What is CGTSME Scheme?
CGTSME is the acronym for ‘Credit Guarantee Funds Trust for Micro and Small Enterprises’ is established by the government of India along with the Ministry of Micro, small and medium enterprises, and the Small Industries Development Bank of India. It was established in 2000 with the objective to provide credit guarantee to financial institutions like banks, NBFCs which will ultimately lend to small and medium enterprises. The CGTSME ensures the guarantee to the lending institutions for all types of loans to the Ministry of medium and small enterprises up to a specific eligible amount.
The aim of the scheme is to support entrepreneurs to establish SMEs and MSME. This will boost the economy of country and shall also generate employment opportunities. This scheme will foretell the provision of the loan to budding entrepreneurs so that they can easily prosper in the competitive market without the third-party guarantees. There are certain conditions to avail loan through CGTSME Scheme. Be aware about the terms and conditions for the scheme and flourish your business.
The loan is provided to the 5 years vintage business which do not have any existing loan on the form. Besides this, business owners can avail maximum 2 crore from the scheme. The loan can be provided by the banks and NBFCs to the business owners who can fulfill the eligibility criteria of the scheme.
Mentioned below is the eligiblity criteria set by the government for CGTSME loan.
1. Lending institutions: This includes all the financial institutions including banks and NBFCs that have been in an agreement with CGTSME to provide loans under the scheme. The banks or NBFCs which are been a part of the scheme are known as the Member lending institutions (MLIs). Currently, there are 131 MLIs in the country.
1. Borrowers: All SMEs must meet the following criteria by the CGTSME.
· The maximum credit facility is Rs. 50 lakh for the maximum guarantee cover of Rs. 62.50 lakhs / Rs.65 lakhs.
· The loan facility exceeding the amount of Rs. 50 lakh the guarantee cap is 1 crore.
· Term credit for the entire outstanding amount on the date the loan is declared to be an NPA or on the date of filing a suit.
1. Exclusions: Mentioned below are the business entities that are excluded from the CGTMSE coverage.
· Retail Trade.
· Educational Institutions.
· Training Institutes.
· Self Help Groups (SHG).
· How to apply for a CGTSME loan
How to apply for CGTSME loan?
The CGTMSE's aim is to allow banks and other financial institutions to look at small and micro business enterprises and to emphasize on the business plan. In addition to the interest paid by the bank, the borrower must pay an additional guarantee fee and service charge in addition to the interest paid by the bank under the credit guarantee fund programme. The current CGTMSE cost is 1.5 percent of the total fee. For the North-Eastern area, which includes the state of Sikkim, it is payable at 0.75 percent.
1. First step: Establishment of the business entity.
Establish a private limited company, proprietorship, limited liability partnership, depending on the type of business. Receive the approvals and tax registration of your company.
1. Second step: Business plan or business model.
Prepare a strong business plan that includes information like business model, profile, promoter profile financial details and so on.
1. Third step: Sanction the bank loan.
Credit terms and working capital facilities are included in the request for the bank loan. Evaluate the sustainability of the business plan carefully. Prepare a business model, grasp the information on the process of loan carefully.
1. Fourth step: CGTSME Loan cover
After the loan is sanctioned it is the responsibility of the lender to file the guarantee cover under the CGTSME scheme as per the interest rate.
Documents required for the CGTSME loan
1. Application form of CGTSME completely filled with the passport size photograph.
2. Business project report, registration certificate of the company.
3. CGTSME loan coverage letter copy of the bank’s loan approval.
4. The CGTMSE also assists the business units with recovery. If a business unit is in terrible shape due to circumstances beyond the management's control, the CGTMSE will reimburse the lender's rehabilitation loan up to a credit limit of Rs. 1 crore.
CGTSME Interest rate
The maximum amount of credit facility
Up to Rs. 5 lakh
More than Rs. 5 lakh to Rs. 50 lakh
More than Rs.50 lakh to Rs. 2 crores
85 % of the default amount maximum of Rs. 4.25 lakhs.
75 % of the default amount maximum of Rs. 37.50 lakhs.
75% of the default amount maximum Rs.1.5 crores
Women and Units in NER
80%t of the default amount maximum Rs.40 lakhs for credit facility up to Rs.50 lakhs.
75% of the default amount maximum Rs.40 lakhs for credit facility up to Rs.50 lakhs.
Credit from Rs.10 lakhs to Rs. 1 crore
MSE Retail Trade
50% of the default amount maximum of Rs.50 lakhs.
CGTSME Scheme is one of the step by the government to promote the entrepreneurship in the country and thus generating more employment opportunities for the people. The scheme shall support small and medium enterprises who are willing to expand their businesses and lack finances. The interest rate of the loan under CGTSME scheme is usually low and it is expected from the enterprise owners to fulfill the eligibility requirements set up by the government of India. My Mudra is joining hands with the government to support entrepreneurship and development in the country. Avail loan from My Mudra to grow your business without worrying about finances.
What is CGTSME Scheme?