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Published on:

September 29, 2025

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Small businesses

All You Need to Know About the CGTMSE Loan Scheme

What if you could get a ₹5 crore loan without pledging a single asset? No land. No gold. No guarantor. Just your business plan and a little paperwork. That’s exactly what the CGTMSE loan scheme is built for. In this article, you’ll learn what the scheme is, who qualifies, how much coverage you actually get, what it costs, and the exact steps to apply without the jargon. Whether you’re just starting up or ready to scale, this guide breaks it down so you can stop guessing and start preparing.

What is the CGTMSE Loan Scheme?

Getting a business loan without collateral usually sounds like a pipe dream. The CGTMSE loan scheme was built to prove otherwise. Short for Credit Guarantee Fund Trust for Micro and Small Enterprises, the scheme was launched in 2000 by the Ministry of MSME and SIDBI to give micro and small businesses a fair shot at credit without needing to pledge assets or bring in a guarantor.

Here’s the deal: CGTMSE doesn’t give you the money directly. Instead, it acts like a safety net for the lender. If your business defaults, the trust steps in to cover a portion of the unpaid loan. That reduces the bank’s risk and increases your chance of getting approved. Both new and existing Micro and Small Enterprises (MSEs) are eligible. But there’s a catch: You must have a valid UDYAM Registration to apply. No certificate, no CGTMSE coverage.

Key Features and Benefits

This isn’t just a no-collateral scheme. It’s a system built to de-risk lending for banks and make credit more accessible for businesses that usually get overlooked.

The guarantee under CGTMSE stays active for up to five years, giving businesses breathing room to repay without constant pressure. You can apply through a wide network of lenders, including private and public banks, regional rural banks, SIDBI, and approved NBFCs.

The scheme also gives preferential treatment to borrowers from underserved groups, like SC/ST founders, women entrepreneurs, Agniveers, PwD, and ZED-certified units.

For anyone without collateral or a long credit history, this could be the difference between another rejection and a real shot at growth.

Eligibility Criteria

Not every small business cuts, and that’s intentional. CGTMSE is meant for registered, compliant, and growth-focused Micro and Small Enterprises (MSEs). Here’s what that actually means:

You must qualify as a Micro or Small Enterprise under the MSME definitions
To qualify, your business needs to be officially listed on the Udyam Portal. Without that registration, you’re not eligible, simple as that.
You’ll also need to be fully compliant with taxes, GST filings, and local licenses. Lenders look for clean records, not shortcuts
You must not fall into one of the excluded categories

Who’s In vs Who’s Out

Here’s a quick overview of eligible vs. ineligible sectors:

Eligible examples:

Manufacturing units, including textiles, food processing, engineering, package, and more
Service providers like IT companies, business consultants, hospitality businesses, and repair services
Trading and Agro-based businesses like wholesalers, select retail operations, warehousing, or agro-processing units can apply, as long as they’re registered and compliant

What’s not:

Educational institutions like schools, colleges, and coaching centers don’t qualify, even if they’re fully registered and operational. The scheme doesn’t cover training or academic setups.
Training providers and skill development programs
Self-Help Groups (SHGs) or cooperative societies that fall outside formal business categories

If your business is registered as a Micro or Small Enterprise under Udyam, is not in an excluded category, and complies with regulations, you’re likely good to go. When in doubt, your lender can confirm.

Pro tip: If you’re unsure whether your business qualifies, ask your lender directly. Each institution may interpret edge cases differently.

CGTMSE Charges and Coverage

The scheme isn’t entirely free, but it’s affordable. You pay a guarantee fee based on your loan size, and in return, the trust covers a chunk of your loan if things go south.

Fee Structure (Annual)

Loan Amount (₹)	CGTMSE Fee (% per annum)
Up to 10 lakhs	0.37%
10 - 50 lakhs	0.55%
50 lakhs - 1 crore	0.60%
1 - 2 crore	1.20%
2 - 5 crore	1.35%

Borrowers from underserved categories like SC/ST, women, PwD, Agniveers, and ZED-certified MSEs often get a 10% discount on the fee.

How much does it cover?

If your loan is ₹50 lakh or less, CGTMSE usually covers 75% to 90% of it, depending on who you are and where your business operates.
Once the loan crosses that ₹50 lakh mark, coverage drops to only 50% for amounts between ₹50 lakh and ₹2 crore.
So even at the upper limit, the maximum you can get guaranteed is ₹37.5 lakh for a ₹50 lakh loan. Anything beyond that? The uncovered portion is your lender’s risk to carry.
Hybrid model: CGTMSE covers only the unsecured portion of loans up to ₹10 crore

What’s not covered

Penal interest or late fees
Legal or recovery charges
Service or documentation fees
Loans already backed by other credit guarantee schemes

How to apply to CGTMSE

Applying under the CGTMSE scheme isn’t as complicated as it seems, but skipping a step can stall your loan. Here’s the no-fluff process:

Get your business registered on the Udyam portal so it’s officially recognized as a Micro or Small Enterprise. Without this step, you’re not eligible, no matter your turnover or team size.
Put together a realistic business plan. Lay out the numbers. Show what the loan’s for, how you’ll spend it, and how it pays itself back. Banks don’t fund guesses; they fund plans that make sense.
Approach an eligible lender, any CGTMSE-partnered bank or NBFC (called a Member Lending Institution or MLI).
Submit your documents, including KYC, business proof, and project report.
Once approved, the lender sanctions the loan and initiates the CGTMSE guarantee request
The bank applies for CGTMSE cover on your behalf; you don’t need to apply separately.
Pay the guarantee fee (annually, as per the slab) to activate coverage.
Once cleared, the loan gets disbursed, and you’re good to go.

Conclusion

You don’t need deep pockets or land titles to access real funding anymore. CGTMSE gives you a government-backed way to borrow without putting everything on the line.

Apply for up to ₹5 crore with zero collateral and high approval potential.
Boost your odds with Udyam registration, a strong business plan, and the right lender.
Know your slabs fees range from 0.37% to 1.35%, and discounts apply for underserved categories.
Use the trust’s coverage smartly, especially if you’re partially secured and using the hybrid model.

Need help turning your plan into a funded loan? Swipe helps you prep, apply, and get lender-ready fast and without the paperwork chaos.

FAQs

1. What is the full form of CGTMSE?

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It’s a government-backed trust, set up by the Government of India and SIBDI to help MSEs get loans without offering collateral.

2. Who is eligible for the CGTMSE scheme?

Any new or existing Micro or Small Enterprise (MSE) engaged in manufacturing, services, or eligible trading activities can apply for Udyam Registration in mandatory. Certain sectors like education and retail, may be excluded.

3. How much loan can I get under CGTMSE?

You can get up to ₹5 crore as a collateral-free loan. However, the guarantee coverage may vary:

Up to 85% for loans up to ₹50 lakhs
50% for loans above ₹50 lakh

4. Is collateral required under CGTMSE?

No. One of the main benefits of the CGTMSE scheme is that no collateral or third-party guarantee is required. Banks receive a credit guarantee from the trust instead.

5. What’s the CGTMSE loan repayment period?

The guarantee typically covers the loan for up to 5 years or the term of the credit facility (whichever is applicable).

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