CGTMSE Meaning and How It Helps MSMEs Get Loans

To start a business, one needs to have dedication, time, and financial resources which are the most important ones. This is because assets are required for a business to be functional. Arranging funds can be a challenging task, especially for someone who has just started a new business venture irrespective of the size of the business. However, government loan schemes offer financial assistance to MSMEs and new entrepreneurs.

Table of Content

• What is CGTMSE?
• Features of CGTMSE
• Eligibility Criteria
• Other Business Loan Schemes by the Government of India

Entrepreneurs and individuals alike are the backbone of a country’s economy. Rather than seeking jobs, entrepreneurs create them. From a broader perspective, it positively affects the economy because eliminating unemployment increases the income of both individuals and the country as a whole. Arranging funds for capital investment is paramount for Micro or Small Enterprise (MSE) business owners.

To ease this, the Government of India has created a scheme called the Credit Guarantee Scheme for Subordinate Debt (CGSSD) which is operated by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This blog throws light on the features, eligibility, and meaning of CGTMSE. 

What is CGTMSE?

Established by the Government of India, it is a trust that has been set up under the Ministry of Micro, Small and Medium Enterprise (MSME) and Small Industries Development Bank of India (SIDBI). The scheme is designed to support first-generation entrepreneurs who want to start their own Micro or Small Enterprise (MSE).

This MSME scheme guarantees credit for 75% to 85% across the country, with an additional 5% over and above the applicable guarantee coverage by RBI, for MSEs situated in Identified Credit Deficient Districts (ICDD). 

Features of CGTMSE

• Type of borrower: If your business falls within the manufacturing and service-based category then you are covered under the CGTMSE scheme. However, Self-Help Groups, Joint Liability Groups and agricultural activities are excluded from this scheme.
• Loan amount eligibility: With the help of this credit facility you can avail assistance of up to ₹5 crores if you own a Micro or Small business enterprise.
• Coverage guarantee: Under the CGTMSE scheme, the coverage guarantee is available to the extent of 75% to 90% of the sanctioned amount of the credit facility. This depends on the category of your business, region and the credit facility availed. For example, the scheme covers 85% of the credit facility for SC & ST entrepreneurs whereas, it is 90% for women entrepreneurs.
• Collateral: The CGTMSE scheme launched by the Government of India, offers collateral-free credit to the Micro and Small Enterprise Sector.

Eligibility Criteria

• All activities under the service sector as per the MSMED Act, 2006 are eligible for coverage under the scheme.
• Both existing and new MSEs are eligible under the scheme.
• MSEs involved in the manufacturing and service sectors are eligible under the scheme.

Other Business Loan Schemes by the Government of India

• Pradhan Mantri Mudra Yojana: It is a scheme launched by the Prime Minister of India on April 8, 2015. The scheme provides loans up to Rs. 20 Lakhs to the non-corporate, non-farm small/micro enterprises. Once you are eligible for this scheme, then you can avail of this loan from Commercial Banks, Regional Rural Banks, Small Finance Banks, Non-Banking Financial Companies etc.
• National Small Industries Corporation (NSIC): It is a certified enterprise of the Government of India, under the Ministry of MSME. Its primary goal is to promote, aid and foster the growth of the Micro, Small and Medium Enterprises sector in the country. One of the key objectives of NSIC is to provide integrated support services encompassing marketing, technology, finance and other services.
• The Stand Up India Scheme: It is a scheme that provides financial assistance between 10 lakhs to 1 crore while setting up a greenfield enterprise. The scheme aims to assist at least one Schedule Caste or Schedule Tribe individual and one woman entrepreneur per bank branch.
• MSME Loans: The MSME loan has emerged as a popular option in the Indian economy over the past five decades. It is a short-term loan that caters to the financial needs of small businesses, start-ups, women entrepreneurs and individuals alike. 

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