What is CGTMSE Loan Scheme & Advantages?

Let us understand CGTMSE Scheme

The full form of CGTMSE scheme is Credit Guarantee Fund Trust for Micro and Small Enterprises. A creative production of the Ministry of Micro, Small and Medium Enterprises, the CGTMSE Scheme offers a unique solution to bridge the financial gap between a business idea and its execution and support budding entrepreneurs. Under this scheme, qualified members can get credit money from banks to fund medium, small, and tiny enterprises. Loan amounts up-to a maximum of Rs 1 crore can be provided with the assuring Credit Guarantee lent by the Government.

This is a fulfilling guarantee for entrepreneurs given as a credit guarantee in times of the business losing creditability. The scheme provides a maximum cover of about 85% of the loan amount which is comforting. Whenever a loan taker is unable to pay the money, the scheme cover makes up for the loss. The lending institutions are paid back for the financial loss incurred due to non-repayment of loan amount. The amount of repayment majorly depends on the total borrowed amount, borrowers’ capacity & purpose of loan.

CGTMSE Loan Scheme and Advantages

The scheme of CGTMSEs is a major contributor to the Indian economy & contributes almost 10% to the India’s GDP. This is quite a participation to boost the economical graph. This is as good as generating a dozen of employment to more than 7 crore people. Though, it is not as easy to procure loans and establish their businesses. Although, there are many lending institutions spread across different segments, lenders are still skeptical about the high rate of NPAs in small and micro companies. Liabilities of these risks have huge consequences; however, businesses and banks take those calculated possibilities. For e.g., MSMEs face issues due to tough loan approval issues & complicated business-related processes. Banks/ Financial Institutions feel challenged to lend without proper documents & guarantee in place.

This is exactly to overcome such situations, CGTMSE has played a vital role to make good the hurdles. It has reduced the risk & helped provide relief to borrowers and lending institutions both.

The best part is that CGTMSE offers benefits for all new & old MSMEs. The most significant being that you are covered for the credit facility obtained, even when you did not have less or zero experience in starting out a business. It is important to note that the credit cover is optional, the MSME Ministry has attached due importance to the scheme and tracks its progress on a longer span.

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