CGTMSE scheme FAQs

Author: Terkar Capital

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust inaugurated by the Ministry of Micro, Small and Medium Enterprises, Government of India, and the Small Industries Development Bank of India (SIDBI). Launched on 30 August 2000, the main purpose of the CGTMSE scheme is to provide credit guarantees to financial institutions that grant loans to SMEs and Memes.

What is CGTMSE Meaning?

The basic purpose of CGTMSE is to encourage first-time entrepreneurs to build SMEs and MEME, estimated to be the support of the Indian economy by availing of collateral-free loans from qualified financial institutions. The guarantee includes default by the borrower to repay the advance. Thus, the CGTMSE scheme essentially considers the requirement of loans to first-generation administrators so that they can flourish in a competitive environment without the burden of security or third-party guarantees. In turn, the financial institutions are given cover for the lack of security to fund SMEs and Memes promoted by small Indian businessmen up to a certain limit.

CGTMSE – A Driving Force for MSMEs

What are CGTMSE Fees?

The fees charged by the trust fund is of 1% p.a of the amount so approved:

  1. 0.75% – for a loan of up to Rs. 5 Lac
  2. 0.85% for loans above Rs. 5 Lac but up to Rs. 100 Lac.

The credit guarantee available below this scheme is 75/80% of the amount so transmitted to a maximum cap of Rs. 62.5 Lac / 65 Lac for a loan facility of up to Rs. 50 Lac. The percentage guarantee implies 85% for micro-enterprises for a sum of up to Rs. 5 Lac. The percentage of guarantee is 50% of the amount so approved for a credit of above Rs. 50 Lac with a maximum limit of Rs. 100 Lac. The ownership of the guarantee is a block of 5 years.

Does CGTMSE cover retail trade?

CGTMSE Coverage extended to Retail Trade & Collateral Loans too – Now Retail Trades & partial collateral loans may be included under Credit Guarantee Scheme of CGTMSE. A decision in this opinion was taken under "Rebooting CGTMSE" established by the Ministry of MSME and CGTMSE on February 20, 2018.

Following modifications were suggested for implementation:

  1. Charging Annual Guarantee Fees (AGF) on Outstanding Loan Amount somewhat than sanction amount.
  2. Extending the Coverage of the Credit Guarantee Scheme (CGS) to cover the MSE Retail Traders section.
  3. Providing loans with Partial Collateral Security "Hybrid Security" under Credit Guarantee Scheme.
  4. Increase in the extent of guarantee coverage to 75% from the existing 50% for proposals above?50 Lac.
  5. Intensifying IT infrastructure of the Trust to develop operational efficiencies and reduce the turnaround time for claim settlement.
  6. Augmentation of the corpus of the Trust from Rs. 2,500 crore to Rs. 7,500 crore
  7. To increase coverage of the loans covered under the credit guarantee scheme from Rs. 1 crore to Rs. 2 crore
  8. To increase coverage of the credit guarantee scheme for loans being enlarged to micro and small enterprises by NBFCs also.

Understand CGTMSE scheme execution.

What is CGTMSE Loan Interest Rate?

All lenders impose a particular cost on the borrower. The important part of the cost to the borrower is the interest rate for the loan. The majority of the lenders recover the CGTMSE loan interest rate that does not exceed 14% PA including the guarantee cover. Most of the time the rate of interest varies as per changes in the financial institutions and the facility which is available under CGTMSE.

What is CGTMSE Full form?

The full form of CGTMSE is Credit Guarantee Fund Trust for Micro and Small Enterprises that gives funding to financial institutions to help SMEs and MSMEs.

How to apply for the CGTMSE Scheme?

To apply for a CGTMSE loan, you are required to set up a business plan including business model, projected goal, etc., and obtain certain business documents if you have just registered your business. Once you have all the essential documents and business plans prepared by a professional, you can apply for the loan with eligible moneylenders. They will analyze your business model and application. If the bank is satisfied, it will process the request to CGTMSE for getting a guarantee cover and confirm the loan amount after CGTMSE approves your application and you pay CGTMSE loan fees.

It reaches out even to the rural areas. The application can be made particularly if the applicant is eligible for a loan under the CGTMSE scheme.

How does Terkar Capital help in getting CGTMSE Exposure?

For many years Terkar Capital has worked extensively and exclusively for raising the finances for the businesses. With respect to the company and its financials, we arrange the source of the funding for the companies. And CGTMSE loan is among them. There are many financial facts, figures that need to be considered before one shall proceed on the CGTMSE. We analyze the financials, business and arrange the whole execution with the best suits facility under CGTMSE.