On 30th Aug 2000 the Government of India in collaboration with the Ministry of Micro Small and Medium Enterprises (MSME) and Small Industries Development Bank of India (SIDBI) initiated CGTMSE Scheme. The CGTMSE full form is Credit Guarantee Fund Trust for Micro and Small Enterprises that aims to provide credit solutions to SMEs and MSMEs. This scheme guarantees to cover default by the borrowers to repay the advance. All new and existing micro and small enterprises are eligible to apply for business loans.
CGTMSE Scheme Cover
To get your loan covered under CGTMSE Scheme you have to pay an additional guarantee fee and services charges. CGTMSE guarantee fee is payable at 1.5%. In case applying in the northeastern region, the state of Sikkim charges 0.75% on the credit facility agreed to covered by the credit guarantee fund scheme.
Significantly, the annual service would be payable at 0.75% on the guaranteed amount. However, according to the policy package for stepping up credit to small and medium enterprises, public sectors are motivated to lessen the annual charges up to 0.25% for borrowers falling under the below categories.
The trust guarantees up to 75% of defaulted principal loan amount and up to 85% of the defaulted principal amount for selected borrowers category. For example, if you have availed 50 lakh credit facility then the maximum guarantee cap will be Rs.37.50 lakh.
How to Get loan Under CGTMSE Scheme?
The aim objective of the CGTMSE Scheme is to provide financial assistance by giving more importance to project viability and business model validation. To cover up loans under the credit guarantee fund scheme, the borrower has to pay an additional guarantee fee as well as a service charge to the interest charged by the bank.
To get a loan under CGTMSE without any collateral security/assets, the following are the procedures that need to be followed by borrowers:
Formation of Business Entity
At the very initial stage of the loan application, the borrower to incorporate a private limited company or proprietorship or limited liability partnership or one person company based on business nature and obtain required approval by executing projects.
Prepare a Project Report for Business
A thorough market analysis is essential for each business, doing so will help you to prepare a detailed project report for business loans. The business plan includes business model, promoter background, projected financials and other related information. Moreover, the project report must be prepared by professional industry experts. Once created, submit the same with the respective bank so that they can proceed for credit facility under the CGTMSE credit guarantee fund scheme.
Get Sanction for Bank Loan
Ensure you fill out the loan application form, submit necessary documents along with a business plan to the bank that provides the loan under CGTMSE Scheme. Generally, the request for bank loans contains term loans and working capital facilities. Thereafter, the bank conducts a deep analysis of your business viability and business to process the application and accord sanction as per the bank’s policy. The loan application form can be obtained by visiting its official website.
Obtain CGTMSE Guarantee Cover
Once your bank loan is sanctioned by the bank, the bank will apply to CGTMSE authorities and obtain the guarantee cover on behalf of borrower. If the loan gets approved by CGTMSE, the borrower has to pay a certain guarantee fee and services charges.
List of Banks offering business loans under CGTMSE Scheme
|Axis Bank||South Indian Bank|
|Bank of Baroda||Federal Bank|
|Bank of India||UCO Bank|
|Bank of Maharashtra||Union Bank of India|
|Canara Bank||United Bank of India|
|Central Bank of India||Yes Bank|
|City Union Bank||Kotak Mahindra Bank|
|Dena Bank||IndusInd Bank|
|HDFC Bank||Jamm & Kashmir Bank|
|IDFC Bank||Karnataka Bank|
|ICICI Bank||Oriental Bank of Commerce|
|Indian Bank||Punjab & Sind Bank|
|Indian Overseas Bank||Punjab National Bank|
|SIDBI||State Bank of India|
Also Read:- A Complete Guide on Project Report for Bank Loan