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How to Apply for CGTMSE Scheme?

How to Apply for CGTMSE Scheme? Access to low-cost and timely credit is usually a big impediment for Micro and Small Enterprises (MSEs) in India, particularly when collateral is a major barrier. How to Apply for CGTMSE Scheme? Aware of this challenge, the Government of India, along with SIDBI, introduced the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme.

This groundbreaking scheme offers collateral-free credit guarantees to MSEs who qualify, allowing them to take out loans without collateral. If you are a startup or a going concern business planning to expand, learning how to apply for the CGTMSE scheme can help you unlock the necessary funds to drive your expansion. This article guides you through the whole application process on How to Apply for CGTMSE Scheme, eligibility, documents required, expenses, and timeframes, ensuring you go through the scheme confidently and clearly.

Eligibility Criteria

  • The scheme is available for both new and existing Micro and Small Enterprises (MSEs) in manufacturing, trading, or services as defined under the MSMED Act, 2006.
  • The business should be registered as an MSE and should not carry on any activity of agriculture or education. Self-help groups and agricultural ventures are not allowed.
  • The applicant should not be a defaulter to any bank or financial organization.
  • The loan has to be raised from a Member Lending Institution (MLI) like scheduled commercial banks, regional rural banks, NBFCs, and other institutions approved by CGTMSE.

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Step-by-Step Application Process on How to Apply for CGTMSE Scheme

  1. Registration of Business
  • Register your company as an MSE and make all statutory registrations (Udyam Registration, GST, etc.).
  1. Prepare a Detailed Project Report
  • Prepare a detailed business plan/project report, with financial projections and description of the business model.
  1. Identify a Participating Lender
  • Visit a participating bank or NBFC which is a Member Lending Institution (MLI) under the CGTMSE scheme.
  1. Submit the Loan Application
  • Complete the CGTMSE loan application form and submit it with the supporting documents to the lender.
  1. Lender Appraisal
  • The lender will value your business proposal on viability and profitability according to its internal norms.
  1. Loan Sanction and CGTMSE Cover
  • Upon approval, the lender will sanction the loan and make an application to CGTMSE for the guarantee cover.
  1. Payment of Fees
  • Pay the applicable one-time guarantee fee and annual service fee as per the sanctioned loan amount.
  1. Loan Disbursement
  • Upon completion of formalities and CGTMSE approval, the loan is disbursed to your business.

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Key Documents Required

  • Duly filled CGTMSE loan application form with passport-sized photographs.
  • Business incorporation or company registration certificate.
  • Udyam Registration Certificate (for MSME status).
  • Detailed business project report with financial forecasts.
  • KYC documents of the applicant/promoters.
  • CGTMSE guarantee coverage letter (provided by the lender).
  • Copy of the loan approval letter issued by the bank/lending institution.
  • Any other papers as necessitated by the concerned lender.

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Average Time Period for the Process on How to Apply for CGTMSE Scheme

  • The process on How to Apply for CGTMSE Scheme should take 2 to 4 weeks from when a complete application is submitted until loan disbursement, depending upon the internal appraisal and documentation cycles of the lender.
  • There may be delays in case additional information or clarifications are requested in the course of the appraisal.

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Cost of the Process (Fees and Charges)

One-Time Guarantee Fee: Varies between 0.37% and 1.35% of the approved loan amount, based on the loan slab and borrower’s profile.

  • Up to ₹10 lakh: 0.37% + GST
  • ₹10 lakh to ₹50 lakh: 0.55% + GST
  • ₹50 lakh to ₹1 crore: 0.60% + GST
  • Above ₹1 crore up to ₹2 crore: 1.20% + GST
  • Above ₹2 crore up to ₹5 crore: 1.35% + GST

Annual Service Fee: A small percentage (as per the guidelines of CGTMSE) of the outstanding loan balance payable on a yearly basis.

  • Discounts: Women, SC/ST, micro enterprises, ZED-certified units, and North East/Aspirational Districts businesses can avail of a 10% discount on the charging guarantee fee.
  • Other Charges: Regular loan processing charges and interest as per the policy of the lending institution.

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How to Apply for CGTMSE Scheme? It is a revolutionary move for India’s micro and small businesses, providing a legitimate chance at accessing credit without the need for collateral. By simplifying the application process and setting crystal clear eligibility parameters, the government and SIDBI have opened up opportunities for entrepreneurs to drive their business aspirations. With the right preparation—filling out your paperwork, developing a strong business plan, and selecting an active lending partner—you can boost your approval and disbursal chances considerably.

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