CGT MSE Loan
About Us
Sachin Vashishth
(Managing Director)
Contact Info
- +91-9810454531
- Projectfinancer@yahoo.co.in
Book an Appointment
Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) is a trust established by the Government of India, under the Ministry of Micro, Small and Medium Enterprises (MSME) and Small Industries Development Bank of India (SIDBI). Launched in 2000, the CGTMSE scheme offers credit guarantees to financial institutions that offered credit facilities up to Rs. 2 crores has now been raised to Rs. 5 crores. CGTMSE scheme offers credit guarantees from 75% to 85% to MSEs across India. Let’s further discuss various aspects of the CGTMSE scheme in detail:
CGTMSE Scheme – Highlights
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Interest Rates As per RBI’s Guidelines is eligible for coverage under CGTMSE Eligible Activities Manufacturing and Services including Retail trade is allowed Educational and Training institutions, Self Help Groups (SHGs), and agriculture-related activities are not eligible Loan Amount For Micro and Small Enterprises (MSEs)– Credit facility up to Rs 500 lakh can be covered on an outstanding basis For Regional Rural Banks (RRBs) and Select Financial Institutions credit facilities up to Rs50 lakh is allowed Guarantee Coverage From 75% – 85% (50% Coverage for retail activity) Collateral / Third Party Guarantee Not required Eligible Member Lending Institutions (MLIs) More than 100: PSUs, NBFCs, RRBs, Private Banks, SUCBs, Fls, SFBs, and Foreign Banks Annual Guarantee Fee for amount up to Rs. 1 crore Fee revised from 2% and reduced to as low as 0.37%
Credit Guarantee under CGTMSE Scheme
Credit Guarantee refers to a situation where the loan to the applicant is backed by a party without the need for any external collateral or third-party guarantee. Here, the loan sanctioned by the member lending institution is backed by the scheme which provides the guarantee cover for a large portion of the loan amount. Under the CGTMSE scheme, both new and existing micro and small enterprises, including manufacturing and service enterprises are eligible for a credit facility of up to Rs.5 crores.
Benefits of CGTMSE Scheme
- 1. Ceiling for Guarantee coverage raised from Rs. 200 lakh to Rs. 500 lakh
- 2. Guarantee fee reduced to diminish the overall cost of borrowings to MSEs
- 3. Micro Finance Institutions as Member Lending Institutions (MLIs) are now eligible
- 4. Concessions related to fees and increased coverage to SC/STs
- 5. Reduced Guarantee fee by 10% and coverage extent increased to 85% to Women, ZED Certified Units and Units in Aspirational Districts
- 6. Annual Guarantee Fee structure revised and fee reduced to as low as 0.37%
Comparison of Business Loan Interest Rates offered by Top Banks/NBFCs
Bank/NBFCs
Interest Rate
Axis Bank
10.75% p.a. onwards
Flexiloans
1% per month onwards
HDB Financial Services Ltd.
8% – 26% p.a.
HDFC Bank
10.75% – 25% p.a.
IDFC First Bank
10.50% p.a. onwards
Indifi
1.50% per month onwards
Kotak Mahindra Bank
16% – 26% p.a.
Lendingkart
12% – 27% p.a.
Mcapital
2% per month onwards
NeoGrowth Finance
15% – 40% p.a.
Tata Capital
12% p.a. onwards
UGRO Capital
9% – 36% p.a.
Comparison of Business Loan Interest Rates offered by Top Banks/NBFCs
- All Existing and New Micro and Small Enterprises (MSEs)
- Scheduled Commercial Banks (SCBs)
- Regional Rural Banks (RRBs)
- Small Finance Banks (SFBs)
- Non-banking Financial Companies (NBFCs)
- Small Industrial Development Bank of India (SIDBI)
- National Small Industries Corporation (NSIC)
- North Eastern Development Finance Corporation Ltd. (NEDFi)
- a)The trust guarantees up to 75% of the defaulted principal amount (up to 85% of the defaulted principal amount for a select category of borrowers). The cover comes with a maximum guarantee cap of Rs.37.50 lakh for the credit facilities up to Rs.50 lakh.
- b)The term credit including interest on the principal is covered for a period of one-quarter and/or outstanding capital advances including the interest, as on the date of the account becoming a Non-Performing Asset (NPA) or as on the date of filing the suit (whichever is lower).
- c)Other charges, such as penal interest, commitment charge, service charge, or any other levy/ expenses do not qualify for the guarantee cover.
Documents required for loan application
- 1. Duly filled CGTMSE loan application form with passport-sized photographs
- 2. Business Incorporation or Company Registration Certificate
- 3. Business Project Report
- 4. CGTMSE Loan Coverage Letter
- 5. Copy of loan approval from the Bank
- 6. Any other document required by the Bank
Steps to avail Business/MSME Loan under the CGTMSE Scheme
The objective of the CGTMSE is to enable the banks to look at small and micro businesses with objectivity and give more importance to project viability and business model validation. To cover the loan under the credit guarantee fund scheme, the borrower has to pay an additional guarantee fee and service charge in addition to the interest charged by the bank. The current CGTMSE fee is payable at the rate of 1.5%. It is payable at 0.75% for the North-Eastern region including the state of Sikkim.
The procedure for applying and availing loans under CGTMSE is as follows:
Step 1. Formation of the Business Entity
Before even starting the procedure for loan approval under the CGTMSE, the borrower has to incorporate a private limited company, limited liability partnership, one-person company, or a proprietorship according to the nature of the business and obtain necessary approvals and tax registrations for executing the project.
Step 2. Preparing a Business Report
Borrowers need to conduct a market analysis and prepare a business plan containing relevant information, such as business model, promoter profile, projected financials, etc. The report is then presented to the credit facility and an application is filed for getting the loan under the CGTMSE scheme. However, businesses should consider that such project reports be prepared by experienced professionals. This shall increase the chances of approval.
Step 3. Sanctioning of Loan from the Bank
The request for a bank loan usually contains credit terms and working capital facilities. After the application and business plan are under process, banks carefully analyze the viability of the business model and process the loan application, and accord sanction, as per the bank’s policy.
Step 4. Obtaining the Guarantee Cover
After the loan is sanctioned the bank applies to CGTMSE authority and obtains the guarantee cover. If the loan is approved by CGTMSE, the borrower will have to pay the guarantee fee and service charges. The CGTMSE loan application form can be downloaded from its official website.
The extended list of Member of Lending Institutions (MLIs) under the CGTMSE scheme contains 141 banks including all the major rural, urban, public sector, and private sector banks of India. The list contains some of the larger banks, such as the State Bank of India, United Bank of India, Punjab National Bank, etc.
Note: CGTMSE does not grant any loan, credit facilities, or subsidies and nor does it have any Loan Agents, Agencies for arranging loans, or credit guarantees offered via its MLIs.
Also Read: How to get PSB loan in 59 minutes
Claim Settlement Procedure
After the disbursal of the final part of the loan amount, there is a lock-in period of 18 months for a preferred claim. The lender shall prefer a claim once the defaulted account has been notified as an NPA. The commencement of recovery proceedings after the account is called an NPA is known as the CGTMSE claim settlement procedure.
About Us
Sachin Vashishth
(Managing Director)
Contact Info
- +91-9810454531
- Projectfinancer@yahoo.co.in