Credit Guarantee Fund for Micro Units (CGFMU) is a financial assistance program launched by the Indian government to provide collateral-free business loans to small and micro units. The scheme aims to support the growth of small and micro businesses in India by providing access to finance without the need for collateral or guarantee. In this article, we will discuss the objectives, nature of facility, quantum of finance, and eligibility criteria for the CGFMU scheme.
Objectives
The primary objectives of the CGFMU scheme are:
- To provide collateral-free loans to small and micro units in India.
- To reduce the risk for lending institutions and encourage them to offer loans to small and micro businesses.
- To promote entrepreneurship and support the growth of small and micro businesses in the country. Small business owners can explore additional financing options through the E Mudra Loan.
Nature of facility
The CGFMU scheme provides collateral-free loans, including mudra loans, to small and micro units in India. The loans are provided by lending institutions, such as banks and financial institutions, who register with the scheme. The loans are guaranteed by the Government of India, which covers up to 75% of the loan amount. The guarantee reduces the risk for the lending institution and encourages them to offer loans to small and micro businesses.
Quantum of finance
Under the CGFMU scheme, small and micro units can obtain loans of up to Rs. 10 lakh per borrower. The loan repayment period can be up to five years. The maximum guarantee cover under the scheme is 75% of the loan amount, which means that the lending institution can recover up to 75% of the loan amount from the government in case of default by the borrower. For those seeking smaller loan amounts, the Shishu Mudra loan is a good option. Businesses looking for more funding opportunities can also consider the PMEGP scheme.
Eligibility
To be eligible for the CGFMU scheme, a business must meet the following criteria:
- The turnover of the business must be up to Rs. 2 crore per annum.
- The business must not have any default in the past.
- The business must fall under the definition of a micro or small enterprise, as defined by the Micro, Small and Medium Enterprises Development Act, 2006.
- The business must not be involved in any illegal activities or activities that are harmful to the environment.
The CGFMU scheme is open to all types of small and micro units, including sole proprietorships, partnerships, and private limited companies. If your business fits the criteria, you could also consider the udyogini scheme for financial assistance tailored to women entrepreneurs.
In conclusion, the CGFMU scheme is a great initiative by the Indian government to support the growth of small and micro businesses in the country. Along with schemes like the pmegp scheme, it provides collateral-free loans, reduces the risk for lending institutions, and encourages entrepreneurship. Small and micro businesses in India should take advantage of these schemes and apply for loans to expand their business operations. Moreover, understanding options like the pradhan mantri mudra loan interest rate can help businesses make informed financial decisions. The scheme has eligibility criteria that must be met, but if a business qualifies, it can access finance to grow and prosper.
