLIs). Lenders must apply to obtain status as a MLI.

Fees: The CGTMSE does not charge any fees directly to the borrower. Instead, upfront fees and annual servicing fees are charged to the MLIs. It is left up to the discretion of the MLI as to how much of the cost of funds to pass on to the borrower. Percentages fees may vary by MLI, however  interest rates cannot exceed 3 percent over the Prime Lending Rate of the MLI. This excludes annual service fees that may be charged.

Amount: Eligible micro and small enterprises can access unsecured term loans and working capital lines up to Rs. 50 lakh from Regional Rural Bank/Financial Institution in the MLI network and up to Rs. 100 lakh from Schedule Commercial Banks and select Financial Institutions that are participating MLIs.

Eligbility: New as well as existing micro and small enterprises are eligible. The discretion to evaluate the credibility of the scheme remains with the primary lending institution that is, the MLIs of CGTMSE.

To apply: Currently there are around 80 participating MLIs. To see if you qualify for a CGTMSE product, create a free account and submit a loan application through the Biz2Credit portal. Biz2Credit will connect you with available MLIs.