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
Dear sir,
Iwant the details of agri purposed loan up to 50 lakhs .
Thanks Regards,
S.Ragu
Hi Ragu,
Can you be more specific? What do you mean by Agri Purpose? Is it for direct agriculture? Or is it for Agri based projects such as Commercial Cold Storage or Rice Mill? Please send a mail to us (Address in Info page) or you may write a comment here too.
Best Wishes
Dear Srikanth,
Any idea if this scheme is available for software startups ? Any one you know who was successful in achieving that ?
Does bank ask for some kind of primary security from the owners ?
Just curious to get info from a first hand exp person:)
Thanks
Kapil
Hi Kapil,
Technically, yes. But getting loan under CGTMSE scheme for a start up is next to impossible if it is the entrepreneur’s first time venture. In case of a start up with an entrepreneur without a history, we are in effect asking the banker, “Why don’t you finance me Rs.100 lakhs to take care of my burn rate? I might pay you back if my venture is successful!!”. The banker has his pension to worry about and hence they take a safer route and I don’t blame them.
I have obtained a small loan for an IT company which is running successfully. I know of two other companies for whom CGTMSE loan would be a cakewalk but they are interested in VC and take home some money first for their sweat. I don’t blame them either.
Prime Security is obviously there. All the existing and future assets of the company will be secured. Whatever hardware you may be buying will be hypothecated. Depending on facts of the case, some kind of security would be needed. For example, if you are having a deal with a reputed company to provide service on a long term contract, you will most definitely get CGTMSE loan if you can register a power of attorney with the buyer to the effect that, they will pay all your dues to “YourCompany A/C Lending Banker” so that the proceeds land in a place where they can monitor its movement.
So, it all depends. For a software company, there are other options, though. Why don’t you register here http://www.smbenablers.com/form.html You will be sent a link for downloading a ebook compiled by me on finance options for SMEs.
Hope this helps.
Cordially
Srikanth
Thanks Srikanth,
This is so not very startup friendly thing, where a real problem is not availability of funds in market, but the availability of people betting on first time entrepreneurs etc. Thats where I thought Government of India is trying to fill the gap. But as per your explanation it seems , Government of India/Banks are taking up this scheme like many others , for just the sake of planning
Regards
kapil
Unfortunately, Yes. IT startups do not have much help till monetization. I work with a telecom startup – first time entrepreneur. I got him secured over draft for burn rate and we are working on quick monetization. Once this happens and once some kind of growth is shown, things are lot easier.
That said, CGTMSE scheme is really a good one and I know of quite a few worthy recipients. Some of them are my clients. I would suggest, you approach banks under CGTMSE, post monetization and pre VC. It normally works. Major trouble is that bankers do not understand most of the IT products. If you have a plastic parts manufacturing project for 2 crores, you will get CGTMSE loan for 1 crore, if you put in one crore and if you can show a few verifiable purchase commitments. So, all in all it is agood scheme, I would say
Dear sir,
We are going to open new manufacturing unit of absorbent cotton in patenership firm, sir we want loan upto 60 laks, so kindlly give me the details about loan proposal.
with Regards
Nilesh
Hi Nilesh,
Not clear what you need. Without specifics I cannot give you any recommendation. If you want loan proposal format or project report format, you may download them from our resources page here http://smbenablers.com/resources.html
If you have any specific questions you may pst here or send me a mail
Is this loan available for setting up a hotel or service appartments business…!
Hello Sir,
We are MBA Graduates planning our own start up. Since it is our first year and our company registration was completed only in May 2010 , we have no previous year balance sheets per se. Do you think the CGTSME scheme is available to start ups like us?
Hi Srikanth
I am planning to set up a brick kiln in Bhopal. I am going for the latest technology for setup and production, so obviously the cost has shooted up.I plan for around 80lakhs of loan through CGTMSE. I am not sure where to start up the process from,Shall I go to the banks directly and ask them of the steps and do accordingly or shall I prepare a report n all first and then approach the bank. Do you think this is a viable project and yes, this is my first venture.
Appreciate any help that lets me get through this process.
Thanks
Ankush
Sorry, the last three months had been hectic and my sincere apologies for not answering earlier
@Shiv Kumar- Yes you can use it for Hotels. It is infact easy when the land is yours and you are going to construct the Building.
@Anup – Technically you are eligible. But getting a loan is very difficult. Please read the previous comments. Intent is to help SMEs which have proved their viability and those who do not have a collateral
@Ankush – Hope this is not too late. Frankly, it is quite difficult for a first time entrepreneur to get CGTMSE Loan. On the other hand, if land is yours and building cost is substantial, you definitely stand a chance. Please write to GYM@smbenablers.com, if you want more info than what is found in this post and comments
we hv a IT (pvt. ltd. )company and it is under registration of S.S.I unit, we hv an a/c with C.C. on S.B.I and their is a limit 9 laks against security. Now we want to transferred the loan to CGTSME it is possiable or not, if possiable then what is the criteria regarding this. Last two year balance sheet is showing profit.This a/c operated last five year.If is possiable then our security money will free is correct or wrong.
Hi Srikanth,
We are a health food delivery start up planning to set up our kitchen & office in Gurgaon. From your blog, it seems it is going to be very challenging procuring a loan under this scheme. Herein, if 75% of the loan is gauranteed and the bank’s exposure is limited to 25%, can offer to put in a FD equivalent to the 25% amount to convince the bank to lend ?
We are going to open new manufacturing unit of production of Silk and other fabrics on jobwork basis, where in Exportes are giving all sorts of Raw materials and take back the finished goods in patenership firm, sir we want loan upto 70 laks, so kindlly give me the details about loan proposal.Since it is our first year and our company registration was completed only in April 2010 , we have no previous year balance sheets . Do you think the CGTSME scheme is available to start ups like us?
with Regards
kiran
First my apologies for the delay.
@Pratap Once you have a loan covered by security THAT loan cannot be subjected to CGTMSE scheme, however other new requirements for funding can be under CGTMSE. If you can give me more details I will be able to advise Contact me @ GMY@smbenablers.com
@Nalin It will give the bankers some peace of mind though, it can’t be a security technically. If you can keep a deposit of 25% and put in margin money, you may try Direct Finance from SIDBI
@Kiran If I can have more details about the project I will be able to throw some light
It is not official, but only sitting Minister’s Nephew can get a loan for a start up under CGTMSE scheme.
I have made a ebook on financing options for SMEs I’ll upload it in the resources page. Meanwhile you may send me a mail and get it from me.
Hi Srikanth,
we are looking to start a new venture for msnufscturing of pstented valves. can we get some loan under CGTMSE scheeem. wht is the procedure for that.
we are a team of technical professionals who want to get in to some serious business
regards
Nikhilesh
Hi Nilesh,
Though there is no bar, normally Startups do not get CGTMSE Loan. You say, it is patented. In this case, may be there is a chance. Please drop a mail to GYM@smbenablers.com. I will give my co-ords and we can perhaps have a chat and/or email communication.
Without specifics, I am unable to suggest a course of action. Our Resource page have some formats for project finance which may be useful.
Best Wishes
Srikanth
Dear Srikant Sir,
I read your article now and it is very helpfull for every entrepreneur. Sir I have a pvt. ltd. company with 4 directors, we want to start our own edible oil brand. We are going to tie up with manufacturing company for contract manufacturing, and brand will be ours. We will be doing the marketing. Is it possible for us to get some benefits under this scheme?
One more thing i was trying to get register on the forum but is showing INVALID FORM again and again. please help.
with regards
WASIM KHAN
I am a contractor will i get the CGTMSE Loan to start a new contract work.
Sir,
I want to start a Garment Industry, need a loan upto 50lakh. What are the procedures to be followed..?
Thanks.
Regards
Mani
Yes CGTMSE Loans is not available for Real Estate but is available for contractor
we are planning to startup new venture, under which we can start food delivery in mumbai. We had been doing it previously from home, unforunately we had to stop due to lack of proper space. After going through the cgtmse scheme we are planning to apply for a loan and start the venture again. we would appreciate if you could guide us on the same eg: the procedure to apply and the documentation required.
Thanks & Regards
Vijaya
Dear Sir,
Please advise whether the credit facility to a MSME can be covered under CGTMSE scheme by a MLI if the proprietor of that MSME had already taken a housing loan from another financial institution against collateral security.
Dear
We are company with two manufacturing facility at two different location manufacturing two different products. One unit has started production 6 months back. We dont have any credit facility from any bank. The second facility is a new one. We have completed the building. We need to expand the buisiness at the Unit one by investing around 1Cr for term loan and need to invest more than 95Lakhs in Unit two for term loan. Can this be done under CGTMSE. Is it available for a company or a manufacturing facility.?
Hi Srikant,
We bagan our company as merchant exporter in 2005 and have been exporting vegetable waxes. We did have post shipment credit facility on collateral basis from SBI for 2 years and eventually we stopped.
Now we are setting up our plant to produce vegetable waxes on a land purchased by us. Are we still considered start ups or we will be considered as established one? How are our chanses of getting this CGTMSE loan?
Regards
Raj
Sir Im from chennai And Im willing to start a supermarket business and it would require a loan of 50 lakhs, is it possible for me to avail the loan under CGTMSE scheme. Please do reply me to my email Id. aashishu23@gmail.com. Awaiting your response.
can a contractor be funded under cgtmse? if yes how ? what documents are required.
Hai srikanth i want to start a new mineral water plant and my budget is 50lakhs and i am a new comer in this field will i get the loan easily.
Dear Srikanth,
First off, you should be lauded for taking the time and effort to help all of us floundering fish in this space. Cheers to that.
I’ve also approached a few banks with a Chennai-based food processing project proposal which has even end-user agreements in place and I’ve tried for the CGTMSE scheme. Needless to say, it’s like hitting a brick wall. I am a first generation start-up and cannot provide collateral at this stage. Any suggestions would be helpful and I’d be interested in sharing details with you if possible, to get a few pointers.
I’ve tried registering but Invalid Form keeps popping up so can we chat or talk somehow? At your convenience of course.
Warm Regards
Manu
It is nice scheme but it should be helpful to small business developers or manufacturer
I am going to start Pharma Machinery manufacturing business in Maharashtra state my business already establish form Feb 2009 pl guide me for eligibility of such scheme for me
Never realized this post still circulates. For some reason, I am not getting comment intimation and I have not been able to answer any of you in time. That I am not active with my blog these days did not help either. My apologies.
@Vijaya – Startup by first gen entrepreneur … well, frankly it is impossible to get CGTMSE loan. If you are sure of the project, go ahead with collateralized loan
@Ajay Parashkar – I do not see any issues. If the proprietor of that MSME had already taken a housing loan from another financial institution against collateral security, it can be beneficial actually. Manager may ask you to transfer the loan the lending bank and that way the loan has indirect collateral security. Managers actually like the scenario.
@Shiraz – I think your situation can in fact get you CGTMSE loan. They have to be two different loans. With your own prime security standing, you should get it. All the best
@Chandrashekaraiah – They look at Entrepreneur’s standing. So I see no issue in your case.
@Nitin Vaid – Possible, but difficult. Depends on what you have achieved
@Aevin – If you are a startup you can forget CGTMSE
@Manu – We started working together – So blogging helps. May be I should do more
@Anish – Collateralise your loan or scout for a financing partner. 1% of a million is always bigger than 100% of a thousand. First Gen Entrepreneurs often forget that.
[...] it is their prerogative. I receive quite a few calls these days on CGTMSE and most of the case. Please read this blog post. This throws lot of light on CGTMSE [...]
Dear Srikanth,
Greetings,
We have a chemical manufacturing unit. The company was setup in 2005 with Rs 25 lac term loan and Rs 7.5 lac Cash Credit against co-lateral from State Bank of India.
The company was continuously in loss till Aug 2009.
In Aug 2009 we have repaid the outstanding term loan at one go and CC enhanced to Rs 15 lac. This CC is against the co-lateral of 15 lac worth property.
We have done Rs 65 lac turnover in 2009-2010 and Rs 1 Cr 30 lac turnover in 2010-2011.
Now we have submitted a proposal to enhance our Cash Credit from 15 lac to 35 lac and term loan of Rs 35 lac for expansion under CGTMSE scheme.
However our bank (State Bank of India) is discouraging us from CGTMSE scheme, despite of having very good track record of transactions in CC account for last 2 years.
Please guide us: Whether we are eligible for CC and term loan under CGTMSE scheme?
Whether we can force our banker to process our proposal under this scheme.
If Yes, and if still bank is not accepting then what actions we can take to get the loan under this scheme.
Kind Regards,
Sunil,
Dear Mr.Sunil,
Once you have a collateralised loan, you are not eligible for Loan under CGTMSE scheme. So when you give a composite proposal, I think SBI is within their rights to reject the proposal. Therefore, you cannot expect Cash Credit under CGTMSE scheme. You have to give two proposals -one for enhancement of CC with collateral and the second would be for term loan without collateral under CGTMSE scheme.
Generally, banks are reluctant to give bigger amount loan without collateral except for companies with impeccable track record. Unless you have positive net worth and good profits, it may be difficult. CGTMSE is a scheme available for the Bankers. It is not binding on them to give these loans. That is it is not entrepreneur’s right but bank’s prerogative.
I normally advise this to entrepreneurs. Don’t approach banks under CGTMSE unless there is year on year profit and turn over growth. I am sure, if help is given to you now, this would not be the same again. But Bankers don’t want to understand business dynamics. They go by hard facts. CGTMSE requires very good Balance sheet. I know it is frustrating. But it is the reality.
SBI is in fact very liberal in giving loans under CGTMSE scheme. Roughly 500 Rs.1 Cr loans were sanctioned under CGTMSE Scheme. SBI share is more than 50%
I know this reply is disappointing. But, I do not want to give you falls hope.What I would advise is get another Rs.15 lacs CC by talking to the Banker. Show increased turnover in the first six months and then approach them for term loan. At the moment, if they say “No”, you have no recourse.
Best Wishes.
Srikanth Gopalan
Dear Sir,
As per RBI circular,retail trade upto 20 lakhs covered under priority sector
under service sector.why CGTMSE should not covered it?
Pl help
@Ganesh What am I supposed to help you with?
@Anand Bajpal Why Indeed? We have to go by the leader. SBI Covers only Manufacturing and Service and leaves out pure trading and real estate. In case of retail, if your requirement is Term Loan (Air Conditioning, Creating Shelf space, Buying Computers etc, it may be possible.
Hi Srikanth,
please let me know whether we can get loan for starting a pizza corner under CGTMSE scheme
Thanks
I am afraid the answer is “No”. Getting sizable loan for a start up is difficult. Definitely not for a franchise. If you have a escrow account requirement with Pizza Corner, you can try for a loan in that bank with smaller collateral requirement.
Dear Sir ,
I , engaged in designing and whole selling of handloom sarees . All my production process through job work many parts of west bengal . I have running this business from last 5 years and making steady profit every year . Now , i am looking for 30 lacs without security loan , is it will come under the CGTMSE scheme .
Regards
A party is having cc limit of 90 lkhs covered under CGTMSE. Now they want cc announcement from 90 to 130 lkhs and fresh term loan of 40 lkhs. Whether the cc limit can be covered under CGMSE for 100 lkhs10 and rest by prime security of stocks and term loan 40 lkhs by prime security of machine???
Thanks
P. Jaswal
1) TL of 50 lkhs was sanctioned along with occ limit enhancement from 40 lkhs to 90 lkhs. TL of 50 lkhs and occ enhancement of 50 lkhs was covered under CGTMSE by the bank. Plz tel me whether enhancement in occ can be covered under this scheme….????
2) whether fresh enhancement in cc limit and fresh TL can be sanctioned by obtaining third party security…..????
Thanks
P. Jaswal
Dear Sir,
I am in outdoor advertising industries last o6 years , now i am interested to start my own advertising agency / company . I need to erect new hoarding but lack of finance i am not grow as per market . In CGTSI
scheme any provision / scheme for SERVICE INDUSTRY company to provided a loan.
Thanking You
Santosh Ray
Hi,
I wanted to start business by going for reputed company dealership. I neither have any assets nor any amount with me. I have only confidence to work. But that doesnot fund me initially. Please guide me if I can approach CGTMS for business loan.
Hi every one. I have started a production a unit of Producing Knitted Fabrics
(popularly known as Hosiery category). Before starting the biz, I didn’t have
any other production unit. But the main thing over here is this that I had the
experience of 5 years in this particular industry since I have been exporting
various kinds of Textile Related products for more than 4 years.
However, when I approached the concerned departments (sidbi, nsic etc.), they refused to give me the loan under the CGTMSE scheme. Then simply made a phone call to Mr. Sahu (an IAS officer of MSME Ministry) and told him the story. He once again he told me to go to any of the central Govt’s organisation and told me that if they refuse you, just make a telephone call to me and I will handle the matter.
Then within a month and a half got the loan of 72 lakh rs. under the CGTMSE scheme and without paying a single paisa to anybody.
Just keep up fighting spirit till you reach the goal, you will get it sooner or later.
SOUMAN LALA.
Hi. Srianth,
I am a salaried person having CTC 40 lacs around pa. & planning to get establish my own manufacturing plant expected cost around 80 lacs. I have a capital base of Rs. 3crore. Can I applied for CGTMSE.
Hi. Srianth,
I am a salaried person having CTC 40 lacs around pa. & planning to get establish my own manufacturing plant expected cost around 80 lacs. I have a capital base of Rs. 3crore. Can I applied for CGTMSE??
My apologies for not replying earlier due to reasons beyond my control.
@D Banarjee: Yes you are eligible. Job work does not bar CGTMSE
@ Praveen Jaswal – Enhancement beyond Rs.100 lacs is not possible under CGTMSE. You have to apply as a separate loan product for the balance. There is no bar in having two different accounts for the same security. Secondly maximum cover is only Rs.100 lacs. Third Party Collaterals are normally frowned upon by banks. Allot a small share, make him/her a Director or Partner on paper and then apply for loan. That normally sticks
@Santhosh Rai – CGTMSE is predominantly manufacturing oriented since you cannot give prime security of Machinery, stock etc. You can apply if it is for computers AC Machine etc if your contribution is good. Generally it is difficult.
@ Venkat Frankly no. For start ups to be considered, your capital percentage needs to be high and there should be prime security cover. (Machine, stocks Debtors etc)
@Sowman Lala Thanks for the input. This requires a separate post. I’ll do that
@Ankit Malani Sure You can. You just need 25% of the project cost and you say it is manufacturing. It sure will sail through.