Understanding CGTMSE ( Credit Guarantee Fund Trust for Micro and Small Enterprises)

Every entrepreneur dreams of success, but the journey is fraught with uncertainties. CGTMSE is your shield, offering a safety net for your business aspirations.
Business Loan
APPLY
2 min read
13 October 2023

Are you an aspiring entrepreneur or a small business owner looking for financial assistance to expand your business? Have you heard of the credit guarantee fund trust for micro and Small enterprises (CGTMSE)? If not, do not worry. This article will provide you with all the necessary information about CGTMSE full form, and how it can help you secure your business.

What is CGTMSE?

The credit guarantee fund trust for micro and Small enterprises (CGTMSE) is a government-supported initiative aimed at providing collateral-free credit to small businesses in India. It was launched by the Ministry of Micro, Small and Medium Enterprises (MSME) and Small Industries Development Bank of India (SIDBI) in 2000 with the primary objective of ensuring easy and affordable access to credit to enable MSME units to graduate to the next level.

How does CGTMSE work?

Small businesses are the backbone of the economy, but they face numerous challenges in securing financial assistance due to various factors such as lack of collateral, low credit score, and other risks. CGTMSE provides credit guarantees to lenders to enhance the availability of collateral-free credit to small businesses.

To avail of a guarantee cover from CGTMSE, a borrower needs to approach a lending institution. The lending institution, after scrutinising the borrower's creditworthiness and submitting its proposal to CGTMSE, may sanction the loan if it meets the necessary requirements. Once the loan is disbursed, the lending institution pays a guarantee fee, and the borrower can then avail of the credit facility.

Who is eligible for CGTMSE cover?

All existing and new micro and small enterprises, including service enterprises, having a valid Udyog Aadhaar Memorandum (UAM) and GST registration, are eligible for CGTMSE cover. Start-ups and new businesses in the manufacturing and service sectors are also eligible for CGTMSE cover.

What are the benefits of CGTMSE?

CGTMSE offers several benefits to both borrowers and lending institutions, such as:

  1. Collateral-free credit: Small businesses can avail of credit facilities without providing any collateral or third-party guarantees.
  2. Increased credit availability: CGTMSE cover allows lending institutions to increase their lending capacity to smaller borrowers, thereby supporting the growth of small businesses.
  3. Credit risk mitigation: CGTMSE provides guarantees to lending institutions against credit losses, thus reducing their credit risks.
  4. Reduced interest rates: As CGTMSE cover reduces the credit risk for lending institutions, the interest rates charged by them are usually lower than those charged on loans without CGTMSE cover.
  5. Easy and streamlined process: CGTMSE provides a streamlined process for loan sanctioning and covers the entire process until loan repayment.

The CGTMSE is an excellent initiative by the government to support small businesses and boost the economy. CGTMSE cover provides collateral-free credit to small businesses, reduces credit risks of lending institutions, and helps to enhance credit availability at lower interest rates. If you are a small business owner looking to expand your business, consider CGTMSE to secure financial assistance without the burden of providing collateral.

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.

Frequently asked questions

What is the full form of CGTMSE?

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It is a trust established by the government of India to facilitate credit to micro and small enterprises.

Who is eligible for the CGTMSE scheme?

All micro and small enterprises engaged in manufacturing or service activities, including retail, are eligible for the CGTMSE scheme. The scheme covers both new and existing enterprises.

Is the Mudra loan covered under the CGTMSE scheme?

Yes, the Mudra loan scheme is covered under the CGTMSE scheme. Under the Mudra loan scheme, small and micro-businesses can avail loans up to Rs. 10 lakhs without collateral security, which are covered under the CGTMSE scheme.