How to Apply for Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for Your Business?

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a game-changer for startups and small businesses in India. Launched in 2000 by the Ministry of MSME and SIDBI, the scheme enables entrepreneurs to get bank loans without needing to provide collateral. For startups, this means access to much-needed capital without mortgaging property or seeking guarantors. Here’s a full breakdown of how the scheme works, who can apply, and how your startup can benefit.

What is CGTMSE Guarantee Scheme?

The CGTMSE scheme is a government initiative that provides a credit guarantee to banks and financial institutions lending to micro and small enterprises. If a borrower defaults, the scheme assures the bank a significant percentage of the loan amount. This encourages banks to approve loans for startups and MSMEs that might otherwise be considered high risk due to lack of assets or financial history.

Key Features of the CGTMSE Scheme

• Collateral-Free Loans: Startups can secure term loans or working capital without pledging any property.
• High Guarantee Coverage: Up to 85% of the loan is guaranteed for specific groups such as women entrepreneurs, SC/ST-led units, and micro-enterprises (for loans up to ₹5 lakh).
• Increased Loan Limit: As of April 2025, you can apply for a loan under CGTMSE scheme of up to ₹10 crore.
• Inclusive Support: Startups in services, trading, and manufacturing can apply, as long as they’re registered as an MSME under the Udyam portal.
• Low Guarantee Fee: Ranges from 0.37% to 1.20% annually, depending on loan size and applicant category.

CGTMSE Scheme Eligibility

You’re eligible if:

• You are a micro or small enterprise (as defined by the MSME Act).
• You are engaged in manufacturing, services, or trading.
• Your business is registered under the Udyam Registration portal.
• You are not involved in agriculture or self-help group models.

Pro Tip: Tech startups, healthcare ventures, food processing, e-commerce, and rural innovation startups are all eligible if they qualify under MSME norms.

Loan Under CGTMSE Scheme: How It Helps Startups

For early-stage founders, one of the biggest hurdles is lack of capital or property to offer as security. CGTMSE removes that barrier:

• No Collateral, No Problem: You don’t need land, buildings, or personal guarantees.
• Improved Approval Chances: Banks are more likely to lend when they know the loan is backed by CGTMSE.
• Faster Scaling: Access to working capital or machinery loans means you can build faster.
• Support for Underserved: SC/ST, women-led, and North-East based startups get special concessions.

CGTMSE Scheme Rate of Interest

While CGTMSE doesn’t set interest rates (that’s up to your bank), the presence of a guarantee often leads to competitive terms. Here’s what to expect:

• Interest Rate: Typically aligned with your bank’s MSME lending rates (usually MCLR + 1-2%).
• Annual Guarantee Fee:
• 0.37% on loans up to ₹10 lakh
• Up to 1.20% for loans of ₹8 crore–₹10 crore
• Other Bank Charges: Standard processing fees may still apply.

How to Apply for CGTMSE Loan

1. Register Your Business: Ensure you are registered on the Udyam portal. Having Startup India recognition is an added bonus.
2. Choose the Right Lender: Approach a CGTMSE-recognised lender (banks, NBFCs, etc.).
3. Prepare a Strong Loan Proposal:

• Business Plan
• Cash flow forecast
• Projected revenues and expenses
• MSME registration documents

1. Bank Processes the Loan: If approved, the lender applies for the CGTMSE guarantee.
2. Pay the Fee: You (the borrower) pay the nominal guarantee fee.
3. Loan Disbursal: Once the CGTMSE issues the certificate, your loan is disbursed.

StartupFlora can assist you through the entire process building your pitch, preparing your documents, and navigating the paperwork.

Real Success Stories

• Jay Parivartan India Pvt. Ltd. – A rural startup secured ₹50 lakh through CGTMSE with StartupFlora’s help.
• Sister Ventures – Received ₹40 lakh for expansion without offering collateral.
• Over 50 lakh loans – Amounting to over ₹3 lakh crore were issued by 2024, with 10% going to innovation-led startups.

Government Push: CGTMSE + PLI = Growth

The Production Linked Incentive (PLI) scheme complements CGTMSE. While CGTMSE supports borrowing, PLI rewards output. In Budget 2025-26:

• Electronics PLI budget grew to ₹9000 crore.
• Auto components PLI rose to ₹2818 crore.
• Total outlay is now nearly ₹1.97 lakh crore.

Startups in manufacturing can use both schemes to raise capital (via CGTMSE) and then earn incentives (via PLI).

FAQs on CGTMSE Scheme

What is CGTMSE and why was it created?

It is a government trust that guarantees loans to MSMEs, making it easier for banks to lend without needing collateral.

Who is eligible under the CGTMSE scheme?

Any Udyam-registered MSME involved in manufacturing, services, or trading excluding agriculture.

How much can I borrow?

Up to ₹10 crore. CGTMSE guarantees 75%–85% of your loan.

Is collateral required?

No. That’s the main advantage of the CGTMSE scheme.

What documents do I need?

MSME registration, business plan, financials, bank statements, and lender documents. StartupFlora can help package these.

What’s the CGTMSE scheme rate of interest?

Depends on your bank, but expect MCLR + 1–2%. Annual CGTMSE fee ranges from 0.37% to 1.20%.

Can a new startup with no revenue apply?

Yes, but smaller loans are more likely to be approved. Build a strong plan and consider working with a consultant.

How is CGTMSE different from seed funding?

Seed funding is equity-based (you give up shares). CGTMSE is a debt scheme no dilution, but you must repay.

Final Word from StartupFlora

If you’re dreaming big but stuck at the funding stage, CGTMSE might be your launchpad. At StartupFlora, we help you unlock such opportunities. We guide you through eligibility checks, application forms, documentation, and bank coordination. Whether you’re bootstrapping or scaling up, we make sure your case is strong enough to get approved.