Many small businesses have sound cash flows but no property to pledge. That is the gap CGTMSE is designed to fill.
What it is
CGTMSE is the Credit Guarantee Fund Trust for Micro and Small Enterprises, set up by the Government of India and SIDBI. It gives participating lenders a guarantee on credit extended to eligible micro and small enterprises without collateral or third-party guarantee. If a covered loan goes bad, the trust bears part of the lender’s loss.
What that means for you
Because the lender’s risk is partly covered, it can consider funding a business that would otherwise be asked for property as security. The guarantee can apply to term loans and working capital facilities, within the limits and conditions the trust sets.
Who it suits
- Micro and small enterprises in eligible sectors
- Businesses with healthy operations but limited collateral
- Borrowers whose lender participates in the scheme
What it costs
A guarantee fee is charged on the covered amount, and is usually passed on to the borrower. The rate depends on the size of the facility and other factors set by the trust, so check the current fee for your case before deciding.
What it doesn’t do
- It does not make a weak proposal strong. The lender still assesses your business and repayment capacity in the normal way.
- It is not automatic. The lender decides whether to cover a loan under the scheme.
- It does not replace your own contribution where the lender expects one.
Where it fits
CGTMSE works best as part of a plan: the right facility, a well-prepared file, and a lender that participates actively. For many first-time borrowers without property, it is the difference between a conversation and a closed door.
Scheme terms change from time to time. Always check the current terms on the CGTMSE website or with your lender before relying on them.
Related service
Government Scheme & Subsidy Advisory
Lowering the real cost of a loan you are taking: eligibility check, application and claim filing.