What this scheme offers
The biggest reason first-generation entrepreneurs get turned down for a business loan is a lack of collateral — property, gold, or fixed deposits to pledge. CGTMSE removes that barrier by having the Trust (jointly set up by the Ministry of MSME and SIDBI) guarantee a large portion of the loan directly to the bank; if the borrower defaults, the Trust compensates the lender for the guaranteed share, so the bank can lend on project viability instead of demanding security. As of a 2026 revision, the maximum guaranteed cover is ₹10 crore (up from earlier ceilings of ₹1-5 crore), with guarantee percentages ranging up to 85% for micro-enterprise loans under ₹5 lakh and up to 90% for women-owned businesses' loans up to ₹10 crore — general MSE loans are typically covered around 75%. DPIIT-recognised startups can additionally access guarantee cover up to ₹20 crore under the related Credit Guarantee Scheme for Startups (CGSS). Both term loans and working capital facilities qualify, though a few sectors — including agriculture/farm loans, educational institutions, and loans already covered under NSIC's own guarantee scheme — are excluded.
Who is eligible
- New and existing Micro and Small Enterprises (MSEs) in manufacturing, service, or trading sectors, meeting the official MSME investment/turnover classification.
- Both proprietorships and registered business entities can apply.
- Enhanced guarantee cover (up to 90%) is available for women-owned enterprises, and preferential terms apply to units in the North-East, J&K, and Ladakh.
- This is not a scheme you apply to directly — your bank or NBFC must be a registered Member Lending Institution (MLI) with CGTMSE for your loan to be eligible for cover.
Documents required
- Udyam Registration certificate (MSME registration)
- Detailed business/project proposal with financials
- KYC documents (identity, address, PAN)
- Bank statements and existing credit history
How to apply
- Register your business under Udyam Registration, if you haven't already.
- Approach a bank, NBFC or financial institution registered with CGTMSE as a Member Lending Institution (MLI) — most major public and private banks are registered.
- Submit your loan proposal with project details, financials, and Udyam registration to the lender.
- The lender assesses your loan application on its own merit, and if you don't have collateral, applies for CGTMSE guarantee cover on your behalf.
- You (or the lender, depending on the agreement) pay an Annual Guarantee Fee — typically around 1-1.5%, lower for the North-East region — in addition to the loan's regular interest.
- Once the lender's application to CGTMSE is approved, your collateral-free loan is disbursed under the bank's normal process.