On 30th August 2000, the Ministry of Micro, Small and Medium Enterprises and the Small Industries Development Bank of India (SIDBI) jointly started the Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE). This Trust plays the role of a guarantor, facilitating collateral-free loans for the SMEs and MSMEs. Here is all you need to know about the CGTMSE scheme to get the needed financing for your business.
What is the primary objective of the CGTMSE scheme?
To start with, the CGTMSE scheme offers credit guarantee to financial institutions that sanction loans to SMEs and MSMEs. Most lenders are wary of defaults and avoid lending to small enterprises without collateral or have too many stringent eligibility criteria that these firms are unable to meet. From the perspective of business owners, having enough security for a loan often poses a challenge. In order to promote a healthy financial environment where the small and micro businesses can take collateral-free loans, the Trust stands as a creditor.
If an MSME defaults on repayment then the Trust reimburses the lending institution. They repay the loan up to a certain percentage as follows.
- CGTMSE guarantees up to 75% to 85% repayment when the loan amount is within Rs.50 lakh.
- The trust guarantees up to 50% repayment when the loan amount is above Rs.50 lakh, but under Rs.100 lakh.
- The trust guarantees up to 85% repayment to micro enterprises when the loan amount is within Rs.5 lakh.
- In case of women-run enterprises and for MSME located in the North East, the Trust guarantees a repayment of up to 80% of the loan amount.
The repayment that the Trust initiates includes the defaulting amount and the interest it may have accumulated through a period of 3 months.
What are the charges that you need to pay to avail the CGTMSE scheme?
CGTMSE charges a fee for all the repayment it makes. For loans up to Rs.5 lakh they charge 0.75% of the loan value as fees. On the other hand, for loans above Rs.5 lakh and below Rs.100 lakh they charge a fee of 0.85%.
Who is eligible for the CGTMSE scheme?
All micro, small, and medium enterprises are eligible to take a loan under the CGTMSE scheme. However, your MSME must be engaged in manufacturing or service activity in order to be eligible for the loan. MSMEs engaged in retail trade, educational and training institutions and self-help groups are not eligible for this scheme.
From where can you get the loan under the CGTMSE scheme?
You can take a loan from any authorised lender listed under the CGTMSE scheme. Finding a lender of your preference is easy as a range of scheduled commercial banks, including both private and public sector ones, NABARD classified rural banks, foreign banks, and NBFCs feature under the CGTMSE scheme lender list. Added to this, 133 financial institutions registered as MLIs (member lending institutions) of the Trust also feature on this list.
In order to apply for a loan under this scheme, you will have to prepare a business plan and submit a list of documents for verification according to the policies of the lender you approach. To skip this lengthy process, you can also apply for a customised business loan of up to Rs.30 lakh quickly and conveniently from Bajaj Finserv. This SME Loan is available at affordable business loan interest rates, a long repayment tenor, and with an easy online application with minimal documents. You also have the added advantages when you choose the Flexi Business Loan.
This facility allows you to meet your business needs and working capital requirements with ease by withdrawing from the sanction as per your convenience, in parts, multiple times. Here interest is charged only on the amount you use. Also, you can choose to repay the loan as interest-only EMIs and then pay the principal at the end. This way you will be able to handle your cash flow better. To start, check your pre-approved offerand apply for a loan using tailor-made deals and enjoy instant approval.