Credit Guarantee Scheme for Startups (CGSS)
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust set up by the Government of India and SIDBI that provides a credit guarantee cover to banks and NBFCs, enabling them to extend collateral-free and third-party-guarantee-free loans to eligible micro and small enterprises. If the borrower defaults, CGTMSE compensates the lender for a defined percentage of the loss, it does not lend to borrowers directly, and the borrower's obligation to repay remains unaffected.
About this Service
CGTMSE was set up in August 2000 by the Ministry of MSME and SIDBI to solve the single biggest obstacle small businesses face when seeking a bank loan: the lack of collateral or a third-party guarantor. Rather than lending money directly, CGTMSE provides a credit guarantee cover to Member Lending Institutions (MLIs); banks, NBFCs and financial institutions — so they can confidently extend collateral-free credit to eligible micro and small enterprises.
If a borrower defaults, the Trust compensates the lender for a defined percentage of the loss. This shares the lender's risk and opens formal credit access to first-generation entrepreneurs and small businesses that would otherwise struggle to offer security. Since inception, CGTMSE has enabled a large number of collateral-free loan accounts across the country, backed by a cumulative guarantee corpus running into lakhs of crores of rupees.
CGTMSE guarantee cover applies to both fund-based facilities (term loans, working capital) and non-fund-based facilities (letters of credit, bank guarantees), extended by eligible lenders to eligible MSEs.
Key Benefits
Key Benefits
- Enables collateral-free and third-party-guarantee-free loans for eligible micro and small enterprises
- Guarantee cover of 75% to 85% of the sanctioned loan amount, with special concessions of up to 90% for women-led enterprises and specific categories such as Agniveers
- Covers both fund-based (term loan, working capital) and non-fund-based (letters of credit, bank guarantees) facilities
- Available to both new and existing micro and small enterprises through any member lending institution
- Reduces the entrepreneur's dependence on informal, high-cost sources of finance
- DPIIT-recognized startups can access enhanced guarantee cover under the related Credit Guarantee Scheme for Startups (CGSS)
Guarantee Cover by Category
Eligibility Criteria
Eligibility Criteria
- Must be a Micro or Small Enterprise (MSE) as defined under the MSME classification (manufacturing or service)
- Can be a new or existing enterprise seeking a collateral-free credit facility
- The credit facility must be extended by an eligible Member Lending Institution registered with CGTMSE.
- The facility must not already be covered under another state or national credit guarantee scheme (no double coverage).
- Certain categories, Self-Help Groups (SHGs), Joint Liability Groups (JLGs), educational institutions, agriculture, and training institutions, are excluded from CGTMSE cover
- The borrower does not apply to CGTMSE directly; eligibility and cover are assessed as part of the lender's loan sanction process.
Eligible Applicants
- Proprietorship firms
- Partnership firms
- Private limited and public limited companies classified as MSEs
- LLPs classified as MSEs
- Both new and existing micro and small enterprises
Ineligible Applicants / Facilities
- Self-Help Groups (SHGs) and Joint Liability Groups (JLGs)
- Educational institutions, agriculture activities, and training institutions
- Credit facilities already covered by another state or national guarantee scheme
- Medium enterprises (only micro and small enterprises are covered under the core CGTMSE scheme)
Documents Required
Documents Required
Mandatory Documents
- Duly filled loan application form with passport-size photographs
- Business incorporation/registration certificate
- Udyam (MSME) registration certificate
- PAN card and Aadhaar of the applicant/promoters
- Business financials, bank statements, ITRs, and financial statements (for existing units)
- Project report or business plan (for new units)
Conditional Documents
- KYC documents of partners/directors for partnership firms and companies
- GST registration certificate, where applicable
- Quotations for machinery/equipment, for term loan proposals
How to Apply
- Approach an eligible Member Lending Institution (MLI), a bank or NBFC registered with CGTMSE, for a business loan.
- Submit the loan application along with business, financial, and KYC documents.
- The lender assesses the proposal on its own credit-appraisal criteria, as it would for any business loan.
- If the lender is willing to sanction the loan without collateral, it applies to CGTMSE for guarantee cover on the eligible facility.
- CGTMSE reviews the proposal against scheme eligibility and confirms the guarantee cover and applicable fee.
- On sanction, the loan is disbursed by the lender, covered by the CGTMSE guarantee to the extent approved.
- The annual guarantee fee is paid by the lender to CGTMSE and typically passed on to the borrower as part of the loan cost.
CGTMSE vs PM Mudra Yojana
Frequently Asked Questions
What is CGTMSE?
CGTMSE is a Government of India and SIDBI credit guarantee trust that enables banks and NBFCs to extend collateral-free loans to eligible micro and small enterprises by guaranteeing a defined percentage of the lender's loss in case of default.
Who is eligible for CGTMSE cover?
New and existing micro and small enterprises (proprietorships, partnerships, LLPs, and companies classified as MSEs) taking a collateral-free loan from an eligible member lending institution.
What is the maximum guarantee cover under CGTMSE?
Guarantee cover typically ranges from 75% to 85% of the sanctioned loan, with concessions up to 90% for women-led enterprises and specific categories; the exact loan ceiling eligible for cover is revised periodically. Confirm the current limit with your lender.
Is an MSME eligible for CGTMSE?
Yes, CGTMSE is specifically designed for micro and small enterprises; Udyam (MSME) registration is generally required.
Can startups apply for CGTMSE cover?
MSE-classified startups can access CGTMSE; DPIIT-recognized startups may separately access the related Credit Guarantee Scheme for Startups (CGSS) with a higher cover ceiling.
Can a new business apply?
Yes, CGTMSE cover is available to both new and existing micro and small enterprises, subject to the lender's credit assessment.
What documents are required?
Business registration/incorporation proof, Udyam registration, PAN/Aadhaar of promoters, financials or a project report, and standard KYC documents.
How do I apply for CGTMSE?
You cannot apply to CGTMSE directly; apply for a loan through an eligible Member Lending Institution, which then seeks guarantee cover from CGTMSE on your behalf.
Is CGTMSE available in Rajasthan?
Yes, CGTMSE is a pan-India guarantee mechanism, available through any eligible Member Lending Institution operating in Rajasthan.
Is collateral required under CGTMSE?
No, that is the core purpose of the scheme: enabling collateral-free and third-party-guarantee-free lending to eligible MSEs.
Is CGTMSE currently active?
Yes, CGTMSE has been operational since August 2000 and continues to guarantee loans through participating lenders.
Can an existing business apply?
Yes, both new and existing micro and small enterprises can access CGTMSE-backed loans through an eligible lender.
How long does approval take?
Timelines depend on the lender's own credit-appraisal process and CGTMSE's guarantee-approval turnaround; there is no fixed guaranteed timeline.
Can CGTMSE be combined with another guarantee scheme?
No, a credit facility already covered under another state or national credit-guarantee scheme cannot receive CGTMSE cover as well.
Approval / Selection Process
- Loan application and document submission to the Member Lending Institution
- Lender's credit appraisal, including business viability and financial assessment
- Lender's decision to extend the facility on a collateral-free basis under CGTMSE
- Application to CGTMSE by the lender for guarantee cover
- CGTMSE eligibility check and confirmation of guarantee percentage and fee
- Loan sanction and disbursement by the lender, with the guarantee cover in place
Common Application Mistakes
- Applying directly to CGTMSE instead of approaching an eligible member lending institution
- Assuming CGTMSE eliminates all underwriting, the lender still conducts its own full credit assessment.
- Not checking whether the intended facility is already covered under another state/national guarantee scheme
- Incomplete or outdated Udyam registration, financial statements, or KYC documentation
- Confusing CGTMSE with other credit-guarantee mechanisms, such as CGFMU (which guarantees Mudra loans) or CGSS (for DPIIT-recognized startups)
Practical Application Checklist
- Udyam (MSME) registration in place
- Business financials/ITRs/bank statements ready (for existing units)
- Project report or business plan ready (for new units)
- Eligible Member Lending Institution identified
- Confirmed the facility isn't already covered under another guarantee scheme
- KYC documents of all partners/directors ready
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Credit Guarantee Scheme for Startups (CGSS)
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