Many Micro, Small and Medium Business Entrepreneurs (MSMEs) may not know and Banks don’t popularize it for obvious reasons. But, Collateral free fund based limit up to a maximum of Rs.100 lacs is available for MSEs.
CGTMSE – Credit Guarantee Fund Trust for Micro and Small Enterprises, guarantees collateral free credit up to a maximum of Rs.100 lacs through banks. I recently got a client of mine sanctioned Rs.75 lacs and I thought I should share it Small Business Entrepreneurs. Eligibility criteria are as follows.
- All manufacturing and Service Companies are eligible. Retail is excluded. Real Estate is Taboo as usual.
- Loan is provided by the banks and CGTMSE guarantees them to a minimum extent of 75% (Maximum 85% over Rs.5.00lacs). So your bank should be an MLI – Member Lending Institution – of CGTMSE. Almost all banks are members and they don’t make a wall poster due to NPA fear!
- All facilities under this scheme should be made available from the same lending institution. If you have a loan from a particular bank, you may have to approach the same bank.
- One important precondition is you should not have any loan secured by a collateral or a third party guarantee or both. If you have it, enhancement is not possible under this scheme. However, a new line of credit can be considered if the banks do not consider it as a composite loan. For example, if you have a working capital loan secured by collateral, there is no bar obtaining a Term Loan under CGTMSE scheme. This however is a grey area. It all depends on the Bank’s interpretation and direct discussion with the banker.
Will you be able to get a loan under this scheme? Assuming, you satisfy the conditions above, only the past conduct of your account can tell. Banks shudder at the thought of NPA and if you are a start up, you can pretty much kiss CGTMSE scheme goodbye. You may be eligible but the Bank’s Manager will not entertain. Understandable. Though the Bank is secured to a minimum extent of 75%, till settlement, it will have to be classified as NPA. Let’s face it. If you were the Bank Manager, you will not take chance. Here are some of the pointers to decide whether you will get the loan under CGTMSE scheme.
- Conduct of your account should be neat. If you kept dishonoring cheques, forget CGTMSE.
- If you already have a collateral free credit, it helps. If you have already availed a priority sector lending without collateral, chances of you getting a CGTMSE credit are high.
- Your balance sheet need not be excellent, but it should be consistent.
- Ask yourself whether you have a tendency for diversion of funds. If yes, CGTMSE is not for you.
A guarantee commission of 1.50% up front will have to be paid. Annual charge is 0.75% of the closing balance as on 31st March needs to be paid. Of course, you will have to pay the regular interest charged by the bank.
If you are approaching bank under CGTMSE scheme, do a bit of home work. Don’t forget, the moment you mention CGTMSE, Banker’s adrenaline will start pumping. Make a compelling case, have a good presentation and your documentation and write up should be impeccable. Good Luck.
Tags: Bank, BankLoan, Business Finance, CGTMSE Scheme, Finance, Loan, Project Finance, Small Business, SMB, SME
superb article, i’ll call it bulls eye, to the point, accurate, and short, i remember 6 years back when i went to my branch and teh branch manager said he dont know what is cgtmse, i had to show him the entire website printed on papers, and now i understand why he said so, may be he thought that i was not eligible, and i guess he has full rights to decide after all he is the one who is taking risk, as a borrower everybody should find the defficiencies within themselves rather than cursing the system.
[...] Two years back I posted a blog “CGTMSE – Collateral Free Loan Scheme”. It still attracts comment. The fact is many don’t get it. In fact of all those who commented [...]
Hello Srikanth Gopalan,
I am an entrepreneur handling two companies. One into IT and one into Green Energy.
I want to start a new venture of manufacturing where we will be using waste rubber and plastic as raw material and get it converted to Oil, Carbon black, steel and gas.
My project cost is around Rs 1.5 crore which includes everything including land cost. Can I get a loan of 1 Crore under CGTMSE where I am ready to mortgage the entire factory to bank ?
Your reply will be appreciated.
@Dev
Yes. It is possible. Especially if the conduct of your other accounts is good, I don’t see why you will be refused.
sir, i m unemplyoed wan to start the business of corrugated box or any oher business i will plam.can this loan is for me?
plz rply
my no is 9971989909
i m working in an ngo. it works for the development for children and women.it is in starting age and strugling for funding issue.can this loan sanction for ngo?????????????
plz rply
@Puneet I am afrid, you may not get CGTMSE Loan. If you have to start, I suggest you start something small with the help of family and friends.
@Priyanka No NGOs are not eligible
@Srikanth Gopalan
What should be my annual income to get a loan of 1 crore under CGTMSE ? Also can you take up my project on professional ground ?
dear sir,my company as ssi unit my turnover 2010 -11 70lac can this loan is for me and apply this schem thanks
@kuldeep singh
Yes. If you do not have any other loan and if you return profits, apply for a loan of Rs.15 lacs. You should get it.
Hi,
My company is a small unit does job work for BHEL running from 1988. we have a cc account of 3lacs. No term loan. I dont need any furthur loan also but can I switch to this CGTMSE scheme so that I will not be asked too much questions frm bank regarding documents …
dear sir
i am asking for a loan of 33 lakhs from ubi. the bank is asking the land on which i have to install my machines, which i have taken under lease from my father and then only the bank shall process my loan under cgtmse. is it mandatory for my father to garuantee the land for cgtmse? will it mot be a loan under collateral security? please help.
sir, i have medicinal plants nursery in bangalore and i interest in cgtsme loan pls help me sir mobile 906040083
Dear Srikanth,
Greetings,
I like to take your advice in my financial matter. I am an registered SME having a loan 4,50,000 under CGTMSE scheme. I am in need of money round 20,00,000. My Latest I.T.R is 1,80,000. I have everything like SSI registration,Tin No.,Audited Balance sheet, good a/c turnover etc. but inspite of having everything the bank manager neither refusing nor accepting application. he is delaying . my Q is that am I eligible for Rs. 20,00,000 limit and what should I do? Should I complain if yes to whom?
Whether an Industrial Co-operative Society can avail an industrial loan from a nationalised bank under CGTMSE?
@Shabeer M I am afraid it is not practically possible
@Lakshmikanth – CGTMSE is predominantly Manufacturing Industry Driven since they expect real Business Assets as security
@rehan – Lot of factors such as end use of money future cash flow etc come in to play. On enhanced loan you may have to pay an interest and CGTMSE charges of Rs.4.50 lacs This means you should be in a position to establish Rs.8 lacs profit on paper before interest and depreciation. Do that and file an official application. Read this blog entry. It’ll answer your doubts http://smbenablers.com/blog/2011/09/12/how-can-you-get-a-loan-under-cgtmse-scheme/
@Deepak = we had a chat over phone Have we?
Dear Mr S. Gopalan,
My Query in regards to this context, That what if I require loan upto 5 core’s Is there is any scheme as CGTMSE or It can be covered under CGTMSE Scheme, One More Thing Is Central Govt going to Raise funding amount to the max. 2 Cr., Whats your take on this………..Again Your Article is Really helpful and I hope your advice also come handy to me.
Regards,
Prayank Raj Sinh
We are foundry people having good induction Furnace 500Kg set up in house facility for finish castings. we are with SBI Commercial Br, are facing financial crunch. Due to investment for the modernization of Furnace presently no working capital in hand and in Bank due to over drawings of 15 lacs bank is not helping as the Account renewal in s pending. We are loosing lot of good orders in hand due delay as financial matters. What could be the remedy to overcome this problem.
Dear Sir,
Your CGTMSE Service is very Excelently providing to the people who is looking For.
Like that to me Also provide me such schems ThanQ……………..
Hi
I read all queries here, I am also applying for cgtmse. First please understand that bank managers are the masters to say no first. We entrepreneurs taking risk by putting our life but bank managers are worried for their pension. We corporates need to pay 33% income tax of our net income, it means we have all the right to ask the money offered by government of india. Those who are applying please please dont ask casually, fill the application and give to bank manager and ask aknowledgement with date and seal. If you are feeling that he wont give acknowledgement send the applciation by registered post then neither he has to accept or reject within specified time. And if that is PSU bank later you can ask the status of application Under RTI act. Dont allow the managers to decide what our future
Dear Sir,
I want to start new Power Looms factory & need Rs.60 lac loan under CGTMSE scheme for purchase of property & Machinery shuld i get the loan ?
we want loan for commercial vehicle & also goods vehicles for improvement of our tour &travels business
Sir, I am holding dsa of a bank currently. My brother is working in a factory since 10 yrs as executive director sales. We are planning to start a component making unit. The cost of project is approx. 1.25 cr.
Is loan possible solely on me or need my brother.
Pls Advice.
jiske abhi lon hay unco cgtmse ke andar hoga nehi aisa bank ka kahana hay . kaya ai baat satya hay
Dear sir,
I taken term lone from bank of india. in CGTMSE. AND i want to apply for capatial central subcidey from centaral gov. will it possible or not pl reply.