Complete Guide to Applying for the CGTMSE Scheme – A Step-by-Step Process

In India, many people have entrepreneurial aspirations. But, getting the necessary financial support is often the difference between making their dreams become a reality and squashing their dreams. Realising the huge entrepreneurial potential of the Indians, the government of India launched several initiatives, like the CGTSME scheme, to provide them with financial support.

These schemes offer a beacon of hope for aspiring business owners to make their business idea a reality and start their own venture. These schemes also allow the existing small business owners to expand their operations and grow further. CGTMSE’s full form is Credit Guarantee Fund Trust for Micro and Small Enterprises.

If you are an aspiring entrepreneur or an existing MSE (micro and small enterprise) owner and are looking for credit options, knowing about the CGSTME loan scheme can help you leverage it and get the desired funds for your business.

What is the CGTMSE scheme?

The credit guarantee fund trust for micro and small enterprises is a government of India initiative that aims to provide credit guarantees to financial organizations that extend business loans to micro and small enterprise owners. Thus, the CGTMSE scheme enables small and aspiring business owners to get access to funds they need for their enterprise and supports their entrepreneurial journey.

The CGTSME scheme covers various MSEs engaged in services and manufacturing activities. Under the scheme, you can obtain an unsecured loan of up to Rs. 2 Crore. An unsecured loan essentially means you need not offer any collateral to secure the funds. The financial organisations, such as banks, NBFCs (non-banking financial companies), and other lending institutions that participate in the CGTMSE scheme apply for CGTMSE coverage on the borrower’s behalf.

This scheme provides a safety net for the lenders that offer business loans by guaranteeing them the recovery of a significant portion of the loan amount and thus encourages them to offer loans to small and medium enterprises.

Eligibility criteria for availing business loan under the CGTMSE scheme

Like any other credit, to avail business loan under CGTMSE scheme, you must meet the following eligibility requirements:

• Business loans under the CGTMSE scheme are available for all existing and new MSEs engaged in trading, services, and manufacturing sectors, excluding self-help groups and agriculture.
  
• As a potential borrower, you must not have defaulted on paying your loan previously, and you must not be a defaulter with any financial organisation.
  
• If you own a Micro and Small enterprise, your eligibility criteria for a loan under the CGTMSE scheme would be as per the requirements mentioned in the MSMED Act, 2006. The eligibility will be determined based on the investment made in machinery or plant and the annual turnover of the enterprise.

Documents required for availing loan under the CGTMSE scheme

As an eligible borrower, you can apply for a loan under the CGTMSE scheme by submitting the following documents:

• CGTMSE application form (duly filled with all the required details and signed)
• Proof of your business incorporation or company registration certificate
• Passport-sized photo
• KYC (Know Your Customer) documents
• Udyam registration certificate

How to apply for CGTMSE loan? Understanding the steps involved

Applying for a CGTMSE loan is quite easy, and it involves the below-mentioned steps:

Step 1

Many financial organisations, including banks and NBFCs (non-banking financial companies) offer business loans under CGTMSE scheme. And, as a potential borrower, you must know and identify which financial institutions offer CGTMSE loans and approach the lender that you would be the best option.

Step 2

Once you zero down on the financial organisation, the next step is to get all the documents required to avail of the loan in order, including a business plan, financial documents, etc., and submit these documents along with the application form. Having a clear understanding of the required papers and keeping them handy can help you avoid delays in the approval process.

Step 3

After receiving the loan application, the financial institution will evaluate, assess the feasibility of the business plan, and verify your eligibility for the loan under the CGTMSE scheme. And, after careful consideration, they will inform you about the rejection or approval of the loan through email or phone call.

Step 4

If your loan application is approved, the lender will apply for a guarantee cover from CGTMSE for the sanction amount. This provides them the guarantee to recover 75% to 85% of the principal amount if they fail to repay the loan.

Step 5

Once the guarantee is in place and all the requirements are met, the financial organisation will disburse the loan.

Conclusion

The CGTMSE loan scheme is truly a boon for all micro and small business enterprises. It helps these business owners get the desired funds to grow their businesses and encourages aspiring entrepreneurs to make their business ideas a reality.

Also, the CGTMSE loan interest rate is quite affordable, which further encourages small business owners to avail themselves of credit and repay them easily without worrying about disruption in the cash flow. To ensure that a maximum number of small businesses benefit from this scheme, the government of India has partnered and authorised several banks and NBFCs in India to extend business loans under the CGTMSE scheme.

If you are looking for other business loan solutions, you can explore the options offered by Udyog Plus, one of the leading NBFCs in India. It is an integral part of Aditya Birla Finance Limited and has a reputation for offering small businesses the best business loan solution.