CGTMSE

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It is an initiative of the Government of India and the Small Industries Development Bank of India (SIDBI), launched to facilitate credit flow to micro and small enterprises (MSEs) by providing credit guarantees to financial institutions for loans extended to this sector.

Key Features of CGTMSE:

1. Objective:

o To promote entrepreneurship by making collateral-free credit available to MSEs.

o To minimize the risk for lending institutions, thereby encouraging them to provide loans to first-time entrepreneurs or small businesses without requiring tangible security or third-party guarantees.

2. Eligible Borrowers:

o New and existing micro and small enterprises, including those in manufacturing and service sectors.

o Retail trade, educational institutions, and certain other businesses are typically excluded.

3. Credit Coverage:

o The scheme provides a guarantee cover of up to 85% of the loan amount, depending on the size of the enterprise and the loan amount.

o Maximum loan amount covered: ?2 crore.

4. Guarantee Fees:

o Financial institutions need to pay an annual guarantee fee to avail of this cover, which is generally a percentage of the loan amount.

5. Benefits to Entrepreneurs:

o Access to loans without the need for collateral.

o Encourages risk-taking and innovation, especially for small businesses and startups.

6. Participating Institutions:

o Banks, financial institutions, and non-banking financial companies (NBFCs) registered with CGTMSE.

Application Process:

• The entrepreneur applies for a loan through a CGTMSE-registered financial institution.

• The financial institution evaluates the proposal and decides to sanction the loan.

• The institution seeks coverage under CGTMSE for the sanctioned loan.

• Upon approval, the guarantee cover is extended to the loan.