Micro and small industries are the veritable backbone of India, creating employment for many and boosting the economy. However, a crucial factor that prohibits many from carrying out operations to their maximum capacities is the lack of financial resources.
What is CGTMSE?
The government has set up the CGTMSE scheme in collaboration with SIDBI with the aim of providing credit to deserving individuals and to strengthen the credit delivery system, facilitating the flow of credit to the MSE sector.The basic purpose of the CGTMSE scheme is to provide access to the MSE sector to the required working capital as well as term loans, if required, from a single lending institution.
Under this scheme, eligible members can avail a loan from Member Lending Institutions (MILs) to bridge the gap between their business idea and its execution. The amount of loan provided is up to a maximum of Rs. 1 crore based on project feasibility and the credit guarantee provided by the government.
The eligibility criteria of the scheme is intentionally simplistic, as the whole purpose for its existence is to provide easy financing to the MSE sector. Hence, availing a loan under this scheme isn’t hard and almost everyone can meet the set eligibility criteria.
The following are the major eligibility criteria set by the government:
A feasible and complete business plan needs to be in place.The enterprise should be registered as per the existing rules before applying for the loan.The scheme is open for both new and existing borrowers.
Process of availing a loan
After having a concrete and viable business plan in place, the business needs to be registered as per the existing laws. It can be a firm, a private company, a partnership or proprietorship.
Once the business is registered, you can approach any of the lending institutions that are associated with the CGTMSE scheme. There are 131 MILs associated with the CGTSME scheme, including all the rural, urban, public and private sector banks of our country.The lending institution will process the application as per their policy and if all the eligibility criteria are met, it will sanction a loan.
The lending institution applies to CGTMSE once the loan is sanctioned and obtains a cover for the loan. You will have to pay the trust a guarantee fee and charges if the loan is approved by the CGTMSE.
There are certain fees and charges applicable as the scheme is implemented by the MILs on behalf of the government.
The MIL needs to pay the guarantee fee to the trust within a period of 30 days from the disbursement of credit. The fee depends upon the amount of loan sanctioned.
Annual service fee
The MIL needs to pay an annual service fee to validate the guarantee cover that is offered under the CGTMSE scheme. It is to be paid every year before 1st June. The interest rate is charged by the MIL at their discretion as long as it falls under the RBI guidelines.
Finding business loans is not easy and without the money, idea and passion can’t do much. Hence, the government of India has come up with several schemes to support the MSEs and turn the dreams of millions into a tangible reality. One such scheme is the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).