Unsecured funding under CGTMSE scheme

Author: Terkar Capital

What is the CGTMSE Scheme?

Micro and Small enterprises equal a huge chunk of our Indian economy, and as the years are progressing; micro and small businesses and entrepreneurs are introducing innovative products and services. CGTMSE scheme is Credit Guarantee Trust Fund for Micro and Small Enterprises, it is a scheme introduced by the Government of India in association with SIDBI. It guarantees funds to lending institutions that provide loans to small and micro enterprises, up to a certain limit. It is an initiative that allows lending institutions to provide loans to small and micro enterprises without the availability of collateral or security. Another objective of this scheme is to help the small and micro establishments to thrive in the competitive market and avail funds especially without the availability of collateral.

What is the lock-in period in the CGTMSE loan?

Before the lending institution puts up a claim on the trust, there is a lock-in period of 18 months from either the date of the last disbursement of loan to the borrower or the date of the guarantee cover coming into force in respect of the particular credit facility, the lock-in period of 18 months is there in the provision to ensure that the process influent and the lending institution’s fund security remains at stake.

Charges required by the CGTMSE

The CGTMSE requires the following charges –

Charges required by the CGTMSE scheme are not fixed and it depends on bank to bank or lending institutions.

This is done to ensure that the scheme works fine for both the lending institution and the borrowers, in this case, the borrowers are Micro and Small scale enterprises, which are a backbone of our Indian economy, amid an economic slowdown, the government introduced this scheme along with SIDBI, this will provide the essential leverage to the borrower which can later enhance its enterprise.

Annual Service Fee (ASF)

Guarantee cover extended by Credit Guarantee Fund Scheme for loans provided before the date of 01st January 2013, in accordance of any specific borrower shall be valid only if the concerned Multilateral convention to implement tax pas an annual service fee (ASF) of 0.50% on the amount guaranteed for credit facilities up to 5 lakh and 0.75% on the amount guaranteed for credit facilities over.5 lakh and till 100 lakh.

Cost to the Borrower

The Credit Guarantee Scheme leaves it to the convenience of the MLIs to decide the annual service fee and otherwise, they can also bear it themselves.

The Interest rate payable by the borrower

"Any credit facility which has been sanctioned by the lending institution (all scheduled commercial banks, selected financial institutions) and NBFCs with the maximum interest rate not more than 14% p.a. and 18% p.a. respectively including the cost of guarantee cover," the interest rate shall not exceed the given parameters.

The process to apply for a credit guarantee fund scheme for micro and small enterprises

  • Commencement of the business organization

    First and foremost is the starting of a company, by starting, what we mean is; getting the enterprise registered by the Government of India, as this scheme cannot be availed unless the enterprise is a registered one.

  • Making a project or business report/description

    This is extremely important because it portrays the potential of a business enterprise to function or a project which may turn out to be a profitable one. A good well-written descriptive report will ensure that there are no hurdles in making the most out of the CGTMSE scheme. The viability of the project acts as a major factor in availing this type of scheme, if the project is viable then the Government itself becomes ambitious towards the outcomes.

  • Get Coverage under the CGTMSE scheme.

    If you are an eligible candidate to avail of this scheme, this procedure is deemed to be completed by now, you must first check the CGTMSE eligibility according to your case.

Apply for CGTMSE scheme

If you are looking forward to avail and make the most out of this ambitious initiative by the government, you must consider Terkar Capital for availing the CGTMSE scheme, it is a trustworthy lending institution, even if you are doubtful about the scheme; the executives in Terkar Capital will explain you the complete procedure, client privacy and requirements are prioritized here and it has been helping such small and micro enterprises to flourish over the years.

Note: The eligibility criteria are common for applicants across India. However, there may be certain other kinds of criteria as well that are to be met specifically to the region or the financial institution that is sanctioning the loan.

Applying for a CGTMSE Loan

The application for the loan is to be made to the banks and financial institutions that are eligible to provide loans under the CGTMSE scheme. The Government, as well as private banks, are involved in the scheme. It is spread out even to the rural areas. The application can be made only if the candidate is eligible for a loan under the CGTMSE scheme. The documents required for the processing of the loan will differ from case to case.

CGTMSE Loan at Terkar Capital

If you are looking for a reliable agency to apply for a CGTMSE loan, Terkar Capital can be a trustworthy financial institution to reach out to. We provide top services of investment banking in India. The providers are authentic and along with the loan, assistance is also provided. The borrower is known in detail about the CGTMSE scheme and is helped in making the most suitable choice. The relationship is maintained even after the loan so as to ensure that the borrower is satisfied with the loan and the services.